Posted on Wed, Feb 24, 2010 @ 07:25 AM
My condo association levied a $37,700 assessment to the home owners asking for up a
upfront payment or pay monthly on the condo association's loan. Those that went the
condo loan route signed liens and are paying principle and interest over the loan term
of 15 years. Can I deduct the interest from my taxes, since I do receive an annual
interest statement.
Learn more about condo association loans
Posted on Tue, Jul 21, 2009 @ 01:25 PM
Increased competition among lenders has led to more competitive pricing
and more flexible loan terms. Condo Association loans that would have been written at
2.5% to 3% over the prime rate in the early 1990s are now priced closer
to 1% to 1.5% over prime (and in some cases lower). Loan
amortizations have also changed. Three to five years was considered a
reasonable repayment schedule in the early 1990s. It is not uncommon
now to see seven to ten year repayment schedules. As a result of lower
interest rates and increased amortizations, condo associations
are finding that their borrowing power has increased. In fact, today
the average loan size is probably in the $300,000 to $500,000 range,
where as ten years ago it was $100,000 to $150,000.
The long-run stability of the condoassociation is still of utmost importance
to the bank, since repayment of the loan will depend upon maintaining a
viable organization. Bankers are still concerned with the historic
operating results of the condo association: Are the condo fees being
set at a reasonable level from one year to the next? Is the condo association
systematically building a reserve account? Is the physical plant being
maintained and in overall good condition? How do the monthly HOA assessments
(including debt service on the proposed loan) measure up with other
similar associations in the marketplace?
High owner-occupancy, professional management, and minimal impact to
condo fees due to the loan were high hurdles for many condo associations. While all
of these benchmarks are still taken into consideration, requirements are much
more fluid as lenders have increased their knowledge. Bankers now focus
on the size of the loan in relation to the overall value of the
complex, the loan per square foot of livable area and the loan per
unit. These factors are tempered with how long the condo association has been
in existence, the owner-occupancy rates, the association's management
situation, the level of reserves maintained by the association and the
impact of the loan repayment on condominium charges.
Learn More About HOA Insurance and HOA Loans
Posted on Fri, Jun 05, 2009 @ 07:14 AM
A condo association or HOA cannot get a mortgage loan. That's because the legal structure of a condo association is fundamentally different from that of a cooperative, which can get a mortgage loan.
In a cooperative, an apartment corporation owns the entire building and acts as landlord to all of the residents. Each resident receives a certain number of shares in the apartment corporation and a (proprietary) lease that entitles him or her to occupy their apartment. Since the apartment corporation owns all of the real estate, it has something to mortgage.
In a condominium association or HOA, each owners receives title to an individual unit, as well as to an undivided, pro rata ownership interest in the common elements of the condominium association (the lobby, basement areas, grounds, etc.). Since each person owns a piece of the real estate, each has something to mortgage, and many condo-apartment owners do just that.
Condo associations and HOA can get a special type of loan that uses the right to assess owners as loan security or collateral. Learn more about HOA loans.
Posted on Wed, Apr 22, 2009 @ 08:20 AM
Often condo associations and HOAs get in trouble with their cash flow management because either they are spending too much or condo association members are not paying their condo fees or HOA fees on time or not at all, sometime resulting in default. Here are some practical ideas to increase cash flow.
Reduce Condo Association or HOA Spending
- Take a close look at the HOA budget. Are there service and maintenance items your HOA or condo association can due with out? Maybe there are services that can be performed once per quarter instead of every month or semi-annually instead of quarterly.
- When was the last time your HOA or condo association negotiated with your vendors or service providers? If your HOA uses a property management company, they should be doing this for you. If your HOA is self-managed, have the condo board go out and get competitive bids and bring them back to your current service provider so they have the opportunity to lower their price for you.
HOA Loans or Condo Association Loans and HOA Credit
Whereas a HOA loans or condo association loans will provide a condo association with a one time lump sum, a HOA credit line can be used by a condo association to draw down on during times of cash flow issues. The HOA or Condo Association receives a check book from the condo association loan provider and can use the checks for whatever purposes the condo association sees fit. Every HOA and Condo Association should have a HOA credit line or condo association credit line in place for future use.
HOA Assessment
HOA assessments and condo association assessments are the most common and traditional ways to increase cash flow next to raising condo fees. Unless a condo association credit line is in place, assessments are typically the best way to get a condo association cash quickly, although it can often be painful to condo owners.
