Loan to few Unit owners from HOA's Line of Credit

[pl.hammon]

What is the name of your state (only U.S. law)? MA

I Live in a condo of 100 units and there is a huge assessment for replacing the outer shell (siding, roof, windows & doors) The per unit cost is in the range of $40 to 60K.

Since the project falls under the category of essential repair, There was no voting for any of the decisions.

The HOA has now taken a $3.5 million Line Of Credit (LOC) from a bank for funding the project. They are giving 2 options to the residents

1. Pay the entire Assessment cost of the individual units upfront or
2. Take a 10 yr loan from the HOA's LOC (this will be given to the residents without any credit check and the HOA will get an interest & a small management fee for handling this loan )

HOA says that anyone who wants to sell their home down the line even if they have made the complete payment on their units Assessment cost will still need to disclose to the prospective buyer about the Associations Debt.

Some of the residents are afraid that we wont be able to sell our codo in the future given the risk of potential foreclosures among those who have taken the 10 yr loan option & the millions of $ Debt that the HOA is holding.

My Questions are

1. Does the HOA has the right to give a 10 yr loan for only a few residents from the Line of Credit.

2. As an individual unit owner, Can I object the HOA from giving 10 yr loan and instead push them for a shorter period of 2 or 3 years loans, so that I may be able to sell my unit anytime after that.

Adv Thanks for your guidance.

[Pojo]

Originally Posted by pl.hammon

My Questions are

1. Does the HOA has the right to give a 10 yr loan for only a few residents from the Line of Credit.

Adv Thanks for your guidance.

Is this a very upscale where most of the owners can just hand over 40-60K in cash upfront?

And if not that would be a lot of money to pay off in 2 or 3 years especially given today's economy.

How do the other unit owners feel?

[pl.hammon]

Originally Posted by Pojo

Is this a very upscale where most of the owners can just hand over 40-60K in cash upfront?

And if not that would be a lot of money to pay off in 2 or 3 years especially given today's economy.

How do the other unit owners feel?

We are told that it is a mandatory assessment as the current wooden sidings (19 yrs old) have started perishing due to water damage and poor construction. An Architect Firm that was hired by HOA has given its report that it needs to be replaced at the earliest to prevent damage to the structure.

Most of the residents are OK it as they dont have a choice. Those who have equity in their home's prefer the upfront one time payment as they get tax benefit.

The 10 yr loan is for the rest who are not able to shell out the money upfront and are not able get a home equity loan. There are a few units are already defaulting on the condo payments and may go for Foreclosure.

The reason why I wanted to push it for a 2 year loan term is,

As per the HOA's corporate attorney, If any unit owner forfeits on the condo payments then as per the Master Lien the Association's due has a priority over the Mortgage lender & the association has act fast and enforce the linen withing a period of 6 months.

However if the unit owner forfeits on the Bank's Mortgage Payments first and not on the Condo payments. HOA may not know about the foreclosure process of the unit and will not have a way to enforce the Master Lien & It becomes a complex scenario (Not exactly sure why it is like that).

This is another reason why I want to push for a 2 year loan period because

If the Condo Assessment Payment is huge whoever who is forfeiting would either default on both the Condo and mortgage payments or Condo payment first and the HOA can enforce Master Lien within the 6 month period.

This way the rest of the residents may not have to take a 10 yr risk of some unit owners foreclosing/foot their assessment costs.

Please advise

[HomeGuru]

Originally Posted by pl.hammon

What is the name of your state (only U.S. law)? MA

I Live in a condo of 100 units and there is a huge assessment for replacing the outer shell (siding, roof, windows & doors) The per unit cost is in the range of $40 to 60K.

Since the project falls under the category of essential repair, There was no voting for any of the decisions.

The HOA has now taken a $3.5 million Line Of Credit (LOC) from a bank for funding the project. They are giving 2 options to the residents

1. Pay the entire Assessment cost of the individual units upfront or
2. Take a 10 yr loan from the HOA's LOC (this will be given to the residents without any credit check and the HOA will get an interest & a small management fee for handling this loan )

HOA says that anyone who wants to sell their home down the line even if they have made the complete payment on their units Assessment cost will still need to disclose to the prospective buyer about the Associations Debt.

