Home News Lawsuits over Charleston condos’ construction issues block owners from refinancing | News

Lawsuits over Charleston condos’ construction issues block owners from refinancing | News

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Many condominiums in the Charleston area have filed proceedings over construction flaws, which means that some owners and potential buyers are missing out on ultra-low mortgage rates.

Lindsey Davis is one of the owners of those condos. In 2021, she was hoping to eventually secure a low interest rate mortgage at a condo on the James Peninsula.

Mortgage rates are close to record lows, and Davis wanted to replace a floating rate mortgage, which was the only option when he bought a home in 2017 due to ongoing lawsuits. ..

By 2021, Daniel Ellis Drive’s 300-condominium complex had filed two proceedings over construction flaws. Davis considered it all in the past and was assured by the complex management company that no proceedings had taken place. She applied for a 30-year mortgage when the average interest rate was about 3% and fixed her interest rate in November.

Unknown to Davis, her condo association has filed another proceeding, and her lender, South State Bank, learned in January that she refused to process her loan.

“We completely missed the boat. We received all these emails from the (Condo) Association that there were no proceedings,” Davis said.

The problem is that most banks make a mortgage and get it Fannie Mae and Freddie MacA federal-established entity that buys mortgages to allow banks to lend more money. And Fannie Mae and Freddie May do not buy a real estate loan in the proceedings.

Six months after Davis’ loan was rejected, mortgage rates almost doubled. Davis’ current floating rate mortgage is scheduled to change in 2024, her potential interest rate reaches 9.125% and her monthly payments could skyrocket.

Davis’s experience (misstated that there was no litigation related to her condo complex) may be unusual, but the inability to obtain a fixed rate mortgage owns or buys a condo involved in the litigation. It’s a problem faced by those who want to.

Lindsey Davis

Lindsey Davis is playing with a cat on June 27, 2022 at a condo on the James Island Peninsula. Like many condo owners and prospective buyers, she was unable to obtain her traditional mortgage due to ongoing proceedings related to construction flaws.Blood Nettle / Staff

For condominium owners, it makes sense to sue when a building is found to have construction-related defects, as someone has to pay to repair them. However, the proceedings can take years, and while the proceedings are in progress, it is difficult, if not impossible, for owners and potential buyers to obtain a traditional mortgage. I feel there is.

“The problem is the existence of the proceedings. A top real estate agent in the Charleston region, broadcasting a weekend radio show on WTMA-AM.” On the other hand, they are doing it for the benefit of their owners, Failure to raise funds reduces potential buyers. “

Beatty had experience in condos in his own proceedings, which shows how prices can plummet and rebound.

He bought a condo at Point James on James Island as a pre-recession investment. Construction flaws spurred the proceedings, house prices fell during the recession, and Beatty said he saw his $ 140,000 condo worth about $ 40,000.

After that, the proceedings were settled, the housing market recovered, and he said he was able to sell for $ 188,000 this year.

Dozens of condos and townhouses in the Charleston area are under proceeding, some of which have been filed multiple times. In most cases, water ingress due to improper window or porch construction is involved, which can lead to mold and termite problems and even life-threatening structural problems.

Repeated proceedings usually involved controversy over the quality of repairs made to correct the construction flaws that spurred the original proceedings, as in the case of the Peninsula.

Another James Island Condo Complex, Pelican Point, has returned to court and is still in proceedings.

Owen Tyler, broker at The Cassina Group, said there was no easy way to find out which condo and townhome complex was involved in the proceedings without looking at court records. The seller is required to disclose such proceedings, but such disclosures will only be made after the offer has been made.

Beatty said condominium shoppers should look for realtors working in the area for enough time to become familiar with the history of condominiums.

Builder ordered to pay $ 55 million

For potential buyers, condos and town homes are some of the most affordable options for home ownership, but only if a mortgage is available.

For condo owners, including Davis, the proceedings meant that frustration had to be monitored as interest rates on ultra-low mortgages fluctuated.

For those who have borrowed $ 200,000 for 30 years, the difference between monthly payments at 3% and 6% is $ 356, which is an extra $ 4,270 or more each year.

Proceedings have potential benefits, at least for condo owners. It is the possibility of winning a large settlement to pay for the repairs that the owner has to fund.

For example, at Pelican Point, in 2019, owners of all 84 condos will each pay nearly $ 60,000 to fund repairs, including termite damage that prompted a temporary evacuation ordered by the city. Was asked. Proceedings Termite insurance contracts have expired in connection with termite damage.

James Island condo owners exiled from termite victims filed proceedings after being charged $ 60,000 each.

According to Charleston County court records, the peninsula condominium filed a lawsuit for construction flaws from April 2006 to March 2011, resulting in a settlement of more than $ 10 million.

From November 2014 to April 2018, the Condominium Association and the two companies involved in the repair were defendants in a proceeding filed by multiple condominium owners and were dismissed on private terms. And in September, the Condominium Association sued companies and insurance companies involved in the repairs following the 2006-2011 proceedings.

“It’s a kind of unique situation,” said Charles Hip, Chairman of the HOA Board of Directors at The Peninsula.

Hipp said he did not want to discuss the proceedings that surprised Davis because he was angry with the unspecified aspects of previous reports on the peninsula issue.

In 2018, Post and Courier was ordered to temporarily evacuate a few days before Christmas after structural engineers discovered damage that Charleston city officials posed a “imminent threat to public safety.” Reported the residents of the condominium.

Hipp, the company Sale and rental Real estate, including peninsular condos, said condos are selling well, despite the latest proceedings complicating mortgage availability.

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