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Roof replacement loan

Started by VC ‱ 13 replies ‱ 248 views

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VC (Florida(FS 720))
Posts: 118
Posted:
Happy New Year to all !

Long time, no see...

Our HOA is a mixed one: it consists of roughly 50% of townhome owners and 50% single family owners.

Now, there's a high likelihood of the HOA(which is responsible for TH roof repairs/replacements) taking a substantial loan for roof replacements. Can single family owners be isolated from being liable for that loan ? E.g. some TH owners defaulting on loan repayments.

Thanks !
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By VC on 01/06/2024 9:12 AM
Our HOA is a mixed one: it consists of roughly 50% of townhome owners and 50% single family owners.

Now, there's a high likelihood of the HOA(which is responsible for TH roof repairs/replacements) taking a substantial loan for roof replacements. Can single family owners be isolated from being liable for that loan ? E.g. some TH owners defaulting on loan repayments.
The HOA corporation would be repaying the loan. To pay for the loan, the board would either raise assessments or impose a special assessment. If owners default on paying an assessment, then this is between the HOA and the owner.

Related aside:
Have you checked the wording in the governing docs to see if per chance only the townhome owners can be assessed for the costs of the roof?

In condominium associations, it's not unusual for wording to be present in the declaration saying that the cost of repairs to common area elements serving less than all units are assessable to only those units that benefit.
VC (Florida(FS 720))
Posts: 118
Posted:
The wording implies that only the TH owners can be assessed the cost:

For Lots containing attached townhomes within the Townhome Neighborhood Service Area, the Association shall be responsible for:

...

Maintenance (including, without limitation, pressure cleaning if applicable), repair and replacement of roofs of dwellings and garages.
The cost_of pérforming maintenance, repair and replacement by the Association shall be a Limited Common Expense of the Townhome Service Area as well as any reserves the Board of Directors may establish
from time to time with respect to such items of maintenance, repair or/and replacement.

My question, though, is whether the single home owners will also be on the hook for the loan repayment since the loan will be extended to the HOA as a whole (I think), not only to the TH "service area".
KerryL1 (California)
Posts: 14,550
Posted:
Not sure, But I think the lender can include in the loan payment terms that this applies only to xxxx TH with their addresses or parcels numbers.
When my HOA took out a BIG loan, the dues payments of the owners was the collateral. So, the e lender, could include only the THs in the wording. Would they? I dunno.
KerryL1 (California)
Posts: 14,550
Posted:
Not sure, But I think the lender can include in the loan payment terms that this applies only to xxxx TH with their addresses or parcels numbers.
When my HOA took out a BIG loan, the dues payments of the owners was the collateral. So, the e lender, could include only the THs in the wording. Would they? I dunno.
VC (Florida(FS 720))
Posts: 118
Posted:
Thanks !

I am not sure either ...
DeanJ
Posts: 1,786
Posted:
Quote:
Posted By VC on 01/06/2024 9:12 AM
Happy New Year to all !

Long time, no see...

Our HOA is a mixed one: it consists of roughly 50% of townhome owners and 50% single family owners.

Now, there's a high likelihood of the HOA(which is responsible for TH roof repairs/replacements) taking a substantial loan for roof replacements. Can single family owners be isolated from being liable for that loan ? E.g. some TH owners defaulting on loan repayments.

Thanks !

Must be a 2024 thing - HOA’s with insufficient reserves trying to borrow their way out.
KellyM3 (North Carolina)
Posts: 2,239
Posted:
Quote:
Posted By VC on 01/06/2024 11:11 AM
The wording implies that only the TH owners can be assessed the cost:

For Lots containing attached townhomes within the Townhome Neighborhood Service Area, the Association shall be responsible for:

...

Maintenance (including, without limitation, pressure cleaning if applicable), repair and replacement of roofs of dwellings and garages.
The cost_of pérforming maintenance, repair and replacement by the Association shall be a Limited Common Expense of the Townhome Service Area as well as any reserves the Board of Directors may establish
from time to time with respect to such items of maintenance, repair or/and replacement.

My question, though, is whether the single home owners will also be on the hook for the loan repayment since the loan will be extended to the HOA as a whole (I think), not only to the TH "service area".

Your Covenants are clear. The roof replacement cost will be repaid by the Townhome owners and not the single-family homeowners. That said, there absolutely must be a dedicated dues adjustment to ensure that single family homeowners aren't subsidizing the roof replacement via reduced budgeting for community-wide amenities and services.

This is easy.
VC (Florida(FS 720))
Posts: 118
Posted:
That's correct.

The reserve study recommendations were ignored and not enough money was collected to replace leaking roofs.

Now the HOA board wants to get a loan. As I said, not sure how it will affect the single family home owners.
KerryL1 (California)
Posts: 14,550
Posted:
It should not affect them at all per Kelly & others. Your docs are clear. My now experience was years ago and it seems a lot depends on finding a lender who'd do what the HOA needed.

So, Dean, yeah we had to take out a $900k loan when our cooling towers (run the HVAC systems) on both 25-story tower roofs were failing 15 years before the end of estimated useful life as estimated in our reserves study. We were in construction defect litigation against the developer, but summer was approaching and no chance we'd reach a settlement before they'd fail. We rec'd a nice settlement a year after the loan and replacements. Biggest crane west of the Mississippi!
VC (Florida(FS 720))
Posts: 118
Posted:
Thank you all for your helpful comments !
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By VC on 01/06/2024 11:11 AM
The wording implies that only the TH owners can be assessed the cost:
For Lots containing attached townhomes within the Townhome Neighborhood Service Area, the Association shall be responsible for:
...
Maintenance (including, without limitation, pressure cleaning if applicable), repair and replacement of roofs of dwellings and garages.
The cost_of pérforming maintenance, repair and replacement by the Association shall be a Limited Common Expense of the Townhome Service Area as well as any reserves the Board of Directors may establish
from time to time with respect to such items of maintenance, repair or/and replacement.

My question, though, is whether the single home owners will also be on the hook for the loan repayment since the loan will be extended to the HOA as a whole (I think), not only to the TH "service area".
I expect the loan will be to the HOA corporation. If the HOA defaults, then I think "on the hook" is woefully improper and inaccurate terminology. The lender is going to go after the corporation. I do not think this means the corporation will, say, put liens on all owners' homes.

But your HOA is not going to default. Know why? Because it would be a gross violation of fiduciary duty for the HOA Board to reach the point of default without first coming down hard on the townhome owners. And I do mean seizing units via foreclosure and selling them until enough money is raised to do what needs to be done (pay back a loan; get the roofs on, at least until the next hurricane).

Perhaps your board might be better served by seeing what the Florida HOA lending situation is. I wonder if the options might be nil. If so, this would make this issue moot. Instead, the board is obliged to special assess and foreclose as needed. For inspiration on the latter, see:

https://www.sarasotamagazine.com/home-and-real-estate/an-unlikely-heroine-steps-in-to-save-crumbling-dolphin-tower

VC, dude, you are a not a lawyer a banker an accountant a tax guy. Nor are you superman. You are a volunteer. Do what the governing docs say the board is supposed to do. Fix the roofs. If it takes a loan, so be it. Charge the people who are supposed to be charged. If they do not pay, start collections.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By ElleN on 01/06/2024 10:34 PM
I do not think this means the corporation will, say, put liens on all owners' homes.
Post-o. Above, change "corporation" to "lender."
VC (Florida(FS 720))
Posts: 118
Posted:
Thanks, Ellen. What you are saying makes sense.

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