Page 9 - New England Condominium February 2020

NEWENGLANDCONDO.COM NEW ENGLAND CONDOMINIUM -FEBRUARY 2020 9 ■ Depth of Knowledge & Experience ■ Expert Advice ■ Creative Approaches & Solutions ■ Flexible Billing Arrangements Thomas Bhisitkul (781) 817-4611 tbhisitkul@lawmtm.com Christopher S. Malloy (781) 817-4604 cmalloy@lawmtm.com Douglas A. Troyer (781) 817-4605 dtroyer@lawmtm.com Thomas O. Moriarty (781) 817-4603 tmoriarty@lawmtm.com (781) 817-4900 30 B RAINTREE H ILL O FFICE P ARK , S UITE 205 B RAINTREE , MA 02184 (617) 934-4550 265 F RANKLIN S TREET , S UITE 1801 B OSTON , MA 02110 www.lawmtm.com MTM is a full-service Condominium & Real Estate Law Firm Experience, Integrity, & Drive Set Us Apart Uncommon Expertise for your Community of Common Interests reserve but that monthly charges include a condominium’s receivables.” The monthly the elevators upgraded and the lobby and the deleterious effect of low reserve funds line item for replenishment as a condition common charges and reserve accounts hallways redecorated. The building’s re- of the loan purchase. The third alternative is to replenish re- serves through financing. This method is “Lenders want to see that they have ad- more applicable to co-ops than to condos equate reserves.” and associations, as co-op properties carry underlying permanent mortgages against also affect buyers’ and unit owners’ ability ual decision,” says Prisand, cautioning that tor, not so much about the dollars as about their entire property. By contrast, in a con- do or HOA, each unit is held in fee simple iro, a partner with the law firm of Goodman replenishing. Buyers’ attorneys may be un- as an individual unit of real estate, so an as- sociation can’t place a lien against the entire sachusetts and Rhode Island, if a communi- property. For co-ops, reserve accounts can ty’s reserves are scanty, “Owners may not be done. Potential lenders will have minimum bad management, that’s something else al- be replenished by borrowing and deposit- ing the proceeds into the reserves, or by tak- ing a line of credit, along with an underlying ability of unit owners to obtain mortgages. path to replenishment, according to all of saying; it’s also good policy. Co-op and con- mortgage, to be tapped when major work is If I am representing a purchaser, I will ap- required as an alternative to assessing resi- dents. However, says Prisand, “Inadequate what might come up. If I am representing in common charges or maintenance, so the never know when an emergency will occur, reserves can also lead to higher interest an association, I advise them to build up the financial pain is minimized. All also suggest that’s why it’s called an emergency. Keeping rates, escrows or reserve requirements.” Options for Condo Associations In the past few years, some banks and other lending institutions have begun to look at financing of condominium asso- ciations from a different point of view. Fi- nancing for capital improvements is now check off every last item on its ‘replacement just in case. available. “Condos don’t borrow as often and refurbishment’ list; the boiler has been as co-ops,” says one attorney. “But there overhauled, and converted from oil to gas; is financing available now secured by the the roof and sidewalks have been replaced, site MyBostonCondo.com. He says that are pledged as collateral against the loan, serves have been substantially depleted. Do guiding the buyer. It’s something that some- making the reserves even more important. you need to replenish your reserve accounts one who isn’t a real estate professional might As mentioned above, low reserves can has done all necessary work, it’s an individ- to finance as well. According to Ellen Shap- Shapiro and Lombardi, located in both Mas- able to qualify for FNMA approval on the reserve requirements that must be met, no together.” secondary market. Low reserves affect the matter how new the boiler may be. The best prise them of the risk. One never knows through small monthly increases included savings. We call those savings reserves. We reserves if they are not sufficient. There is that reserve funds should never be used those reserves at an acceptable level pro- never a reason for inadequate reserves.” What if Everything Has Been Done? Say you live in a successful, mature, should be increased by two or three percent them plan for regular maintenance. Like an well-functioning co-op in Boston. Over the each year on a regular basis to keep resi- past few years, the building has managed to dents used to the idea of regular increases, the unexpected, both physically and finan- to previous levels? “If it’s a timing issue, and the building good peek behind the curtain to see how a there are still potential ramifications of not the planning. If there are low reserves, you comfortable with the low reserves, regard- less of all the work that has already been completed that’s one thing, but if it’s from our experts, is a steady, incremental one – dominium buildings, like individuals, need to subsidize monthly charges to residents, tects the association or corporation and the and that maintenance or common charges residents against the unknown and helps Potential Effects on Unit Sales Bobby Woofter is a broker with the web- on sales “Often depends on the professional too easily overlook. In reality, it’s a really building is managed – an important indica- need a good explanation for the purchaser. If the low reserves are from work already Saving for a ‘rainy day’ is not just a cute insurance policy, reserves guard us against cially. n A J Sidransky is a staff writer/reporter with New England Condominium, and a published novelist.