Condo COA Questions

Question: Our board wants to build a larger pool and upgrade the clubhouse and is considering borrowing $200,000 and use our $50,000 reserve fund. While the expansion concept is supported by the members, I question the wisdom of borrowing money and using reserves earmarked for other things to do it.

Answer: A homeowner association borrowing money, particularly for discretionary spending like this, is a bad idea. The costs associated with this kind of borrowing are high since it is considered a commercial loan which carries a higher interest rate, shorter term and high closing costs. And the loan must still be repaid by the owners just like any loan but with the added liability of the HOA being responsible to collect the payments. If this project is desirable, the funds to do it should come from the members themselves by whatever means they may have available – cash in savings, home equity loan or Uncle Ralph. That way, the HOA stays out of the loan business and the repayment issue does not impact the fee structure or increase the HOA’s administrative duties.

Question: The HOA has just purchased a ladder and a power washer for our residents to use in and around their units. One of our residents has suggested that the HOA is liable if residents hurt themselves while using this equipment. Do we need to include something in our insurance to cover this or is there a simpler way?

Answer: It’s not advisable to provide things like HOA owned ladders and power washing equipment to owners. Either one of these could result in serious injury if misused. Owners should rent their own equipment or hire a contractor to do the work.

Question: We have a board vacancy that requires an appointment to fill. Our president wants the board to vote by email. Doesn’t voting need to be done at a member meeting or a special meeting?

Answer: Board vacancies are typically done by the board at a board meeting. That board meeting should be open to the owners.

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