Now Might be a Good Time for an Association Loan
Interest rates have never been better. As a result, many owners have jumped at the chance to refinance their homes or condos at seriously low rates. Yet, individual owners are not the only ones who can benefit from these low rates. Community association loan rates are probably lower than you think. Some of our associations have seen rates in the 4% range, and they may be going even lower if recent economic trends continue.
My point is that if you’re an owner or board member at a condo or HOA that has to tackle a costly repair project, or if your community needs to do a handful of expensive smaller projects, now is a good time to consider borrowing money to make these projects happen.
Borrowing funds for a repair project might make sense for several reasons. If your association has inadequate reserves, and you are facing repairs that cannot be delayed any longer, then without lending you will have to assess your members and collect the assessment funds before you can start the project. For many associations and their members, a large assessment due in a lump sum, or over a very short period of time, can really cause some financial pain for owners, and perhaps result in a number of delinquencies and, possibly, foreclosures. A loan allows the association to access funds for the project in the near term, while allowing the association the flexibility to collect the repair costs from the owners over time, sometimes up to 20 years. The association gets to complete its project, and owners are given maximum payment flexibility. Win-win!
In addition to funding, there are many important considerations that a board needs to think about when confronted with big ticket repairs. Investigating the issues, developing a thoughtful scope of repair, utilizing construction experts and project managers, and communicating with owners, not to mention following the requirements of the law and your governing documents, are all crucial to project success. And, if funding is sought, these considerations may become closing conditions.
The attorneys at Barker Martin have helped many associations obtain financing for projects. Our assistance often comes in many forms. We can help with reviewing your governing documents to determine if you even have the authority to borrow, or if amendments are needed. We frequently help develop special assessments, review construction contracts, and lending documents. We are also available to attend association meetings to help the board explain the borrowing and assessment process.
If you would like to know more, give one of our attorneys a call.