Many older condominium corporations find that their common area renovation costs are greater than their reserve fund can afford. Because of this shortfall, the condominium’s board must either delay necessary repairs or assess each unit owner a special assessment to pay for the renovation.
What can be done to help owners who cannot afford the special assessment or others who have sold but not closed on their unit or are planning to sell in the near future?
The answer is Condominium Corporation Financing. Once a condominium corporation has, or adds to its by-laws, a right to borrow money, it can finance the costs of the common area improvements.
Each unit owner can decide whether to participate in the renovation loan or simply to pay their share of the assessment. Only the unit owners who participate in the borrowing will be responsible for its repayment.
Unit owners who do participate in the condominium loan will not have to qualify for the loan as the loan is only registered against the corporation’s interests. There will not be any separate security registration on the participating owners’ units.
For those unit owners who choose to participate in the loan, there will be a small increase to their monthly maintenance fees to cover the principal and interest of their share of the loan. If a unit owner sells the unit before the loan has been fully repaid, the new owner will take over the loan repayment obligation and the previous owner will no longer have any obligation for the debt.
Condominium Corporation loans are available from $50,000 - $15,000,000.