PUBLISHED ON: May 7, 2020
We provide this update to advise of the extension of the "safe harbor" period for the return PPP funding, which was recently extended through May 14th. As explained below, our position is that, despite conflicting reports, cooperatives and condominiums are currently ineligible for PPP funding, and, therefore, absent congressional action, which is unlikely to come, retention of PPP funds which may have been received will subject buildings and the individual board members who signed the loan application to liability. Accordingly, we urge any of our clients who have received PPP funding to protect themselves by taking advantage of this final opportunity to return the funds without penalty.
As noted in our previous newsletters and in many other industry publications, Small Business Administration regulations, on their face exclude cooperatives and condominiums (as well as other residential real estate businesses) from eligibility for PPP loans.
Nonetheless, numerous boards have filed loan applications and apparently a few associations have received funding. The disbursement of loan proceeds is subject to audit by the Small Business Administration, and Congress has authorized an ample enforcement budget to effect these audits. As part of the application process board members are required to sign certifications affirming, among other things, their good faith belief that their association is eligible to receive PPP funding. In the event auditors conclude that any filing of an application for a PPP....