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Hi fellow Board members. The Condo Association is considering utilizing our right of first refusal to purchase a unit that is underpriced. We would then turn around and sell it and make a profit. it is a risk but a relatively small risk. However, we would need to get a mortgage to do this. Can the Condominium Association get a mortgage to buy a unit?
Our management agency says no ... only for capital improvements. That doesn't make sense to me ... they would have the unit as collateral as well as the income stream from common charges. Of course, we would have to get a majority of unit owners to agree to the loan and purchase. I look forward to your feedback. Thanks.
I am a property manager and i helped my condo board get a loan but it was to fund a capital plan. Condos operate differently from Coops, therefore, my best advice to you is to read the condo bylaws which should outline the board's authority to make such purchase, check whether there are any purchasing limitations and what kind of unit owner approval you may need. Condo by laws may provide the option for the condo board to finance or borrow funds for this purchase. (the word you are looking for is borrow or finance instead of mortgage. Coops have mortgage, condos dont). Then the board should definitely consult with counsel for further interpretation and direction. Hope this helps.
Look at NY RPL 339-jj (Borrowing by Board of Managers) and you Condo's By-Laws.
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From what I've read from the BCL, the board of directors are able to do many things, even if the shareholder's do not agree, but they must be doing it in "Good faith" and in the "Best interest" for the coop.
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