Condo Media - September 2019 - 45

Your banker will also ask for historic financial information on the association (usually two years' worth),
including balance sheets and income
and expense statements, as well as the
current operating budget and an aging
of the condominium's fees receivable.
Accountant-prepared statements are
always preferable, but for smaller associations where this is not financially
feasible, internally prepared statements are acceptable, provided they
are in standard accounting format
and someone from the association or
the management company can speak
knowledgeably about them.
By analyzing this information,
your banker develops an understanding of how the association is being
managed financially and can determine the impact the proposed loan's
debt service will have on the association's cash flow and its ability to repay
the requested loan.
THE COMMITMENT LETTER
Once your banker is satisfied that
the loan request makes sense and
represents an acceptable lending
risk, the bank will commit to the loan.
This is evidenced by a commitment
letter that spells out the basic business terms and conditions under
which the bank is willing to lend
the association money.
The letter will be addressed to
the association via its professional
manager or one of the trustees and it
will specify the amount of money the
bank is willing to lend and will detail
the interest rate and loan repayment
period. In condominium association
lending, loans are typically full-payout loans (no balloon payments), so
the loan repayment period will match
the note term.
The commitment letter will also
identify the collateral for the loan, this
usually being a general security interest in all of the assets of the association, as well as a specific assignment
of all of its current and future fee and
rental income. This fee income will
include, but may not be limited to,

all regular common area charges, all
current and future special assessments
and any proceeds received from future
insurance settlements. Rarely does an
association own real estate, but if it does
(typically parking spaces or a superintendent's apartment) the bank may
record supporting liens on these assets.
The commitment letter will describe
restrictions on premature repayment
of the loan, as well as any prepayment
fees which will have to be paid in the
event the loan is paid off prior to maturity. The bank's closing attorney will be
identified in the letter. However, he or

she will not prepare closing documents
until the loan commitment has been
accepted by the association and the
commitment fee paid. In order to accept
the commitment, a majority of the association's board must counter-sign it
in their capacity as trustees.
The commitment letter will have
to be accepted by a certain date and
closed by a certain date. Many bankers
require that a commitment fee accompany the signed letter. Typically, this
fee will be applied to closing costs, but
may be retained by the bank if the loan
fails to close.

Representing Condominium Associations, Homeowner
Associations and Management Companies throughout
New Hampshire and Northern Massachusetts.
Providing representation in all areas of condominium
law from drafting and execution of condominium
instruments, amendments, collection of assessments to
litigation from trial through appeal.
For specific questions and to find out how we can
service your particular needs, please contact our office
and speak with one of our attorneys.

(603) 627-5997

45 Bay Street
Manchester, NH 03104

(603) 742-1052
3 Webb Place
Dover, NH 03820

(800) 828-3200

565 Turnpike Street
North Andover, MA 01845

www.fenigeranduliasz.com
Serving clients in all of NH and northern MA
September 2019 CONDOMEDIA

Condo Media - September 2019

Table of Contents for the Digital Edition of Condo Media - September 2019