In the course of providing financing for a condo, lenders must obtain information about the condo project in order to determine if the project meets the guidelines set by Fannie Mae, Freddie Mac, or the bank’s own internal lending policies. The information required is gathered, kept, maintained, and distributed in almost all cases by the Property Management company hired by the condo association.
Property Management for condominium projects exist for one simple reason – owners lack the ability or knowledge to manage a complex entity with so many moving parts. As a former condo board President, I know firsthand the numerous tasks the management company is responsible for. Just handling all the complaints and disputes removes a significant burden from the Resident Manager or Board of Directors. But the Property Management company is hired by the project’s Board to deal with the dirty work. And the fact they are hired and paid, brings me to the crux of today’s article.
Over the past few months we have noticed a growing trend when we as lenders request a set of condo disclosure documents in order to review the project. That trend is the receipt of dated old disclosures. No different than an appraisal, pay stubs, or credit report, every document in one’s loan application file must be timely and current. I know no real estate agent would even think that an appraisal that was 6 months to a year old could be used in the current transaction, and the same goes for condominium disclosure documents.
So, as I noticed this trend happening, I reached out to several top real estate agents throughout the state and asked them why they provided old documents. To my surprise, the answer had to do with cost and convenience. Many of the top agents sell multiple units in the same condo project. After receiving disclosures on one transaction, they mistakenly believed those documents could be reused – saving the new seller some money, and the transaction some time. In many cases, it takes 10 days to obtain a set of easily accessed digitally stored forms that the Property Management company charges several hundred dollars to provide.
Here’s the question all condo owners, Resident Managers, and condo Boards need to ask themselves: If we are paying a professional management company to work on our behalf, why are they charging us to obtain our own documents?
The situation has gotten so out of whack. Here’s a perfect example of what I can only point out as pure greed by one of the largest property management companies in the state: We are providing financing for a condo in a complex on Maui. It was learned rather late in the process that there was litigation by the board against the developer for construction defects. All the underwriter needed to know was if any of the defects been repaired, or if the work was still waiting to be completed. When the underwriter called the Property Management Company to get a simple answer, the response was “I cannot provide you any information, but you can purchase documentation from us to get your answer.”
Look, everyone has a right to make money in their field of business, and I am not trying to deny Property Management Companies a right to make a profit. But technology has changed the very reason these companies originally started charging to maintain these documents. Where in the past a full set of condo disclosure documents represented a stack of paper several inches think, that pile is now reduced to a few digital documents easily emailed.
Property Management Companies work on the behalf of the condo project. Providing the project’s documents to its owners upon request – for free, should be a service included in the fee they charge the association. As it sits today, it is a profit center for these companies, and that is wrong. It is a disservice to the very people that hire them in the first place.