Seth Weissman of Weissman Nowack Curry & Wilco PC has written a useful explanation of the Georgia Condominium Act. Weissman also explains why banks must adhere to the same consumer protection requirements as other sellers. I thought this was an interesting read to share considering the number of bank-owned condos for sale. It seems that more and more bank-owned properties will be entering the market in the near future. I think it’s important to know how the rules apply to the banks selling them.
Selling Bank-Owned New Condominium Units
Many brand new, never previously sold bank-owned condominium units are now on the market for sale. A question which is increasingly being asked about such units is whether the bank seller must comply with the consumer protection requirements of the Georgia Condominium Act in selling these units. The answer, as explained below, is an unequivocal yes!
Georgia law requires that consumers be given certain special protections in buying condominium units that apply “to the first bona fide sale of each residential condominium unit for residential occupancy by the buyer, any member of the buyer’s family, or any employee of the buyer.” The consumer protections apply to “any such sale regardless of whether the seller is the declarant, the association, or any other person.” Therefore, the requirements apply to bank-owned condominium units that have not been previously sold. The protections generally fall into three categories.
First, the sales contract is required to contain certain disclosures in bold-face type warning buyers of issues to consider before purchasing the unit. Therefore, a GAR condominium unit sales agreement cannot be used because it does not contain these disclosures. More importantly, there is a standard set of disclosures that can be attached to all contracts to bring them into compliance with the law. The nature of the disclosures made will change depending on the type of condominium unit being sold. So, for example, the disclosures in a unit that is part of a condominium conversion are different from the disclosures for a newly-constructed condominium unit.
Second, buyer must be given a bound copy of a condominium disclosure package and sign an acknowledgment that they have received the same. For two reasons, banks should not simply use the condominium disclosure package prepared by the original developer or “declarant.” The Georgia Condominium Act requires that the
disclosure package be current. The foreclosure will often result in a new declarant and this must be reflected in the disclosure packet. The passage of time will normally result in the condominium association’s budget being out of date. Additionally, if the bank merely hands out the original disclosure package, it runs the risk of being legally liable for any misstatements, or out of date statements, of the original declarant. Therefore, at a minimum, the bank should carefully review the condominium disclosure package which is being used to be certain it is current, accurate and complete.
Third, buyers who are purchasing previously unsold condominium units for residential occupancy must also be given a seven-day right to rescind or back out of their condominium sales contracts. The seven-day period does not begin to run until the buyer has signed a contract and acknowledged in writing the receipt of the condominium sales contract. The Georgia Condominium Act is silent on whether a buyer who was not given a current condominium disclosure package can rescind after they have closed on the purchase of their unit. However, the likelihood is that they can.
It should be emphasized that this section of the Georgia Condominium Act is one of the few which provides that the “willful violation of any of the requirements of this Code section by the declarant, the seller, any sales agent or broker, or any other person shall constitute a misdemeanor.” Since there is a risk of criminal prosecution for failing to comply with the law, this is definitely an area where an ounce of prevention is worth a pound of cure.
Written by Seth Weissman
Weissman Nowack Curry & Wilco PC