Sell Your Condo Fees You Can't Collect On
An option to sending your HOA collections to a lawyer is to sell the condo fee debt to a 3rd party purchaser at a discount who will then try to collect on the debt themselves at a small profit before a condo unit gets into default. This will get the condo association needed cash much quicker and easier than going the legal route.
Have Your HOA Consider an Automated Pay Solution
Your Condo Association or HOA can receive condo association fees via Bank Account Debiting or Credit Card Payments. 3rd Party payment companies charge a transaction fee and handling fee. This could help your HOA to get paid quicker.
Save money and time - send your own HOA Collection Demand Letters
Posted on Wed, Apr 15, 2009 @ 05:18 PM
By: David M. Bendoff
Many a Condominium Association Board finds itself in the position of having to pay for necessary maintenance, repair, or replacement of common elements (e.g., balconies, windows, roofs), but without sufficient monies on hand or income in the annual budget to pay for the work. A decision often has to be made, then, whether to borrow money and fund the repayment of the HOA loan, or to fund the actual work, through a special assessment. This requires the Board to analyze a confusing maze of statutory language, the Associations' governing documents, and political considerations. This article will highlight some of the issues with respect to Association spending limitations for maintenance, repair, and replacement of the common elements, special assessments, the power to borrow money, and the pledge of assets as collateral for a loan.
BOARD SPENDING AUTHORITY
The Condominium Property Act ("Act") governs the Board's spending authority and provides that the powers and duties of the Board include the operation, care, upkeep, maintenance, replacement and improvement of the common elements. Nonetheless, expenditure limits are commonly found in a Condominium Declaration. However, the Act provides that limits in the Declaration are not applicable to expenditures for repair, replacement, or restoration of existing portions of the common elements. The terms "repair, replacement or restoration" mean expenditures to deteriorated or damaged portions of the property related to the existing decorating, facilities, or structural or mechanical components, interior or exterior surfaces, or energy systems and equipment with the functional equivalent of the original portions of such areas.
Replacement of the common elements can result in an improvement over the original quality of such elements or facilities. However, unless the improvement is mandated by law or is an emergency, if the improvement results in a proposed expenditure exceeding five percent (5%) of the annual budget, the Board, upon written petition by unit owners with twenty percent (20%) of the votes of the Association delivered to the Board within fourteen (14) days of the Board action to approve the expenditure, must call a meeting of the unit owners within thirty (30) days of the date of delivery of the petition to consider the expenditure. Unless a majority of the total votes of all unit owners in the Association are cast at such a meeting to reject the expenditure, it is ratified. The Board should build the potential for unit owner petition/vote, if applicable, into the time line for this project. Note that "emergency" means an immediate danger to the structural integrity of the common elements or to the life, health, safety or property of the unit owners.
SPECIAL ASSESSMENTS
Any common expense not set forth in the budget or any increase in assessments over the amount adopted in the budget must be separately assessed against all unit owners. In general, if any separate assessment adopted by the Board would result in the sum of all regular and separate assessments payable in the current fiscal year exceeding 115% of the sum of all regular and separate assessments payable during the preceding fiscal year, the Board, upon written petition by unit owners with twenty percent (20%) of the votes of the association delivered to the Board within fourteen (14) days of the Board action, must call a meeting of the unit owners within thirty (30) days of the date of delivery of the petition to consider the separate assessment. Unless a majority of the total votes of all unit owners in the Association are cast at such a meeting to reject the separate assessment, it is ratified.
Notably, the Board may adopt separate assessments payable over more that one fiscal year. With respect to multi-year assessments, the entire amount of the multi-year assessment is deemed considered and authorized in the first fiscal year in which the assessment is approved.
Parallel to the spending authority guidelines discussed earlier, the Act provides that separate assessments for expenditures relating to emergencies or mandated by law may be adopted by the Board without being subject to unit owner approval. But assessments for additions and alterations to the common elements or to association-owned property not included in the adopted annual budget, must be separately assessed and are subject to approval of two-thirds of the total votes of all unit owners.
ASSOCIATION LOANS
Unless the Condominium Association's Declaration provides otherwise, the Not-for-Profit Corporation Act authorizes Condominium Associations to borrow money. Loans to a Condominium Association or HOA are typically secured by a pledge of Association assets (e.g., right to receive future income, bank accounts) and not by a mortgage on real estate. One section of the Act does not require a unit owner vote in the event that the Association proposes to pledge all or substantially all the property of the Association as collateral for a condo association loan or HOA loan; however, another section provides that, unless the condominium instruments expressly provide to the contrary, a majority vote of the entire Board may assign the right of the Association to future income from common expenses or other sources and to mortgage or pledge substantially all of the remaining assets of the Association. If the Association's Declaration is silent on the issue, the pledge of all or substantially all of the property and assets of the Association may be approved by majority vote of the entire Board. However, the Board must be mindful of whether the Declaration requires unit owner approval for a pledge of all or substantially all of the property and assets of the Association.