Some of the residents are afraid that we wont be able to sell our codo in the future given the risk of potential foreclosures among those who have taken the 10 yr loan option & the millions of $ Debt that the HOA is holding.

My Questions are

1. Does the HOA has the right to give a 10 yr loan for only a few residents from the Line of Credit.


**A: no, your understanding is not correct. The loan is to be offered to all residents for the HOA to repair common areas.


##########
2. As an individual unit owner, Can I object the HOA from giving 10 yr loan and instead push them for a shorter period of 2 or 3 years loans, so that I may be able to sell my unit anytime after that.

Adv Thanks for your guidance.

**A: yes, but since you are not on the Board, your say would be just that. You have no offical Board voting rights.

[pl.hammon]

Originally Posted by HomeGuru

**A: yes, but since you are not on the Board, your say would be just that. You have no offical Board voting rights.

Many Thanks HomeGuru, Can I tell this to the Association's Board/Trustees

"Since the Association has not taken any voting, You should not give a loan for a few residents, from the Associations Line of Credit (As the responsibility on the LOC falls on all the residents)"

Can you also please clarify another question

Does the Association's Board have a right to take a Line Of Credit in the first place for the purpose of Assessment, without taking a voting from the residents.

[Pojo]

Better keep checking here before writing anything that is NOT what Guru is telling you at all!

In all assessments I have been involved with there was always a choice per home to pay upfront or make payments. The reason being apparent because many folks can not afford to shell out that kind of money.

You said the residents had a choice and many chose the payment option and many didn't so I think you are just out of luck given the amount of the assessment and the payment necessary on a monthly bases if this were only for 2 years or even 3. It would be close to 1K per month.

[HomeGuru]

Originally Posted by pl.hammon

Many Thanks HomeGuru, Can I tell this to the Association's Board/Trustees

"Since the Association has not taken any voting, You should not give a loan for a few residents, from the Associations Line of Credit (As the responsibility on the LOC falls on all the residents)"

Can you also please clarify another question

Does the Association's Board have a right to take a Line Of Credit in the first place for the purpose of Assessment, without taking a voting from the residents.

**A: the answers are in your HOA docs.

[pl.hammon]

Originally Posted by HomeGuru

**A: the answers are in your HOA docs.

Thank you, Let me check.

[HomeGuru]

Originally Posted by pl.hammon

Thank you, Let me check.

**A: read very carefully.

[pl.hammon]

Originally Posted by HomeGuru

**A: read very carefully.

Hi Home Guru

There is nothing in the Master Deed that tells anything about the Associations right to borrowing a Line of Credit or Lending a loan to a few residents towards the assessment.

In the annual meeting I asked the Association’s Attorney if the HOA has a right to lend money to a few residents from the associations Line Of Credit and he said the way the loan is structured they could do that (and he didn’t want to entertain my question beyond that)

Since the master deed is silent on the topic, Should I ask the board about any specific law that allowed them to do that, Can you help me with a legal set of questions that I can ask?

If the answer is not satisfactory can I ask for this to be brought up for voting to allow such a loan?

Thanks in advance.

[HomeGuru]

Originally Posted by pl.hammon

Hi Home Guru

There is nothing in the Master Deed that tells anything about the Associations right to borrowing a Line of Credit or Lending a loan to a few residents towards the assessment.

In the annual meeting I asked the Association’s Attorney if the HOA has a right to lend money to a few residents from the associations Line Of Credit and he said the way the loan is structured they could do that (and he didn’t want to entertain my question beyond that)

Since the master deed is silent on the topic, Should I ask the board about any specific law that allowed them to do that, Can you help me with a legal set of questions that I can ask?

If the answer is not satisfactory can I ask for this to be brought up for voting to allow such a loan?

Thanks in advance.

**A: then write to the Board and request a legal opinion from the HOA attorney. Such opinion needs to be in writing.