Why Does Running a Revenue Generating Business on the Grounds of a Condo Complex Scare Lenders?

Asked by Hartman Cole Real Estate, Marina Del Rey, CA Sun Oct 2, 2011

I recently had a lender tell me that some banks are not lending on the Marina City Club because it has been recently reported in the HOA docs that there is a ‘for profit’ business being run out of one of the conference rooms. It is my understanding of that complex and others that there have been different businesses doing this for years and this is the first time I have heard of this kind of disapproval. Is this something new or just new to me? Has anyone been denied a loan or had a client denied a loan after the bank reviewed the HOA docs and found an operating business on the books either on this complex or others?

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5
Mack McCoy, Agent, Seattle, WA
Sun Oct 2, 2011
I think you know the answer 'way better than we do, so instead of our guessing, why not tell us what kind of business, who is running the business, and whether using this common area for a business is a violation of the declaration or by-laws?

It's new to me, but I am interested in how a HOA would allow someone to take over a common area for private use.
1 vote
Scott Godzyk, Agent, Manchester, NH
Tue Oct 4, 2011
It is unusual for any condo to rent out a common area to a business. This could make it a commercial use. I would think you should contact the agents of units that previously sold and ask them who they got mortgages through.
Web Reference:  http://www.ScottSellsNH.com
0 votes
Kathleen Bec…, Agent, Santa Monica, CA
Tue Oct 4, 2011
Hmmmm.... I find that very interesting. The Marina City Club is a Land Lease property owned by the County of Los Angeles. There are only a few mortgage companies that will lend on that property.

Look at the past sold listings, call the agents and find out who did their financing. There are 2 or 3 agents that specialize in that property and will gladly give you the mortgage broker's info that lends on that property.

Good luck!

All the best,

Kat
0 votes
Suzanne Gla…, Agent, Los Angeles, CA
Sun Oct 2, 2011
Hi Bradley,
I believe Marina City Club is also on a land lease which limits the lending pool... are you sure that's not what's causing the problem?
Suzanne (Suzie) Glaser
LA VILLAGE REALTY
p.310.383.1141 | http://www.LAVillageREALTY.com
RealEstateSuz@gmail.com | lic # 01390707
(a division of Power Brokers Int'l | lic # 01520327)
0 votes
Shane Milne, Mortgage Broker Or Lender, South Jordan, UT
Sun Oct 2, 2011
Both FHA & conventional financing permit a certain amount of the project to contain commercial space (20% for Fannie/Freddie, 25% for FHA) - so unless the commercial space is more than the permitted percentage of the project or it's being advertised as some sort of condo-hotel or the public liability insurance doesn't cover the commercial spaces that are owned by the HOA, I don't see what the issue would be.
0 votes
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