… Borrowing by Condo Corporations
Although the Condominium Corporation had been diligent in managing their reserve fund, it is not always possible to project the exact costs associated with repairing the common property until the time comes to actually do it. When the board released the Special Assessment to the owners, naturally there were many questions and uncertainty about how the individuals would be able to raise the funds to complete the needed repairs. I was contacted by a board member who was hopeful for a viable solution to their problem and what could be done for their owners. I met with this board and explained the borrowing option:
Condominium Corporation, and after carefully deliberating & discussing the issue, determined to initiate the first stage of the loan process which is getting proposals from multiple lenders. These proposals are based on a review of all the Condominium Corporation documents, such as the financials, bylaws, minutes, budget, reserve fund study, just to name a few. I explained that they did not need to have an exact dollar amount for the repairs to start the loan process as they could obtain the proposals with an estimated repair amount. This can save valuable time for the Condo Board and reduce the risk of delaying too long to start the condo loan applications while waiting for that exact dollar amount. Many other things can be done simultaneously during the loan process such as; • Getting scope & specs from an Engineer for repairs and proceeding with tenders from contractors;
• Answered the many Frequently Asked Questions;
• Discussed the positive and negative aspects of this alternative; and how it could affect the owners; I described how the loan would be obtained and what decisions the Board would need to make to get it. I gave the assurance that I would work with the board throughout the process from start to finish to help answer any questions or address any concerns they may come across. Some particular points of interest to the board about a condo loan was that; • All the required funds could be borrowed to cover the entire amount of repairs without having to remove money from the reserve fund; • There is no lien registered against an owner’s unit because of the loan; • An owner’s condo fees would not be raised because of the loan; • Owners were given an opt-in or opt-out choice on participating in the loan; • In the future, if the current owner sells their unit, the loan can be automatically transferred to the new owner; • All owners were automatically qualified for the loan if they chose to opt-in; The Board had all the information that enabled them to decide if this was a potential option for their
Having an owners’ information meeting;
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• Proceeding with a vote on a borrowing bylaw at the owners’ information meeting; • It is not required to finish one of these tasks before starting the next, the optimum result is to have the loan approved and the repair contractor ready to go at the same time; The importance of a proposal is that it outlines the parameters of the loan with key points such as: • Amount of loan asked for and how the loan money will be transferred to the condo; • Interest rate, length of term & amortization, monthly payments, renewal information; • Any loan conditions, clauses, restrictions and legal wording; Once these parameters are known for each lender proposal, the Board can decide on their choice of a lender and provide that choice and all the information related to the condo loan to the owners at an information meeting. At this meeting owners would be able to ask any questions they have on the condo loan process & vote on the Condominium Corporation borrowing bylaw agreeing to the loan.
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