E.B. from Maryland writes:
Dear Mister Condo,
Our condo association wants to borrow $178,000 to refurbish our HVAC system. We know we cannot get a mortgage loan based on ownership of real property, but some states allow Associations to secure loans based on their ability to raise fees. Where do we find the relevant law?
Mister Condo replies:
E.B., thank you for writing. As you know. I am not an attorney nor am I an expert in Maryland law. For legal opinions about condominium law in your state, you should speak with an experienced community association attorney.
As a practical matter, I do have some experience with community association loans. Banks that lend to community associations are highly specialized at what they do. You are correct that the loan you are seeking is not a traditional mortgage. In fact, loans to community associations are more closely related to municipal bonds in that the lender looks at the community as a whole and will evaluate the risk of such a loan before moving forward. Additionally, you may find it wise to consult with a qualified attorney to discuss the benefits and drawbacks of using a community association loan to finance such a project. Good luck!