If the Declaration requires unit owner approval to pledge all or substantially all of the assets of the Association, and such approval is impractical or can not be obtained, the Association should work with its lender to limit the required pledge to an amount that is less than substantially all of the Association's assets. For example, a pledge of the special assessment, and not regular assessments, may be acceptable to the lender and, depending on the Association's financials, may result in a pledge of less than substantially all of the Association's assets.
ASSOCIATION LOAN ALTERNATIVE
In lieu of a loan by the Association, the Board could levy a special assessment to fund the cost of the loan, payable by unit owners in lump sum. This would allow individual owners to either use their own funds to pay the special assessment and avoid any interest charges, or to obtain their own loan and take advantage of a potential income tax deduction. However, there may be circumstances under which the Association can get a loan but the individual owners would not qualify.
Finally, from a political perspective, it is useful to hold an informational meeting or meetings of the Association to discuss the proposed project before the Board takes action to approve expenditures, a special assessment, a loan, or contracts to perform the work.
More about HOA Loans and Condo Association Loans
Posted on Fri, Mar 13, 2009 @ 12:25 PM
Although you may find the value of your condo unit down, its a great time to invest in condo association or HOA capital improvement projects.
All trade services are currently on sale - many for over 50% discounts because the trades need the work since the economy and housing market has crashed.
We received a quote to paint our common areas two years ago for $12,000. The painter called us back one month ago and offered to the same paint job for $5,000. Needless to say, our condo association went ahead with the painting project.
Some trades that may be offering great home improvement deals include:
- Painters
- Plumbers
- Wallpaper Hangers
- Electricians
- Brick Layers
- Building Cleaners
- Carpet and Flooring Installers
- Woodworkers
- Drywallers
- Elevator Installers
Additionally to good time for these capital improvement projects, its also a great time for associations to take out a HOA Loans. Rates for Homeowners Associations and Condo Associations are currently about 6% which is excellent.
find a property manager
Posted on Wed, Feb 25, 2009 @ 12:13 PM
Here are some creative initiatives your condo board can take on with your condo association.
Leverage the Condo Association with Direct TV.
Maybe your property has a mix of cable and internet providers and can leverage group buying power through the condo association or HOA. If properly wired, Direct TV can have all residential units feed from one satellite dish, eliminating the satellite dish skyline and wiring mess in and on top of your condominium building. You have to call Direct TV’s MDU Division (Multi-Dwelling Unit) for this kind of deal. I think its worth checking out. Here is the link to the Direct TV MDU webpage Direct TV MDU.
Use a Condominium Association Credit Card
Pay condo association bills on time while helping with the cash flow by charging it. Go through the condo association vendor list and find out who takes credit cards. If your vendors accept credit cards, your condo association can rack some points over the year that can be redeemed at place like Home Depot for new community grill. If you’re a small condo association, American Express provides great financial reporting at the end of the year that will certainly help you keep the books.
Collect Condo Fees from Credit Cards
Your condo association can do this through most banks. This is a great way to collect total funds needed for larger capital assessments. It’s another way to increase your condo association reserves and minimize accounts receivable and default risk.
Secure an HOA Loan or Condo Association Loan
Regardless what your condo reserve or budget looks right now, every condo association should have one have a HOA Credit Line. The cost is nothing or minimal to open a HOA Credit Line and it’s becoming more acceptable practice for condo associations and home owner associations to use one. Current HOA loan rates can be anywhere from 6.5% to 8% and condo associations usually have a choice of amortization schedules. HOA loans and lines of credits are usually secured by the right to assess condo owners.
Take your Condo Association on a Green Initiative
How can this be a bad thing? There is a plethora of content available on the Internet on how to go green, but basically it’s about energy conservation in our condo buildings, which I’m sure we can all do greener. Maybe switch from oil to gas or other alternative energy sources, use faucets and toilets that use less water, put in energy saving light bulbs – they’re more expensive, but will last a lot longer.
Start a Condo Association Website
There are many different condo association website service providers that specialize in hosting condo websites and all you need to do is update it on a regular basis. A condo association website will help raise the property value and enhance communications with condo boards and condo owners.
