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Beware of Lender Questionnaires

Lender questionnaires are one of the many forms completed during the home buying process. The simple act of completing a lender questionnaire could land a community association in a prolonged legal battle! Imagine battling through 8 years of litigation because of how a community association or property manager responded to a question about special assessments. This is exactly what happened in the case of Eisenberg v. Phoenix Association Management, Inc., decided on November 4, 2002 by the Appeals Court of Massachusetts.

In Eisenberg, during closing in May 1994, the property management company, Phoenix Association Management, responded 'No' to the question: Are there any special assessments now planned, or have there been any in the past? The plaintiff, Allan Eisenberg, stated that he relied on the management company's response to the question and he would not have purchased the condominium if he knew that special assessments were imminent. The condominium owner successfully won his lawsuit and recovered $8,000 in damages.

So, what went wrong in the Eisenberg case and how can community associations protect themselves from potential lawsuits? First, it is important to always remain truthful to buyers about property conditions and projects. In Eisenberg, the Board was aware of ongoing roof problems and other property issues before the condominium owner bought his unit, but they failed to disclose this to the buyer. Second, provide all pertinent information that a buyer may need in deciding whether or not to purchase a home. In Eisenberg, during the closing, there were no special assessments planned; however, there had been several complaints from residents regarding repair issues within their units. In fact, the Board of Trustees met a month after closing to discuss imposing special assessments. In general, it is better to err on the side of providing too much information rather than 'just enough' information to buyers.

The Eisenberg case is a stark reminder to all community associations that even the slightest negligence during the home buying process could land them in hot water. While the questions on a lender questionnaire appear to be straightforward, Associations must still remain truthful when completing lender questionnaires. It is important to disclose all pertinent facts about a home to the lender and to buyers to avoid unnecessary litigation.

Completing all the required forms when purchasing a home can be a daunting task especially with the added requirements needed from community associations. Our firm is available to answer any questions that you may have regarding the home buying process, including completing lender questionnaires

If you have any questions or concerns with regard to lender questionnaires, please do not hesitate to contact our office.

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