Condo Board Considering Loan Brokering: Bad Idea!

C.M. from outside of Connecticut writes:

Dear Mister Condo,

A condo owner is delinquent and also has incurred late fees. Another owner wants to pay the delinquent amount and when the owner pays he wants to be reimbursed the delinquent amount and also any late fees that he has incurred and paid. I do not agree with this, what are your thoughts?

Mister Condo replies:

C.M., I couldn’t agree with you more. The association has absolutely no business getting involved in loan brokering between unit owners. If, on the other hand, two unit owners reach an independent agreement where one borrows funds from the other and directly repays the other, there is “no harm, no foul” to the association. In fact, there is nothing the association could do to prevent such an arrangement because it would be a private agreement between the two parties. The association does not need to concern itself with the source of common fees as long as they are paid on time. If the unit owner who borrowed from the second unit owner defaults on his loan repayment then the second unit owner could take his own collection actions, without any involvement from the association. Any arrangement that involves the association brokering or guaranteeing the loan payment is likely in violation of the association’s governing documents. Bottom line is that it should not be allowed. Hope that help. Good luck!