E.L. from Hartford County, Connecticut writes:
Dear Mister Condo,
My condo association is in the process of attempting to take out a loan for common element repair (roofing and siding), and special assess all unit owners for each units’ share of the loan. The loan requires a majority of unit owners to vote “Yes” to proceed. At the time of the loan closing on February 1st, not enough “Yes” votes were received. About half of unit owners never voted. The board wants to set up a new closing date, which requires the bank being sent a new set of financials, and the bank issuing a new commitment letter. The board wants to count all the votes received from the failed loan closing date (which was supposed to close on February 1st), and simply add new votes received to this number prior to the new March 15th closing date. They view this as the easiest way to get a majority of unit owners to vote “Yes.” Is this legitimate? Does the board need to begin the voting anew given the new loan closing date and potentially slightly different loan interest rates? If you have any law/cases that could be cited either for or against this strategy, it would be really helpful. Thanks so much for your help.
Mister Condo replies:
E.L., I am sorry that your association finds itself in need of a loan for common element repairs that should have been budgeted for many years ago. A Reserve Fund contribution should have been made every year so the money would be available when it is now needed. Instead, the association now needs to use vote wrangling maneuvers to take out a loan that will raise common fees for current and future unit owners instead of the previous owners who had use of the common elements as they aged. I also hope that your association sees that the loan will fix the current problem but not prevent the same thing from happening again the next time common elements wear down and need replacing. As for the legitimacy of the vote, I cannot comment without knowing more. I am not an attorney nor do I offer case law references in this column because I do not offer any legal advice, only practical. The reality is that your Board has two choices. Ignore the repairs and suffer the consequences or raise the capital via loan or Special Assessment. In this current fiscal climate, a Special Assessment would likely prove devastating to many homeowners, forcing them to sell their homes or end up in foreclosure. The loan, while expensive, will certainly help to soften the blow. If you feel the loan is being passed outside of proper channels, then you might wish to consult with an attorney. On the other hand, if you are in favor of the association getting the loan, making the needed repairs, and not forcing you and/or fellow homeowners to come up with the funds for a Special Assessment, I would let the Board proceed with their work of getting the necessary votes for the loan to pass. Best wishes for a successful ending!