Can Our Association Borrow Money?
With economic times being as tough as they are, many condominium and community associations are concerned about their ability to borrow money, and what complications may arise in so doing. There are many banks and lending institutions that are now providing loans to community associations; however, associations are advised to proceed with caution as the loan terms may require substantial collateral, including the right to take over the collection procedures from the association. Moreover, the loan documents may be, in some cases, onerous and not necessarily even handed.
Lenders strongly recommend that the association retain counsel from the onset to review the community association documents to determine what requirements will be necessary to effectuate the loan; particularly since the lender will want a legal opinion from counsel for the association indicating the authority of the association to borrow money. The association’s attorney may be in the position to assist in negotiating more favorable terms for the loan with a lending institution. It has been my experience in this area that the association proceed with caution while considering all options for raising the necessary funds.