Legal Question in Real Estate Law in California
Can a Condo Board of Directors obtain a loan using real property as collateral?
Our condo Board of Directors needs to raise money for a special project. They are asking owners to vote on a resolution in which we, the owners, would authorize them to ''borrow from time to time from a ...lender, on such terms as may be agreed upon between the Board and Lender, such...sums of money as in their judgment should be borrowed, without limitation...''
The resolution also gives them power to ''mortgage...any property...including without limitation all real property and any personal property of the Corporation...'
I think this is insane.
Is it also illegal? If so, what specific law could I point to?
4 Answers from Attorneys
Re: Can a Condo Board of Directors obtain a loan using real property as collater
how was my last reply???????
Re: Can a Condo Board of Directors obtain a loan using real property as collater
It's hard to say what the Board thinks it can do, but as a practical matter I would think the phrase "....property of the Corporation" means property owned by the Corporation in a fairly strict sense, and not property owned by others over which the Corporation may have some control under an HOA contract, CC&Rs, etc.
I think you misunderstand the proposal, but who knows? The Board might not be well advised and/or might think it can do what it should not.
The prudent thing would be to find out who the Board's legal advisor is, then request an explanation from them.......it seems to me that a condo board can indeed mortgage property, but only property that stands titled in the name of the entity that the board governs, per se, and not property held by condo owners.
Get an explanation, and if it isn't as I suggest, you should probably consult an attorney who represents you, or you and other condo owners similarly situated.
Probably a harmless situation, but bears further investigation.
Re: Can a Condo Board of Directors obtain a loan using real property as collater
I would consider requesting mediation, they likely owe you that under the CC&Rs/bylaws. You can compel it. All HOA members should be informed of the vote, etc. I've studied some CC&Rs/bylaws on occassion. I would have to review your documents.
Re: Can a Condo Board of Directors obtain a loan using real property as collater
I have quite a bit of experience representing condominium associations and I can say that I have never heard of a board of directors requesting such broad authority to borrow money. Typically loans are taken out only for special projects and limitations on borrowing authority should be spelled out in the CC&Rs. Under the law, HOA's must levy regular and special assessments to fullfill their obligatios to maintain the commons areas and other duties under the CC&Rs. In addition to the CC&Rs, Articles of Incorporation and Bylaws, you should look the the general California statutes on nonprofit corporations as the Davis Stirling Common Interest Development Acting, which starts and Civil Code Section 1351.
I highly recommend that you seek the assistance of a local lawyer with experience in condominium law. I would start by contacting the California Association of Community Managers or the Community Associations Institute.
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