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Posted By MelissaP1 on 09/03/2007 2:56 PM
It should be in the CC&R's if your HOA is allowed to get a loan. You should check to verify. Our rules did allow for us to apply for loans if need be. However, the actual process may be more difficult than getting a regular "household" loan. The HOA will have to provide enough historical financial records to prove they have a solid collection history and solid ability to repay the loan possibly without raising the dues. The HOA may have to raise the dues FIRST before applying for the loan if that is needed to raise the dues to cover the loan payment.
Raising the dues may require a "special meeting" with the general membership. Most likely the Majority (51 - 75%) will have to agree to either a special assessment or a special temporary dues raise if over the allowable yearly dues hike. The amount of the special assessment or dues percentage will have to be agreed upon and voted in by the membership. The BOD may put in the motion for this vote. The BOD will ultimately be responsible for filling out the paperwork and approving the contractors.
I've never filled out a loan for HOA but have considered it. The option was there but not worth it. We couldn't afford to monthly payments. Plus I am on the side of NOT putting one in more debt if you can pay off a debt instead. Loans just put you deeper in debt, at greater risk, and make you pay interest. Where a special assessment the debt is paid off and there is no interest charged.
Have you checked into making the roof repairs an insurance claim instead? All the HOA would have to do then is pay the deductible. Which could be only a few hundred to a few thousand dollars. Certain roof repairs are covered by the HOA's insurance. We had damage to our clubhouse roof once and the insurance would have covered it. However, the cost of the repair was under the deductible costs so we paid for it outright. The cost of insurance may raise a bit if you use this option but it may be a better option. Plus, you will know what your insurance company does cover and update that policy if need be.
MellissaP1 - You've never filled out a loan for an HOA but you write "They can also be difficult to obtain from a HOA as well."? I don't understand your post. You can't afford to pay off a loan (lower monthly payments/higher overall cost), yet you can afford a one-lump special assessment (large lump one-time sum)? Mind you I'm not advocating a loan but it may be a viable option depending on the association's finances. Loans do not necessarily put you deeper in debt. They increase the overall price of the purchase due to the interest that accrues. Loans can offer an association a chance to get the job done and time to recover. What an association should negotiate is no penalty for early payoff.