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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