TO BEG OR BORROW
Eric Glazer, Esq.
Published October 19, 2015
Each year your condo association or HOA is required to pass an
annual budget that in theory should pay all of the bills of the
association. The statutes require this. Then a storm hits, or
balconies start deteriorating and many Associations suddenly
find themselves in desperate need to repair the common areas
with no reserve funding to rely on. Boards now are faced with a
difficult choice. Do we special assess everyone, or do we
borrow money from bank. Often times, rather than pass a huge
special assessment and force everyone to instantly dig deep into
their pockets, many associations turn to banks for a loan. The
question is…is there anything in the condominium or HOA statutes
that would prohibit this. In simple terms, the answer is no.
In fact, borrowing money is expressly authorized in the Florida
not-for-profit corporation statute. So, unless there is a
specific restriction in your governing documents that prohibits
the Board from borrowing money, there really are no
When borrowing money from a bank, the association will be
required in the loan documents to pass a special assessment in
an amount sufficient to fund the repayment of the loan, or
promise to include the debt payments in the annual budget.
Several years ago, The Director of the Division of Florida Land
Sales, Condominiums and Mobile Homes issued a Declaratory
Statement that allows Condominium Associations to permit owners
the option of paying the special assessment in full without
interest or paying the assessment with interest over time. The
decision does not say the association must offer the option,
only that it may offer the option.
The association will be required to sign lots of
documents, including a Collateral Assignment of the right to
collect assessments. This simply means that if the association
doesn’t pay back the bank – the bank has the right to collect
the monthly or quarterly assessments directly from the owners.
In a condominium, one thing the association will not have to
sign however is a mortgage. That’s because the association does
not own any property that can be mortgaged. Remember, all of
the owners own the common areas, not the association.
Some board members believe borrowing money is a bad
idea because loans are generally repaid over a longer period of
time than it would take to collect a special assessment. The
loan repayment is seen as a drag on the long term financial
resources of the association. Others see the ability to borrow
as a god send, making repairs to the property possible because
most members cannot afford an immediate expensive special
Has your association borrowed money from a bank? Was it a good
idea, or did it turn out to be a long-term drain on the
resources of the community?
HOA & Condo Blog
Eric Glazer graduated from
the University of Miami School of Law in 1992 after
receiving a B.A. from NYU. He has practiced community
association law for more than 2
decades and is the owner of Glazer
and Associates, P.A. a seven attorney law firm with offices in
Fort Lauderdale and Orlando and satellite offices in Naples,
Fort Myers and Tampa.
Since 2009, Eric has been the host
of Condo Craze and HOAs, a weekly one hour radio show that airs
at noon each Sunday on 850 WFTL.
He is the first attorney in the
State of Florida that designed a course that certifies
condominium residents as eligible to serve on a condominium
Board of Directors and has now certified more than 10,000
Floridians all across the state. He is certified as a Circuit
Court Mediator by The Florida Supreme Court and has mediated
dozens of disputes between associations and unit owners. Eric
also devotes significant time to advancing legislation in the
best interest of Florida community association members.