DavidL45 (Florida)
Posts: 1
Posts: 1
Posted:
Can a HOA secure a bank loan without the membership voting on it?
A service of:
Community123.com
Professional websites for HOAs & condos, since 2004
Professional websites for HOAs & condos, since 2004
🎁 1st year FREE for HOATalk members! →
bank loans
Started by DavidL45 • 9 replies • 363 views
💬 Join us to post & get advice from 50,000 HOA & Condo leaders.
Create Free Account →
⚡ Takes 30 seconds
Already a member? Log in
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
I for one would doubt it. I was in an HAO that did a bank loan for about 1Mil but owners had to approve by 2/3rds. It passed at about 90%.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
It depends on what your documents say if it can be a board vote or membership one. The HOA can secure a loan but it will be much more costlier than doing a special assessment. Which bank loans can make owners do both...
Former HOA President
AugustinD
Posts: 3,698
Posts: 3,698
Posted:
Is this a condominium?If this is an emergency, both the Florida condo statute and the Florida HOA statute says the Board can arrange for such a loan without owners' approval, unless the governing documents prohibit this.
Read here:
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/0720.html
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0718/0718.html
If not an emergency, then you would have to quote here what the covenants say about securing loans.
Quote:
Posted By DavidL45 on 03/22/2022 3:04 PM
Can a HOA secure a bank loan without the membership voting on it?
Can a HOA secure a bank loan without the membership voting on it?
Read here:
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/0720.html
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0718/0718.html
If not an emergency, then you would have to quote here what the covenants say about securing loans.
LoriM15 (Florida)
Posts: 1,009
Posts: 1,009
Posted:
We are a Florida HOA governed by FS 720. We amended our documents (this is from our bylaws) last year. There used to be a dollar amount that we could borrow, I believe it was $50,000, without member approval. We decided to make it a percentage of our budget because then our documents were "evergreen" and would not need to be updated if there was inflation over the years.
6.10 Borrowing Money. The Board may borrow money on behalf of the Master Association; provided, however, that (i) the consent of the Members of at least two-thirds (2/3rds) of the entire Voting Interests of the Master Association, shall be required for the borrowing of any sum in excess of 20% of the current year’s budget; and (ii) no lien to secure repayment of any such borrowed money may be created on any Lot, Unit or Residential Land without the consent of the Owner of such Lot or Unit.
Our condo sub-associations, under FS 718, also have the ability to borrow money. I know because they are borrowing money to pay for roof replacement in at least one of the condo associations.
Our HOA was turned over by the developer about 20 years ago and we have never borrowed money. But if we have a major hurricane we need to have the ability to borrow if necessary.
6.10 Borrowing Money. The Board may borrow money on behalf of the Master Association; provided, however, that (i) the consent of the Members of at least two-thirds (2/3rds) of the entire Voting Interests of the Master Association, shall be required for the borrowing of any sum in excess of 20% of the current year’s budget; and (ii) no lien to secure repayment of any such borrowed money may be created on any Lot, Unit or Residential Land without the consent of the Owner of such Lot or Unit.
Our condo sub-associations, under FS 718, also have the ability to borrow money. I know because they are borrowing money to pay for roof replacement in at least one of the condo associations.
Our HOA was turned over by the developer about 20 years ago and we have never borrowed money. But if we have a major hurricane we need to have the ability to borrow if necessary.
MaxB4
Posts: 3,513
Posts: 3,513
Posted:
It is one thing to obtain a bank loan and another having the authority to re-pay the loan. I just secured one for a California property and the re-payment started in January. While the Board was not required to obtain authorization to obtain a bank loan, they were required to obtain membership approval for the special assessment to re-pay the loan. The bank also required legal counsel to sign off on all the legalizes.
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
Quote:
Posted By DavidL45 on 03/22/2022 3:04 PM
Can a HOA secure a bank loan without the membership voting on it?
Can a HOA secure a bank loan without the membership voting on it?
Your HOA would need to obtain a loan where the common area property isn't the loan's collateral (Lien). Higher interest rates for essentially backing an HOA loan against your monthly cashflow so you'd need a gameplan for repayment. Otherwise, get the community approval.
PatJ1 (North Carolina)
Posts: 568
Posts: 568
Posted:
Quote:
Posted By KellyM3 on 03/22/2022 7:45 PM
Posted By DavidL45 on 03/22/2022 3:04 PM
Can a HOA secure a bank loan without the membership voting on it?
Can a HOA secure a bank loan without the membership voting on it?
Your HOA would need to obtain a loan where the common area property isn't the loan's collateral (Lien). Higher interest rates for essentially backing an HOA loan against your monthly cashflow so you'd need a gameplan for repayment. Otherwise, get the community approval.
We were advised the same thing when looking for a way to fund a major project. If community property is put up as collateral to secure the loan, a membership vote is needed.
MaxB4
Posts: 3,513
Posts: 3,513
Posted:
Quote:
Posted By PatJ1 on 03/22/2022 11:44 PM
Your HOA would need to obtain a loan where the common area property isn't the loan's collateral (Lien). Higher interest rates for essentially backing an HOA loan against your monthly cashflow so you'd need a gameplan for repayment. Otherwise, get the community approval.
Posted By KellyM3 on 03/22/2022 7:45 PM
Posted By DavidL45 on 03/22/2022 3:04 PM
Can a HOA secure a bank loan without the membership voting on it?
Can a HOA secure a bank loan without the membership voting on it?
Your HOA would need to obtain a loan where the common area property isn't the loan's collateral (Lien). Higher interest rates for essentially backing an HOA loan against your monthly cashflow so you'd need a gameplan for repayment. Otherwise, get the community approval.
We were advised the same thing when looking for a way to fund a major project. If community property is put up as collateral to secure the loan, a membership vote is needed.
Community property is not used for collateral, it is either HOA dues or a special assessment that is.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
I was a member of one HOA in MA that floated a $2.5M loan from a local bank. Each unit/home (value of about $400 to $450K) was responsible to pay their fair share ($25 to $35K) back to the bank within 5 years. The bank offered several plans. Pay up front, no interest. Other plans went out to 5 years with interest. The BOD did a hell of a job presenting the plan. They had informational meetings, mailings, spreadsheets, etc. It needed 75% of all owners to approve. Close to 90% approved the plan. Two that did not agree got together and sued the HOA. That got thrown out of court fast when the Judge said the HOA went about it properly. This Special Assessment became a "negotiable" item when one sold a unit.
🎯 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