Taking out a loan to make repairs and enhancements

Started by JulieH3 • 7 replies • 1700 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

JulieH3 (Illinois)
Posts: 3

Posted:

I live in a town home community in Aurora, IL and I was wondering if anyone can tell me if it is legal for the Board to take out a loan to make non-emergency repairs without the vote of unit owners? Also, if those changes require drastic color changes and the addition of new decorative elements, does the Board have the power to do that without a unit owner vote?

MarkM31 (Washington)
Posts: 556

Posted:

Does it look like I can read your CC&Rs?

JulieH3 (Illinois)
Posts: 3

Posted:

Thank you for the response. I actually read them and didn't see anything that applied to our current situation. Our Declarations and Bylaws are very limited, unfortunately. That's why I was hoping that there was something applicable in the Illinois Condominium Property Act to protect our unit owner rights.

KerryL1 (California)
Posts: 14,550

Posted:

Welcome to the forum, Julie. Laws are different in different states.

Restrictions in an HOA's governing documents like your CC&Rs (aka "declaration," "covenants" ) are different from HOA to HOA.

Now, some kind soul here may research your IL laws. In general, HOAs may borrow to do non-essential maintenance, but it might need owners' vote to approve, so see if you can find that in your documents, probably in your CC&Rs or Bylaws. If not there, it probably is in your state laws.

For exterior paint of your town homes, the first question is isn't your HOA reserving for new paint? Reserves are an account that was set up to pay for things like new paint. Owners put money into the reserves account every month as a part of their dues. so, find out if you have reserves for exterior paint.

Often the Board has the power to change the paint colors without the vote of homeowners. But it's a good idea to permit owners to make an "advisory vote," which is non binding, but the Board can get your opinions that way and you all will have some voice. Usually the way it's done is the Board will decide on, let's say, 3 different "pallets" or combinations of colors that they are considering. Then they display them--perhaps on an easel board in a managers office or clubhouse (if you have one).

The addition of "decorative elements," will not have money in reserves for it because reserves only are for existing elements. So that's the one that MAY require an Owners' vote IF the Board must get a loan to do that work.

How many town homes are in your HOA?

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By JulieH3 on 04/27/2015 7:49 AM
I was wondering if anyone can tell me if it is legal for the Board to take out a loan to make non-emergency repairs without the vote of unit owners?

If there is nothing in your declaration that requires a member vote to borrow money and/or make repairs, then it is probably within their discretion to do so, although state law regarding non-profits or condos may limit the board's actions. I am not familiar with Illinois law in that regard.

Quote:

If those changes require drastic color changes and the addition of new decorative elements, does the Board have the power to do that without a unit owner vote?

Similar answer. If the declaration does not require a member vote or member approval then the board has the power to do that. I doubt that state law addresses decorations and color schemes.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Julie

I was an owner in an HOA of townhomes. 3-4 per townhomes building. 175 total. Selling for about $450K each. Long story short, but there was a lot of work that needed to be done. The BOD presented a "package" that would cost each owner $25K (yes, twenty five thousand dollars). It needed 75% of owners to say yes. The BOD arranged to borrow the money from a bank and each owner had several "finance" options from a one time $25K payment to like $6K per year.

82% said yes which means about 32 owners (18%) said no but they had to go along with it.

JulieH3 (Illinois)
Posts: 3

Posted:

Thank you, Kerry, for the informative and detailed response. Your proposal for a advisory vote, would definitely satisfy my neighbors and me. I am actually drafting a petition now for a special meeting to discuss these concerns. We have 24 units in our HOA.

I have done some scanning of the lengthy Illinois Condominium Property Act, but it could give any layperson a headache! The Board is not painting the common areas, but rather replacing the siding with an entirely different color and adding some trim, doing away with original shudders, and other things. Some of this is a positive thing, however, the color scheme is drastically different, and it seems only fair that unit owners would have some say in these non-essential "improvements."

I am also troubled by the loan in that I would think it would affect each unit owner is some way when we sell our units or if the association itself runs into the red.

KerryL1 (California)
Posts: 14,550

Posted:

Are there other IL statutes that might affect you, Julie? Are you really a "condo," for instance? I'm thinking that there is something somewhere about HOAs getting loans.

Have you found out if your HOA has any funds in a reserves account to replace the siding?

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here