Dear Benny: I bought a condo in foreclosure auction and there are many pages in my purchase and sales contract. On one of these pages it says I had viewed or received the condo association bylaws and declaration. In fact, I never did.
After the auction and after I carefully read the contract, I asked the title company to give me the condo documents. Apparently, they don’t have it. They said they will give it to me at closing time.
My intention is to rent the condo, but the whole building is vacant. Can I ask that they open the building? If not, and there is no condo association, thus no such bylaw, can I legally back out of the deal? What should I do? – David
Dear David: Why didn’t you read your contract before you were the successful bidder at the foreclosure sale? Unfortunately, I am afraid that you will either have to go to closing or forfeit any deposit you gave at the auction sale.
I had a case similar to this a couple of years ago. My clients claimed they never received the public offering statement (POS) that new condo developers are legally required to give to potential buyers. Under the law of Maryland (where the transaction took place) you have 15 days to cancel your contract based on your review of that POS. This same law applies in many states.
We went to court and the judge said: “I agree that you had the right to cancel, and I believe that you did not receive the POS. But you signed a statement that you did, in fact, receive that document, so, sorry, I have to rule against you.”
The fact that there may be a closed building does not mean there is no condominium association. Assuming that the condo documents were properly recorded with the recorder of deeds in the county where the property is located, there is a condominium association, even if there is no board of directors.
You should find out who owns the other units in the association. Try to organize everyone and have them vote to elect a board of directors.
But you may have yet another problem: Do those legal documents allow owners to rent their units? Many associations put restrictions on renting, and nowadays lenders are looking carefully at condos to make sure that there are not too many tenants in the complex.
Bottom line: You should always read legal documents before you sign. In your case, I strongly suggest you immediately retain a lawyer to assist you.
Dear Benny: My wife and I are selling our house and moving to a retirement community, which also has assisted-living facilities. We have an offer coming this next week. This is the only offer we have had in the three months the house has been on the market. We have put a contract on an apartment in the retirement facility.
Presuming we can reach agreement with our buyer and sign the contract and get a settlement date, the retirement facility wants us to take out a bridge loan for the buy-in fee (about $300,000). Our concern is whether anything could go wrong before settlement. We feel we would be more comfortable waiting until we have the cash in hand.
Are we being overly fearful? We are told that it is a normal procedure to take out the bridge loan as the earnest deposit guarantees that the settlement will go through. Is this true? We trust our seller’s agent but feel the buyer’s agent is dragging her feet. Should we have a real estate lawyer too? If so, how do we find one? — John
Dear John: I suggest that you get a real estate attorney to assist you. If you don’t know of any, you can call the local bar association in you area. Usually, those associations have referral arrangements.
You asked if anything can go wrong before settlement. The short answer is yes. While most settlements go smoothly, some can be a real disaster. For example: The buyer may have what we call buyer’s remorse and want to walk away from the deal. That’s why when I represent sellers I insist on a large earnest-money deposit to put pressure on the buyer not to want to cancel the contract.
Additionally, the buyer may find problems in your house and either want you to pay a lot of money to correct those issues or walk from the contract.
Another possible glitch: In today’s economy, the appraisal that the buyer’s lender may come in too low or the buyer may not be able to get the necessary financing.
Yes, a bridge loan is common, but there is a risk that you will end up having to pay two loans: your current mortgage as well as the bridge loan.
I would give serious thought about going the bridge loan route.
Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to email@example.com.