Q: I am buying a condo unit. My lender just told me they found a reference in the community documents to a “rec lease.” The association told them it was paid off, but the bank wanted more proof and denied my loan. I found a local bank that will give me a loan if the association states in writing that the rec lease was paid off. Should I be concerned with this? — Anna
A: It is always good to proceed cautiously when making any large purchase or important decision.
A “rec lease” occurs when the recreational facilities’ ownership is kept separate from your condominium association’s management and control. In these communities, the owners pay maintenance dues to both their association and the independent business that owns and manages the amenities.
These arrangements used to be popular but have fallen out of favor over the last few decades. Many associations have “bought” out the rec lease and have brought those facilities and services under the same management and control.
There are still communities with active recreational leases, many of which have excellent amenities, making the extra expense and hassle worthwhile for the residents.
Many institutional lenders will not lend in these communities because of how some of these leases are written to make a lender liable for a unit owner’s delinquent payments.
