QUESTIONNAIRES
QUESTION: Fannie Mae and Freddie Mac have recently updated their guidelines for condominium loans. Will lenders now revise the questionnaires they submit to condominium associations and do associations have to answer all questions?
SOLUTION: The short answers are ‘perhaps’ and ‘no’. Lenders may or may not revise their questionnaires, but associations should not change the way they respond to them.
While Associations should try and accommodate the questionnaires with responses to maintain marketability of units, that should not create potential liability for the Association or its manager.
Our advice to clients remains the same: be careful answering all questions and releasing information to third parties. For many years we have recommended using a release agreement when releasing information and that still stands.
Although it can be tempting to answer questions regarding the structural integrity of the property with the assumption that nothing is wrong (especially when a lender is threatening that not answering “will kill a sale”) many of the questions asked remain unlimited in scope and potentially difficult for even an engineer to answer.
Boards and Managers should provide only information about which they are certain, and they should not answer questions requiring expert opinions they aren’t qualified to offer.
If there is a recent engineering study that can often be given out instead of offering an opinion about structural integrity. For questions that are overly broad, it is better to narrow the response if a response is given. For example, if the question asks if there are any structural or other defects in the common areas or in the units, we might recommend responding with: “No written citation or violation has been received within the last year stating that the buildings are not structurally sound.”
When it comes to questions about current or anticipated assessments, we suggest a qualified response encompassing the possibility that the board might impose an assessment in the future: “The board has been discussing projects that may require a special assessment but has not made a final decision on the amount or on whether or when an assessment might be levied.”
On the theory that it is best to avoid potential landmines if you can, if you aren’t sure how to answer a question, you should consult your association’s attorney and have them review the responses before releasing them.
If you have questions about lender questionnaires or the new lending guidelines, please contact Justin Magsarili or any of our MEEB Attorneys.