Assessment Problems That HOA Loans Can Fix
Problems with Special Assessments
Faced with the fiduciary duty to maintain the property, the board of directors can propose a large one-time special assessment to the membership to pay for the needed improvement. Such a special assessment can become a volatile political question among the members of the community association. Many times the documents will require at least a two-thirds vote of the membership to impose a special assessment. Therefore, if the board of directors cannot convince the membership of the need for a special assessment or if members simply vote against it because they cannot afford; such a lump sum special assessment, the board of directors finds itself between the proverbial rock and a hard place. On one hand, it has a fiduciary duty to maintain the community, but, on the other hand, it might not be able to muster owner support for a one-time special assessment.
Complicating the board's position under such circumstances is the fact that delay in making capital improvements will often prove even costlier because of deteriorating conditions in the capital resource. The board's logical recourse is to borrow the needed funds.
Of course, seeking an outside loan will provide the association with a chance to make the capital improvement or replacement immediately and pay the loan back over time through the condo association's special assessment process.