Capital repair loan

Can a BOD on its own without the entire owners community (a quorum) decide to take a large bank loan to repair TH roofs, for example ?

The reserve fund can cover perhaps only 5% of the total repair bill, hence the idea of taking a loan has emerged. If one has to rely on the TH reserve replenishment, the process will take about 20 years.

Oh, and the reason I said probably is because the documents (your bylaws and CCRs) usually give the board the authority to obtain loans on the association's behalf, so pull out your documents and read them. Sometimes, there are provisions saying a certain percentage of homeowners have to agree to loans that exceed a certain amount or any type of loan. Similar to special assessments or amendments to the documents.

Looks like membership vote is not required in our case:

"Condo associations and HOAs typically have all the rights and powers of not for profit corporations, unless specific rights are revoked or amended in the association documents. Florida Statute 617.0302(7) states that not for profit corporations can:

“Make contracts and guaranties, incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure its obligations by mortgage and pledge of all or any of its property, franchises, or income."

https://www.daniafernandez.com/2021/04/20/can-a-condo-association-borrow-money-without-a-membership-vote/

No, we do not have the same assessment. SFH are responsible for their capital repairs individually.

SFH dues consist of the landscaping portion and the common operating/common area reserve fund expenses.

VC, is there an emergency as defined in FS 252.34(4)? Has a state of emergency been declared pursuant to FS 252.36 in the area encompassed by the association? If so, then FS 720.316 (1) (k) says that, the board has the power to take loans without owner approval. Read the fine print here:
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/0720.html

I recommend getting comfortable with identifying keywords and searching the applicable statutes.

Thank you, Ellen. I already saw FS 720.316 (1) (k).

No, no state of emergency has been declared. Some TH roofs (50% ?) are leaking and there's an opinion that the cause of leaks is a construction defect (the roofs are about 15 yo on average), so the idea is to replace wholesale for which we do not have money in the TH reserve fund. I need to dig deeper into engineering studies that were made before my time and understand why limited repairs are not possible, but the current opinion is that a replacement would be cheaper than repairs.

VC, just saying: I consider leaks an emergency. Mold is often an aftermath of leaks. Mold eradication is incredibly expensive.

VC, how can you be sure the leaking is not a consequence of the recent hurricanes?

In Florida, I am not sure owners would be on good ground to contest this loan as a violation of FS 720.316.

What the governing documents (bylaws and declaration) say about loans, and whether owners' approval is required, may be more important here.

I understand, and I can see the TH owners' point. The problem I see with all community associations is that owners have a vested interest in making short-term decisions at the expense of longer-term efficiencies. The requirements around reserve funding help counteract this, but not entirely. If I were a townhome owner, I'd be more willing to bite the bullet if there were some reason to take out the loan other than saving money in the long run. For example, if you're having to make more repairs that are driving up operating costs, that may get their attention - especially if you point out that you're basically throwing the money away since the roofs will be replaced in x years. Ditto programs that provide support for more efficient construction that could benefit everyone short term. In other words, they'll need something that benefits them personally.

FWIW, we had a board president who thought we shouldn't have to put aside money for roofing replacement because that's not her problem. Pointing out that state law requires us to do so was not persuasive. So be thankful it's only the owners you're up against. :-)

If these townhouses are part of a Condo Association, you should declare an emergency and do a special assessment. Florida state law says all condo policies must have assessment coverage with a no larger than a $200 deductible up to a limit (usually $2000). For example, the condo we own had a $1600 special assessment this year for excess isurance costs. If the condo association had been smart, they would have said the assessment was for hurricane cleanup instead of insurance premiums. They did pay a huge amount for hurricane cleanup and it would have been a legitimate way for the insurance to pay. Now I have to pay out of pocket - otherwise my insurance would have paid with no deductible up to $2000.

The condos sub-associations in my community have been adding anything and everything, including new landscaping, to their "hurricane" expenses before figuring their special assessments, because they know the most each unit will have to pay is $200.

I do have that coverage on my home, but the deductible is $4000, so it would have to be a huge special assessment before they pay.

My point is a special assessment might be a much better route than a bank loan in this case.

We can do a special assessment all right. I am not sure why President is considering a loan option. Perhaps, because the amount of money each TH owner will have to come up with is about $45K.

Ellen, Cathy, Lori thank you all for your valuable input !

I should have read the thread from the beginning more closely - sorry I didn't realize the amount per TH was so high for a special assessment.

Here's another point - the downside of a special assessment is that it can make the unit harder to sell, because if the special assessment is done in installments, the new owner usually takes on the debt of the special assessment. This was the case in several communities when we were looking to buy a condo and it made it much less attractive to buy compared to other properties. Same thing when each unit has a debt from a refurbished or rebuilt clubhouse, golf course, etc.

Our HOA documents do provide that the board can get a loan without member approval up to a certain amount (in our case it's a percentage of our budget, not a fixed amount). We recently did this by getting a $500k line of credit for hurricane repair costs. Luckily, we haven't had to use it, but it's there in case we do. I suspect your board does have the right to do this.

If it were a smaller amount per unit a special assessment is the better way to go in my opinion. Once and done. But with such a large amount, I would say borrowing the money is the better option and paying it over time in increased fees is the better choice.

Do you know if they have an engineering study (not just a roofer's opinion) about the roof life? I would be suspect that this is something that came up suddenly unless it's weather-related damage or your reserve study was just wrong. Or your board kept the fees artificially low because otherwise it would be unattractive to new owners.

The condo sub-associations in our community have always kept their condo fees too low to cover real costs. They all had to have new roofs due to damage in the last big hurricane (Irma not Ian) but didn't have enough money for the insurance deductibles and had to borrow. That's the way they do business. We do not run our HOA in a similar way.