The Depew School District stands to lose all the mortgage interest payments it has received from the sale of the Lincoln Street School if the buyer prepays the $400,000 mortgage, the School Board learned Thursday.
The board was notified by letter that a provision in the mortgage agreement with Southeast Community Work Center Inc. says that if the buyer prepays the entire principal balance during the first 30 months of the mortgage, the district "would waive any claim for interest during such period."
Southeast Community Work Center purchased the school from the district in 1987 and agreed to pay $400,000 over a 10-year period at 9 percent interest. The district received monthly payments of $5,067 according to the agreement. Lost interest payments that would now be applied to the principal would exceed $70,000.
Trustee Jane Wiercioch, who said she had never seen the original contract, described the agreement as a "raw deal" for the district. Other members also expressed their dissatisfaction with the prepayment provision and agreed to examine the original contract.
Attorneys for Southeast Community Work Center notified the district that they would discharge the mortgage in February, thereby meeting the prepayment provision.