Condo Media - May 2022 - 37

SCOTT ERIKSEN, ESQ.
PARTNER, PERKINS & ANCTIL, WESTFORD, MASS.
PER LL-2021-14, associations can no longer defer maintenance without
risking that those loans to buy and sell units will be declined. To put it
another way, the purpose of the new, additional requirements, according
to attorney Scott Eriksen, is " to shift the risk from the lenders to those on
the front lines: the associations and property managers. The questions are
designed to allow lenders to evaluate risk. The questions may also prompt
an association to make needed repairs. "
Eriksen and Wolf agree, associations and managers are unable to answer
the new lender questions because they aren't qualifi ed - they aren't structural
engineers - or they don't have enough information to answer. For
example, questions about adequate reserves are beyond the scope of boards
and managers. " Associations are not able to speak to this unless a reserve
study is done and then, what is 'adequate?' The term is too vague, " says Wolf.
" What may be adequate for one may not be for the lender. If we say yes, and
suddenly there is an unplanned event that exceeds the current reserves,
we open ourselves up to being sued. " Both Eriksen and Wolf say the lender
should be conducting their own diligence.
" It's a perfect storm for frustration, " says Eriksen, " but we must understand
where each player is coming from. Not all sellers and buyers are
impacted: cash buyers and anyone who has a conventional loan are not.
Buyers and owners who want to refi nance can fi nd local banks that have
different requirements from federally backed entities and hold its mortgages
in-house. Boards and managers want to help and they want to protect
their communities. It's a balancing act. "
Note that these new requirements are imposed on mortgage lenders,
not associations directly. Eriksen says boards and associations don't have a
legal obligation to respond, but they want to help people buy and sell their
unit. As one expert puts it, the risk of liability must be weighed against the
backlash from sellers whose buyers cannot secure funding if the association
declines to answer the new questions.
HOW SHOULD ASSOCIATIONS RESPOND?
Eriksen's role is advisor to the property managers who are on the frontline.
The managers direct the unit owner to him if needed. He says that the struggle
back and forth will continue between managers, lenders, and unit owners.
For now, the industry has come up with a universal response. In the long term,
he hopes the questions will be modifi ed and that legislation will help buildings
be safer by requiring inspections and mandating reserve studies.
The response that Eriksen has advised property managers
to provide includes saying that these questions are beyond
the scope of the board's and management's ability to address;
they need one or more qualifi ed professional opinions; and the
lender should conduct such diligence, including a structural
review of the property, as it feels is necessary or appropriate.
In addition, he advises saying the board and management
Both Eriksen and Wolf say
the lender should be conducting
their own diligence.
cannot warranty structural conditions because they do not
have the expertise and that the board and the property manager will provide
in good faith to the lender(s) information, such as transition studies and
reserve or inspection reports that the board may have.
Both Eriksen and Wolf note that the impact of these regulations and their
effect on the sale of units is developing and may become clearer as associations
begin submitting these new mortgage questionnaires.
May 2022 CONDOMEDIA 37
Condo Media - May 2022

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