HOA bank loan

Started by LindaR14 • 7 replies • 658 views

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LindaR14 (Florida)
Posts: 1

Posted:

If an HOA Board President or Board decides to borrow a large sum of money, a Million Dollars, from a bank, must/should they inform the community before acting? Can this action be intentionally with held from the community?

SheliaH (Indiana)
Posts: 6,964

Posted:

Well, what do YOU think? You pay assessments - don't you think you should be made aware of activities that can affect how much you pay or if a special assessment might be necessary?

The first thing to do is to talk to the board - what is the loan for? Did the board consider other ways to finance this other than a loan (and yes, a special assessment may be necessary?) If so, why was this the best option? And why haven't you already gone to them with this - or have you?

You should already know this, but check your documents to see what it says about special assessments. Usually, those require homeowner approval. A loan may not necessarily require homeowner approval, but assessments will have to cover the loan payments, reserve deposits, and routine monthly expenses, which will probably mean an increase. Some documents require homeowner approval if the board wants to increase assessments past a certain percentage. For example, my community requires homeowner approval if the upcoming year's assessment must be increased past 5% over the current year.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

AugustinD
Posts: 3,698

Posted:

LindaR14, is this a condominium or non-condominium? Is it subject to FS 720 or FS 718? Has control of the board been turned over to the membership, or does the developer still control seats on the board?

AugustinD
Posts: 3,698

Posted:

Both FS 718 (condos) and FS 720 (non-condo HOAs) permit a Board to borrow money "to fund emergency repairs" without a membership vote.

The nonprofit corporation statute gives the Board the authority to borrow money.

Else it appears to me that the only restrictions on borrowing will be those in the Declaration or Bylaws.

For what purpose is the loaned money to be used? Is that purpose listed in the Declaration?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Should they inform the membership? Yes - to me it's common sense.

Must they inform the membership? No
They must keep minutes and it should be mentioned in the minutes.
The loan should be identified in the financial reports.
Per statute - the board must show these documents to any member if the member asks.

JaniceM7 (Maryland)
Posts: 16

Posted:

Our board did take out a $2million dollar loan and we saw it in the budget. Both the inflow as well as payments.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Linda

You have your answer. You like is or not?

MaxB4
Posts: 3,513

Posted:

There are two issues, one the bank loan, the other, how is it being repaid. I would think that would be of some importance.

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