When purchasing a property or refinancing a mortgage, a lending bank will do a Title Search on the property in question. Often, if there are outstanding violations on file for the subject property, the bank will ask the Agent for an Indemnification and Hold Harmless letter stating that the Condominium Association, Cooperative Corporation and/or Managing Agent will indemnify them for all claims and damages as a result of these violations.
Occasionally, the Bank will ask for the Unit Owner / Shareholder to also be included on the letter in question, but they should not be. If the Co-op or Condo should indemnify the particular Shareholder or Unit Owner in question, the building could be releasing them from any financial obligations in the future. For instance, if the building is fined $100,000 in the future for an outstanding violation and all Unit Owners or Shareholders are paying that charge through their maintenance / common charges or are assessed to pay that amount, the Shareholder or Unit Owner who was named in the Indemnification Letter could use that as evidence to show that they are not required to contribute to their portion of the outstanding penalty.
By keeping only the lending institution on the Indemnification and Hold Harmless, the building will still have the authority to have the Shareholder or Unit Owner contribute to the financial obligations that those violations will cause.