Before any loan is committed to a condominium corporation, there are several discussions a lender must have with the corporation before signing an agreement.
In this video, we discuss:
- The structure of a condominium corporation
- What a lender needs to know
- Specific questions a lender must ask
I am Mark Giavedoni, a commercial real estate and lending lawyer at Gowling WLG.
This video is part of our Real Estate Topics for Lenders Series.
In this video we will be discussing Lending to a Condominium Corporation.
While there are many different types of condominium structures, typically a condominium corporation has the following elements:
1. individual units owned by a person (corporation);
2. common elements owned by the condominium corporation
3. unit owners are members of the condominium corporation with 1 vote per unit;
4. there is a governing Declaration followed by a series of bylaws and rules to give effect to the structure, use and governance of the condominium corporation.
Before any loan is committed to a condominium corporation, the lender should:
1. Review the Declaration to understand the structure of the corporation, how it runs and rules or restrictions about its operation;
2. Review the bylaws and rules, being the specific procedures and parameters; does the Condo have the power to borrow?
3. Obtain a current status certificate, which identifies if the unit owner is in default, if the condominium is funded, is involved in litigation and is current with its obligations;
4. what does the unit owner own and what are common elements of the condominium?
5. what type of security can be given in light of the structure of the condominium?
6. is this a project intended to become a condo or is it an existing condo?
Does the condominium have authority to borrow money? It needs a specific bylaw authorizing the specific loan and likely approval of its members, not just its board of directors
What type of security is possible? Can the condominium pledge its common expense receivables? Are they capable of being the subject of a security interest or mortgage registration?
Does the condominium corporation own a unit that could be given for a collateral mortgage security?
Can the lender access the revenue stream of the corporation or take a security interest in these assets?
Will the condominium corporation require a special assessment of its members to make payments against a loan or mortgage obligation?
These questions and more should be discussed with counsel BEFORE any commitment to lend is signed by a lender.
Read the original article on GowlingWLG.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
