What liability does condo converter have for defects?

Answer may be surprising

DEAR BOB: In August 2006 I purchased an apartment in a condo conversion in the resale market. My seller bought the condo eight months earlier direct from the condo converter. To what extent and for how long a time frame can the developer be held liable for repairs and warranty work to each individual unit? For example, if a front-door lock is defective, and the third-party manufacturer offers a 25-year warranty, who is responsible for repairs, bearing in mind the manufacturer requires a copy of the invoice? --Helena S.

DEAR HELENA: In a condo conversion, the developer is liable to the homeowner's association (HOA) for any structural defects, such as a foundation problem, in the common areas. However, if something goes wrong within your condo unit after purchase, the developer usually has no liability to the owner, especially a subsequent owner who was not the original buyer.

Purchase Bob Bruss reports online.

If you are asking who is responsible for repairing your front-door lock, don't expect the developer to replace it (although a good developer will take responsibility and then deal with the lock manufacturer). Your best recourse is against the lock manufacturer. Or forget it. For more details, please consult a local real estate attorney.

HOME ON LEASED LAND USUALLY NOT ELIGIBLE FOR REVERSE MORTGAGE

DEAR BOB: I have friends who own their home, which is on leased land. The senior-citizen reverse mortgage lender told them the residence is not eligible. Is this correct? --Anthony L.

DEAR ANTHONY: If the residence is a manufactured house or a mobile home on a leased lot, it clearly is ineligible for a reverse mortgage.

However, if it is on a leased lot with an option to purchase, then some lenders will approve a reverse mortgage in such a situation. Owning a residence on leased land is never an advantage and is frequently a detriment.

ODDS OF LENDER ENFORCING "DUE ON SALE CLAUSE" ARE MINIMAL

DEAR BOB: You recently had an item about a mortgage-due-on-sale clause where you said it was unlikely the lender would call the loan. What are the odds the lender would find out and call the loan due in full? --Lawrence L.

DEAR LAWRENCE: As long as the monthly mortgage payments are made on time, mortgage lenders rarely risk enforcing the due-on-sale clause when a property title is transferred "subject to" the mortgage.

If a lender should attempt to enforce the due-on-sale clause, unless the transfer is exempt under the Garn-St. Germain Act such as an interspousal transfer, the new owner can then either pay the lender's assumption fee (usually 1 percent of the mortgage balance) or refinance with another lender.

Unless mortgage interest rates skyrocket, a mortgage lender would be very stupid to attempt to enforce a residential due on sale clause today.

The new Robert Bruss special report, "The 20 Essential Questions Smart Home Buyers Must Ask to Avoid Overpaying in a Buyer's Market," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com. Questions are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center).

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