Start your own Condominium Association Loyalty Program
This is interesting – I stumbled upon this the other day: www.condoperks.com. Evidently this service combines a condo association website with a shopping portal, where as condo association members make purchases at affiliated retailer, the condo association gets a percentage of the sales. Looks like its only available in few metropolitan cities right now and they’re still growing their business concept. They're definitely worth keeping an eye on.
Posted on Thu, Feb 19, 2009 @ 09:53 AM
Homeowner Associations and Condo Associations needing expensive renovations that cost more than condo reserves can find financing for improvement projects through CondoAssociation.com.
Community Association Banks understand HOA and Condo Association financing needs. HOA Loan providers can use the assessment fee cash flow as repayment and an acceptable risk.
Many community lenders require detailed monthly financial statements and an audited annual statement to evaluate the loan request. The annual tax returns are also helpful in verifying assessment income. Once the condo association's cash requirements are understood by the HOA lender, a financial projection can be made to assess the impact of a new loan on that cash flow.
Condo Association Loans and HOA Loans may include credit lines (typically for the construction phase) or long-term HOA loans (to pay off a construction loan).
More about HOA Loans and Condo Association Loans
Posted on Mon, Feb 02, 2009 @ 03:49 PM
Our condo association's dam is in need of repair and our condo board would like to get a condo association loan or HOA Loan for doing the repairs. What is a likely rate for a condo association loan?
The exact interest rates are a function of several variables. However, the approximate range in today's market is about 6%. For a current condo association loan rate quote you can submit the HOA Loan Request Form. HOA Loans and Condo Association Loans are a good alternative to special assessments that may drain condo association members.
We are a Co-Op. Do we qualify for a Condo Association Loan?
Yes, Condo Association Loans and HOA Loans are for all types of Community Associations including: Condominiums, Homeowner Association's, Town-homes, Cooperatives, Timeshares.
Are there any restriction to what we can use HOA loans or Condo Association loans for?
Community lenders usually work with condo associations to provide innovative HOA loan and Condo Association Loan structures to just about any application. Typical reasons for HOA loans and Condo Association Loans are to support capital maintenance projects, construction defect litigation, condo association insurance premium financing, purchasing real estate or equipment, condo association land lease buyouts.
Other solutions include Condo Association Credit Line which HOA's can tap at their discretion to increase their cash flow.
What's the difference between a HOA Loan or Condo Association Loan and a HOA Line of Credit?
When a Condo Association takes out an HOA loan, the lender provides the condo association all the funds in one lump sum. With an HOA credit line, a Condo Association qualifies for an HOA credit limit, which they can draw down on and pay back at any time.
Top 5 Reasons for an HOA Loan or Condo Association Loan
1. A Condo Association Loan Can Increase Condo Association cash flow
2. Condo Associations can make capital improvements or repairs with a condo association loan or HOA loan
3. An HOA or Condo Assocation can purchase additional property with Condo Association Loans and HOA Loans.
4. Condo Association Loans can be used to purchase condo units from condo unit owners or condo developers.
5. A Condo Association Loan or HOA loan can fund a construction defect litigation
Posted on Fri, Jan 30, 2009 @ 08:06 PM
CondoAssociation.com Announces HOA Loan Program for Construction
HOA loans and Condo Association Loans are now available exclusively to Townhomes, Condo Associations, Cooperatives, Office Condominiums, Timeshares, Condo Associations and Homeowner Associations (HOAs) at CondoAssociation.com at very competitive rates and terms depending on the Association's creditworthiness.
While traditional construction loan interest rates can be anywhere between 8-15%, CondoAssociation.com can offer very favorable loan terms to Condo Associations because of specialty HOA loans or Condo Association Loans which are secured by an assignment of the condo association assessment rights. Construction loans traditionally use the property asset as collateral or control of the condo association's cash.
This HOA loan or Condo Association Loan structure offers a bright spot to HOAs, Condo Associations and other types of associations looking to start or complete new construction projects, whereas traditional construction loans may be too expensive or not available.
- HOA Loans and Condo Association Loans for construction don't require a lump sum down payment
- Traditional Loan To Value (LTV) models don't apply to HOA Loans and Condo Association Loans
- Construction loan uses may include, but are not limited to renovations, the purchase of condo units or land leases construction defects and construction defect litigation and renovations.
- HOA loans also apply to Condo Associations, Homeowner Associations, Community Association, Co-Ops and Timeshares and are a great alternative to a special assessment to association members.