K.C. from New Haven County, Connecticut writes:
Dear Mister Condo,
Our community is in the process of obtaining bids for roof replacement. We will need to take out a loan to cover the costs, and will need to raise condo fees over the next few years to repay the loan while also building reserves for future projects. It is my understanding that we need to obtain a majority vote from the owners to close on a loan – what information is required to be disclosed to the owners in a letter about the loan? Are there specific laws that should be cited, or other information that would need to be included?
Mister Condo replies:
K.C., good luck with the roof replacement project. I am sorry that your association did not collect enough money over the years from the previous owners so that the reserve Fund was properly funded to cover the expense of the new roof. Now, you face the added challenge of financing the roof through an association loan. I am not an attorney and offer no legal advice in this column. You should involve your community association attorney at the outset of this transaction for many reasons, the least of which is that you have to follow the rules for taking out a loan and obligating current and future owners to the terms of the loan. Many association governing documents are silent on the subject and may need to be modified but some are quite specific on the approval of such a project. You may require a super majority of owners to vote in favor, you may require 100% of owners to vote in favor, you may require no owners voting against. All of these scenarios are possible. The Common Interest Ownership Act (CIOA) may come into play as well and, again, your attorney can advise you to make sure your association is in full compliance. You will also want your attorney to review the bank papers BEFORE the association signs.