P.B. from Hartford County writes:
Dear Mister Condo,
My Board wants to get a new roof. They set up a meeting for owners to vote on whether to take a 250K loan or not. At the meeting an attorney hired by the board to do the closing showed up and was practically running the meeting and trying to convince owners to give approval for the loan. I objected on the grounds that it was a conflict of interest to have the attorney there running the meeting since no vote was taken and not enough owners showed up for the meeting. Now the attorney instructed the board to go door to door to get proxies filled out. Is that ok?
Mister Condo replies:
P.B., not only is that OK, it may be the only way to get the necessary votes for the loan so the new roof can be purchased. HOA loans or Special Assessments are rarely needed by community associations that plan for the future and build a proper level of Reserves to handle something as common as a roof replacement. But, as is too often the case, the desire to keep common fees low wins the battle for fiscal responsibility. The end result is no money in the Reserves when needed. In this case, the Board has decided to seek out an HOA loan. The reason the attorney is needed is that it is very common that the association’s governing documents do not allow for the Board to take out a loan on behalf of the association. The proxy votes are the Board’s attempt to get the authority to negotiate the loan and obligate the association to the repayment of the loan, which is required from the bank before the loan is granted. As you can see, it often plays out as a comedy of errors before the final vote is taken and the money is loaned. The real question is how will you support the association moving forward? Will you be the one to suggest that common fees are raised 15%, 20%, 25% higher than they are right now? Will you be the one to insist that the association build a proper Reserve Fund and that Reserve Study be conducted so that a proper level of funding can be achieved? Without support for the unit owners, the Board’s hands are tied. If you need a new roof, the money will need to come from somewhere and that somewhere is the unit owners. Whether it comes in the form of a loan, a Special Assessment, an increase in common fees or a combination of any of the three, the unit owners will pay. Good luck!
1 thought on “Condo Board Seeks Solution to No Money for the New Roof”
Yes, if you need a new roof then you must do it by any means necessary. Also, I hope this teaches you a lesson about funding reserves.