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Borrowing for the Big Project | Legal Insights Blog

Our blog and quarterly events addressing the issues affecting condo association and HOA boards.

Borrowing for the Big Project

The 2018 building season has come to an end, and it is now time for the Board to consider what building projects are needed for 2019.  If your association does not have enough reserves to replace the roofs, or rebuild the swimming pool, or replace worn out roads, the Board may want to consider borrowing the money to take on big capital projects.  Condominium Boards are specifically empowered to borrow money and give security for a loan under Ohio law, provided that the Declaration specifically grants such powers.  See ORC 5311.081(B) (17).  Most modern condominium documents do grant authority to the Board to borrow and secure a loan, but if your governing documents do not contain borrowing authority with the power to secure the loan, the owners will have to approve an amendment to the Declaration to allow the Board to borrow the money and grant security.  Usually, the standard security is the stream of income produced from regular condominium assessments. 


            Now is the time to start the amendment process since the owners must approve the amendment by at least 75%.  Moving an amendment to completion is a time consuming process which can take months before it is ready to record with the county recorder.  Boards want to be ready to complete a loan and begin construction as soon as the weather allows next year.


            Most banks do not lend to condominium associations; only a select few banks understand the risks and rewards of lending to condominium associations and are ready to assist.  The lending process is not as hard as you might imagine.   If your association is of a certain size, has a  small amount of  receivables, adequate reserves and insurance, a reasonable number of rental units and a solid financial statement, there should be no impediment to getting a loan for your project.  No personal guarantees should be required.    


            Williams & Strohm has been involved in many successful loan transactions and can help your board find the right lender for your project.  Call us to find out more about condominium borrowing.  614-228-0207.

Robin Strohm

Robin Strohm

Ms. Strohm has been practicing law since 2004 and is a principal of the firm Williams & Strohm, LLC. As a member of the Ohio and Columbus Bar Associations, she is admitted to practice in all Ohio courts and the Federal District Court for the Southern District of Ohio. Read Robin Strohm's full bio.