ConorM (Illinois)
Posts: 15
Posts: 15
Posted:
Has anyone had any experience with the HOA lending money to individual owners instead of getting a HOA loan?
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HOA as Lender
Started by ConorM • 5 replies • 1290 views
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TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
I wouldn't do it.
That said, a Board would typically have the authority to invest money how they see fit.
The loan should have proper paperwork along with penalties for non-payment.
The loan should also earn similar to what a bank loan would have earned.
Again, I wouldn't do it.
That said, a Board would typically have the authority to invest money how they see fit.
The loan should have proper paperwork along with penalties for non-payment.
The loan should also earn similar to what a bank loan would have earned.
Again, I wouldn't do it.
LarryB13 (Arizona)
Posts: 4,099
Posts: 4,099
Posted:
Conor,
From your question, I assume that the association does not own the unit as you mention lending money.
There is a reason why a commercial lender is not willing to fund this transaction. It may be that they see the borrower as too risky or the property as too risky. Either way, if experienced lenders are not willing to get involved what are the chances that the condo association would fare any better?
Normally, a condo association is limited by its declaration as to what it may do. If the declaration does not specifically allow the association to lend purchase money then it probably lacks the authority to do so.
However, if the association already owns the unit and needs to sell it, then the issue is not that the association is lending money but rather entering into an installment sale. In this case, it would give the association some control over who purchases and would allow the association to exclude investors.
From your question, I assume that the association does not own the unit as you mention lending money.
There is a reason why a commercial lender is not willing to fund this transaction. It may be that they see the borrower as too risky or the property as too risky. Either way, if experienced lenders are not willing to get involved what are the chances that the condo association would fare any better?
Normally, a condo association is limited by its declaration as to what it may do. If the declaration does not specifically allow the association to lend purchase money then it probably lacks the authority to do so.
However, if the association already owns the unit and needs to sell it, then the issue is not that the association is lending money but rather entering into an installment sale. In this case, it would give the association some control over who purchases and would allow the association to exclude investors.
ConorM (Illinois)
Posts: 15
Posts: 15
Posted:
I'll throw in a few more facts and maybe that could change things:
We have a capital repair project that requires a $190,000 special assessment.
We have 16 units (all owner owned), 4 of which need varying amounts of financing.
One lender is willing to lend, but charges $2,500 for the financing fee. I understand that the financing fee needs to be spread across all the owners. Most of them don't like this idea -- "why should I have to pay for them?"
We have a capital repair project that requires a $190,000 special assessment.
We have 16 units (all owner owned), 4 of which need varying amounts of financing.
One lender is willing to lend, but charges $2,500 for the financing fee. I understand that the financing fee needs to be spread across all the owners. Most of them don't like this idea -- "why should I have to pay for them?"
LarryB13 (Arizona)
Posts: 4,099
Posts: 4,099
Posted:
Conor,
You have a 16-unit condo complex that failed to adequately fund for capital repairs. Due to that past failure, each owner must now pony up almost $12,000. Twelve of the owners are apparently able to do so but four others each need to take out a loan and each wants to the association to pay part of their costs in doing so.
What planet do these people live on? Why is it you believe that the fees that these four owners will face should be borne by the twelve others with adequate resources? ("I understand that the financing fee needs to be spread across all the owners.") It was bad enough that your association mismanaged its past financial affairs but why compound the problem by asking all owners to give the other four a free ride?
I doubt that any of the twelve who can pay have that cash stuffed in a mattress. They are having to cash in investments or take early withdrawals from their 401K's. They are each paying a price by losing the future earnings to pay their share of the repairs. Is your association somehow going to reimburse them also for their losses? Why are those who must pay for financing entitled to assistance while those who will lose future opportunities are not?
Sorry, but this makes no sense at all.
You have a 16-unit condo complex that failed to adequately fund for capital repairs. Due to that past failure, each owner must now pony up almost $12,000. Twelve of the owners are apparently able to do so but four others each need to take out a loan and each wants to the association to pay part of their costs in doing so.
What planet do these people live on? Why is it you believe that the fees that these four owners will face should be borne by the twelve others with adequate resources? ("I understand that the financing fee needs to be spread across all the owners.") It was bad enough that your association mismanaged its past financial affairs but why compound the problem by asking all owners to give the other four a free ride?
I doubt that any of the twelve who can pay have that cash stuffed in a mattress. They are having to cash in investments or take early withdrawals from their 401K's. They are each paying a price by losing the future earnings to pay their share of the repairs. Is your association somehow going to reimburse them also for their losses? Why are those who must pay for financing entitled to assistance while those who will lose future opportunities are not?
Sorry, but this makes no sense at all.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
One HOA I was in had an owner agreed upon $25K assessment per unit (175 units). The association got qa local bank to back the deal and owners were offerred several payment plans and the association got their money upfront.
The longer the repay time, the more one had to repay. Typical loan arrangement. I think the longest payment time was 5 years.
Hope this helps.
The longer the repay time, the more one had to repay. Typical loan arrangement. I think the longest payment time was 5 years.
Hope this helps.
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