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Condominium Association and HOA Loan Challenges

Condominium associations and HOAs are charged with the duty to collect common fees on a regular, usually monthly, basis. Included in these common fees are funds set aside for future expenses of the condominium association or HOA. These funds are generally said to be “in reserve” and are commonly referred to as “reserve funds”. The specific use of these monies is to maintain and upgrade the common areas of the condominium association or HOA. Condominium associations and HOAs are routinely chock full of commonly owned elements. Among the more common are pavements, roofs, decks, building exteriors, amenities like swimming pools and tennis courts, club houses, commonly owned landscaped areas, and parks. In theory, keeping enough funds in reserve means that there is money available to maintain and repair these common elements, either on a prepared schedule or as they fall into disrepair.

Unfortunately, most condominium associations and HOAs do not hold enough funds in reserve to do this properly. One recent estimate indicated that as many as 90 percent of all condominium associations lack sufficient reserve funds to handle these repairs and replacements. If you find your condominium association or HOA needs to borrow money to handle repairs, maintenance, or legal issues, clearly you are not alone. HOA Lending Solutions was formed to supply condominium associations and HOAs with the needed capital to supplement the reserve funds of typical condominium associations and HOAs.

In a typical commercial loan, collateral is required for the lender to even consider the loan. Since condominium associations and HOAs do not typically have collateral, lenders look to legal right of the condominium association or HOA to levy condominium unit owners or HOA residents. These levies come in the form of assessments and/or monthly condominium or HOA fees. This is why it is so critical that a condominium association or HOA keep easy to read and easy to understand financial records. These financial records will be reviewed as part of the lending process.

Because condominium associations and HOAs are run by elected volunteers who routinely change seats, the loan is made to the condominium association or HOA rather than to the Board of Directors. For this reason, the legal documents are also of great importance and impact every unit owner within the condominium association or HOA.