When a prospective sale of a condominium unit is underway, lenders often require detailed information about the condominium association’s litigation status and financial health. These requests are critical to lenders to assess the risk associated with lending against a property within the community. However, for the association and management, responding to those requests can be time-consuming and resource intensive.

Lenders typically request litigation status updates for information on any ongoing or past litigation involving the association and which may affect the financial stability of the Association or its Members. Additionally, lenders request details concerning the association’s financial status, including budget, reserves, outstanding debts and upcoming special assessments in order to properly assess a prospective purchaser’s ability to pay the debt and remain current with their financial obligation to the association.

Often, condominiums and management are called at the last minute by the seller and/or the buyer’s representatives seeking to obtain immediate responses to lenders’ requests right before closing. Unfortunately, many of these requests are received via email with “URGENT” or “NEEDED TODAY” in the subject line, creating unnecessary work and stress for the association and management personnel.

Luckily, Florida law allows condominium associations to charge lenders (and others) requesting such information before furnishing the same, however, many associations and management personnel are not aware of the ability to recover the costs of the same. Additionally, if provided with ample time before closing a condominium may condition the delivery of such information upon payment from the requesting party.

Under Florida law, specifically Chapter 718, Florida Statutes (Fla. Stat.), condominium associations are required to maintain certain records and provide them upon request. This includes financial records, minutes of board meetings, and records of any litigation the association is involved in.

Associations are authorized under Chapter 718, Fla. Stat., to charge a reasonable fee for providing this information. This fee is distinct from the estoppel fees that are typically charged when preparing an estoppel certificate for a unit sale under §718.112(2)(I), Fla. Stat.

Pursuant to the relevant provisions of §718.112(12)(e), Fla. Stat., “The association may charge a reasonable fee to the prospective purchaser, lienholder, or mortgagee for providing good faith responses to requests for information.” This statutory provision allows associations to recoup the costs associated with compiling and delivering responses to lender requests.

Often, the association’s response to lender requests will require the assistance of legal counsel, and association’s responding to lender requests with assistance of counsel should be recovered by the association, if not associations should ensure that all lender requests are sent to legal counsel for review.

Haber Law LLP recommends the following “best practices” in addressing lender requests. First, the association should set a clear and reasonable fee structure for providing litigation status updated and responses to lender requests or clarifying that such requests are handled by association counsel.

Clients of Haber Law benefit by having legal counsel communicate the required rate and payment before any information is provided. Many times, this structure assists in reducing the number of requests received, as well as harassing emails from requesting parties who have not submitted payment.

Next, the association should make sure that it is maintaining its official records in a neat and organized manner. This will assist in facilitating timely responses to lender requests (as well as Official Records Requests). Finally, the association should inform prospective buyers and their lenders about the process and fees for obtaining these reports early in the process. This can prevent misunderstanding and ensure smooth transactions.

Responding to lender requests for litigation status updates and financial health reports is an important aspect of condominium association operations. By charging a reasonable fee for these services, associations can manage the associated administrative costs effectively. Adopting best practices in record-keeping and communication can further streamline the process, ensuring the association fulfills its obligations while maintaining financial stability.

By understanding and properly managing lender requests, Florida condominium associations can facilitate smoother unit sales and ensure compliance with state regulations, all while protecting their financial and operational integrity.

Haber Law LLP has successfully implemented procedures to help association clients deliver timely responses to lenders’ requests efficiently, and without costs to the association. For further guidance on handling these requests and communicating the appropriate fees, condominium associations are encouraged to consult with legal professionals experienced in Florida condominium law.