Condo Media - May 2020 - 47

No one criteria is cast in stone. We will
continue lending, but will be monitoring the economic situation as well as the
health of our existing portfolio to make
sure we are not taking unnecessary
credit risks at any point in time."
According to Picha, "South Shore
Bank continues to work with condominium associations that are looking to
finance capital improvement projects.
As the economic landscape continues
to evolve, the bank will be evaluating
each loan request on its own merits.
The bank also continues to learn about
new programs that are being made
available through the Small Business
Administration (SBA). Should these
programs benefit condominiums the
bank will have discussions with borrowers regarding what loan type best suits
their needs. At the present time though,
the bank is only offering traditional
financing for condominiums."
The fact that all the lenders are still
happy to review new applications for
regular condominium association loans
and that some will look at SBA loans is
a big relief. I believe their analysis will
include looking at delinquencies for the
association pre-January 20, 2020, as
well as looking at current delinquencies, and looking at the reserves and the
other typical underwriting they have
always done.
SBA CARES Act Economic Injury
Disaster Loans (EIDL) section
7( b) 9(2):
In addition to regular condominium
association loans, SBA now has a possible loan product for condominiums
under the Cares Act and Emergency
Declaration of President Trump.
The Economic Injury Disaster Loan
Program or changes to SBA regulations at section 7(b)(2). This is funded
for $10 billion. There is a forgivable
$10,000 advance for payroll and such,
and then loans of $25,000 BUT if the
loan is collateralized, the loan may be
for $2 million at 2.75 percent interest for up to 30 years. At first I was
concerned that the SBA would not understand that an assignment of future

income is a collateralized loan but one
of their information pieces specifically
recognizes that.
The program requires that the loan
be for a state-recognized not-forprofit. While this is easy in 49 states
and the District of Columbia, the
drafters of condominium documents in
the Commonwealth of Massachusetts
typically use trust and not Chapter 180
not-for-profit corporations. But CPA's
in Massachusetts file a not-for-profit
state tax form for condominium associations (Form 3M) so that is one argument and if that does not work, you
could discuss with your attorney creating a Chapter 180 corporation for the
condominium association. The section
of the Act discusses personal guaranties and it is unlikely and unwise for a
board member to guaranty a loan so we
will have to see how the SBA handles
these loans as they are applied for.
These issues are complicated and
there are different opinions. It is difficult to watch webinars on the SBA
loans and read articles and figure out
who is right. But I think that is true for
most new legislation, so by the time
you read this piece in May, we will
likely know more.
I have tried to make a very complicated topic understandable but communities and managers should contact
their legal counsel to discuss further.
Since it is April 3rd and the real
test will be known as grace periods
for April payments come in and more
when May delinquencies are known.
I understand many condominium
associations will do nothing because
they do not immediately feel the
impact and may not until May or the
end of June. Associations also might
borrow from their reserves in April if
needed. But I implore managers and
condominium associations to speak to
their local lenders today.

Sadly, I am convinced the world
will be feeling much more pain in May
than on April 3, 2020 and there is
plenty of pain as it is. But I don't think
condominium associations have seen
the impact yet. Versus eliminating
discretionary expenses or thinking
that the super lien guaranties that unit
owners will pay if you put pressure
on them, it is likely that the federal
government will impose a moratorium
on collecting consumer debts that will
include condominium fees and will
trump state condominium acts including those with super liens.
Finally, there is another reason to
start preparing for a loan-compassion. For the worst disaster of our
lifetimes, people who always paid their
bills simply will not be able to. If you
have a community of 100 units and 5
or 10 don't pay, I suggest that you sit
down with these people (well by telephone or Zoom these days) and see if a
payment plan or a deferral or waiver of
late fees can be worked out. If the loan
gets the condominium association
through the bumpy road ahead and
you have a loan so that the manager
gets paid, vendors get paid, essential
and non-essential services get done,
needed repairs and replacements are
performed, the condominium association should be able to operate "business as usual" and also show compassion to those financially impacted by
Covid-19.
These are frightening times. Above
all, please stay safe and God bless you
and your families.
n STEPHEN MARCUS IS A
CONDOMINIUM ATTORNEY AND
CONSULTANT IN NORTH EASTON,
MASSACHUSETTS. HE HAS BEEN
A CONDOMINIUM LAWYER FOR
41 YEARS. © STEPHEN MARCUS
2020 ALL RIGHTS RESERVED.

May 2020 CONDOMEDIA

Condo Media - May 2020

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