I am writing this letter in response to an article by Patrick Anderson that ran in Providence Business News recently (“Twenty years on, court ruling changes condo law,” Sept. 10, 2012).
The article raises important issues, addresses timely topics, and is valuable to condominium-unit owners, bankers and developers. With this in mind, I would like to take the opportunity to clarify a few items.
First, condominium-unit owners will in fact still be able to secure 30-year mortgages, and banks will continue to lend to them. This case concerns banks that lend to developers, not unit owners. One lesson learned from this case is that banks that lend money to developers need to remind their developer clients to exercise their rights to develop/finish the project within the time frame they set in the condominium declaration. Should either the developer or the bank that takes over a project neglect to exercise those rights within a timely manner, the property that they have placed a mortgage on would become the condominium association’s.
The second clarification is that the America Condominium Association case is different from the Bowen case. In the America case, the developer simply failed to develop the property within the given time frame, and in so doing, it became the property of the condominium-unit owners. In the Bowen case, there was no developer. Instead, the bank, and later the bank’s receiver, failed to develop the property and simply sold it to a third party, who, in turn, failed to develop the property within a given time frame.
Overall, it is the responsibility of banks to institute the proper safeguards before lending to a developer.