Loans–a sign the condo was not well managed
Seacoast Online.com
By Robert Ducharme  
03 June 2016

Under the law, associations are allowed to take out loans for capital projects, such as paving, deck replacement and siding. But loans are, first and foremost, a sign the association has not been managed well.

Everyone knows roofs last, give or take, for 30 years and will need to be replaced; siding and decks chip and rot at different times and places, especially depending if one is on the south (sunny ) side of the unit or north (shady) side; and paving needs to be done, give or take, every 15 to 20 years. But rarely are these budgeted for properly.

Boards have an affirmative obligation, as do the owners on whose behalf the board works, to set aside for these projects through proper funding. Once roofs are replaced, for example, the process of saving should start right away. It’s not fair (and not legal) to defer maintenance, to the point where the association does little to nothing for many years and the new owner gets hit with a large special assessment or has to be part of a loan. And the interest charges can financially kill.

For instance, even a $250,000 loan for a 50-unit association at a 5 percent rate over 15 years will cost the association more than $350,000 in interest payments. Payments that come out of the association’s increased condominium fees – individual payments that come to about $7,000 in extra payments for every unit owner in the association. Surely, that money can be put to better use. Insist that your association have a proper reserve study done to help figure out what the cost of long-term expenses will likely be and budget for it. Starting now.

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