Condo Corporations and Borrowing Money
Why does it make sense for a condominium corporation to borrow money? There are many reasons, and a lot of it depends on the type of condominium you are and situation you are in. Whether you are a condominium facing a deadline to payout a mortgage to the Declarant, you have a shortfall and need to levy a special assessment, or you’re facing a looming major capital project – borrowing money on behalf of the Corporation often makes sense as opposed to the alternative. One reason to borrow is that it can alleviate a large special assessment on unit owners, which is more fair to current owners who may be new to the property or don’t plan to live at the condominium for long. Another reason is the way the loan can be structured, as the corporation can borrow the money as they need it, which minimizes interest costs and the makes sure you only borrow the required amount of funding. However, the main reason a condominium corporation would turn to borrowing money is to keep condo fees as low as possible. Keeping your condo fees competitive is very important for your condominium, as you don’t want to make it financially difficult for someone in your community and you also want unit owners to be able to sell their unit at their highest value.
A few things to keep in mind if your condominium corporation is looking into financing:
- Make sure you take into consideration additional fees and costs associated with your lender & legal partners
- Plan ahead – the process of lending, drafting & voting on a borrowing bylaw takes time and unit owners need to be well informed of the current situation
- Will this loan impact the salability of our units?
Overall, it’s important to exhaust and weigh all your options when it comes to raising additional funds for your condominium corporation, and often borrowing money versus levying a special assessment on current unit owners makes sense.
Robert Weinberg, Percel Inc.