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Litigation in Condo complex makes Loans dicier than they are!

I am having my first experience of managing an escrow on an oceanfront condo complex on Kauai. I've just learned that a couple of owners are suing the homeowner's association for some water damage from a leak the owners feel is the association's fault. There was water damage and I am sure that those couple of owners are upset and want some remuneration.

The difficulty arises for any other owners that happen to be engaged in selling. When a condo association provides what we in Hawaii call the RR105C, the condo must disclose the nature of the complaints. Since the actual damage of the complaint/suit is unknown, lenders seem to be pretty unwilling to consider a loan on the project due to the unknown nature of the legal complaint/suit. In this case,  I am hopeful that the association's insurance company will resolve the issue. Short of that, we have asked for an opinion letter from the attorney representing the condo association.

The association wants us to pay for the opinion letter. Not sure how fair that is to my seller but that remains an option should the complaint not be resolved. It's quite eye-opening when a dynamic like this comes into play and an innocent seller is unfairly effected by the actions of some of his fellow owners. Have have you been able to deal with this issue when it's shown up?

Inquiring minds want to know.

Ron Margolis, RA, CDPE, ABR Hawaii Life Real Estate Services 808.346.7095 email: ron@hawaiilife.com

Comment balloon 0 commentsRonnie Margolis • July 19 2008 02:26AM

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