Florida Not For Profit Corporation

Started by RebeccaD6 • 5 replies • 232 views

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RebeccaD6 (Florida)
Posts: 2

Posted:

Can a Florida Not For Profit Corporation HOA collect HOA fees from residents and then loan that money out to a 3rd party making profits off the interest of the loan?
Especially when the money could be used for community repairs.

ElleN (Idaho)
Posts: 4,420

Posted:

What a fascinating question.

I will assume we are not talking about a HOA that purchases CDs or U. S. Savings bonds, effectively loaning money to banks or the federal government and earning interest from the "loan." (Believe me, we do get posters here who have thought stranger things.)

Just to get the ball rolling --

-- If this is a Florida HOA subject to FS 720, and we are talking about funds in the reserve account, then IMO the practice described above would require a vote of the owners. Quorum would have to be met, whence a majority of the owners would have to approve this for this practice be lawful. See FS 720.303 (6) (h).

-- Tax implications arise.

-- Then there are the vague "fiduciary duty" obligations of the board. Is becoming a de facto bank, loaning money to people the board thinks are creditworthy, in the best interests of the association? Emphatically: No.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Rebecca

It is not uncommon for Reserve money to be "invested". The issue becomes how invested. Most BOD's will, and should, play it safe with say CD's. Anything else is questionable. Does anything else require owner approval? That answer is in your Covenants.

RebeccaD6 (Florida)
Posts: 2

Posted:

The board on their own, I dont recall a vote by home owners loaned the golf course on which our homes sit money which they get interest from.
I'm assuming its our reserve funds.I cant get any financial documentation. Thats another issue.

DeanJ
Posts: 1,786

Posted:

HOA commonly allocate a portion of the fees toward reserve and protect those reserves against inflation by loaning or investing the funds.

Many homeowners don’t understand this concept, see a lot of money that does not appear to be needed and want their fees lowered. You basically have two choices, pay over time or pay large assessmemts.

DeanJ
Posts: 1,786

Posted:

After reading Florida 720, I am shocked anyone would ever volunteer to be on an HOA board there.

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