Purpose
The legal duty of the condominium or homeowners association to maintain the common elements or common areas gives rise to most borrowing situations. The purpose of a typical loan is to make capital improvements to the common areas or the common elements.
In the case of condominiums, this can vary widely. In older high-rise condominiums, there can be a need for retrofitting an entire heating, ventilating, and air conditioning system which might cost from $500,000 to $1 million. Larger associations own miles and miles of roads that might need resurfacing. Other recurring borrowing situations are for replacement of roofs, replacement or installation of siding on condominium units, and renovation and repair of recreational facilities such as clubhouses, swimming pools, and tennis courts.
When the board of directors of a community association is faced with the necessity of making capital improvements that could range from $100,000 to $1 million, depending on the size of the community in question, the natural source of funding is to assess the individual owners. In addition to the regular monthly assessment which a condominium or a home-owner association pays, in almost all cases, the community association declaration and bylaws will provide for a special assessment.
