Association Borrowing Questioned

Nov 22, 2023 | Associations, Elections, Law, Q&A

Q: The board of directors of my condominium association has been discussing taking out a loan to pay for major repairs to our condominium building. To my knowledge, our association has never borrowed money before. It seems to me that for such a serious undertaking, a vote of our owners should be required. Is a loan by the association a mortgage on my unit? (W.K., via e-mail)

A: Borrowing money by condominium associations is not uncommon. However, it can be one of the more complicated legal issues an association may encounter.

As usual, a review of your condominium documents is the first place to start. Some documents specifically require owner approval before the association can borrow money. Some documents grant the board unlimited authority to borrow. Some allow the board to borrow to up to a certain amount and then require an owner vote. Many documents are simply silent on the issue.

The Florida Condominium Act does not generally address an association’s authority to borrow money. Chapter 617 of the Florida Statutes is called the Florida Not for Profit Corporation Act. This law also applies to most associations and states that corporations not-for-profit have the authority to borrow money unless limited by the articles of incorporation or bylaws of the corporation.

It is also necessary to understand how the loan is secured and intended to be repaid. It is not uncommon for the repayment of the loan to be secured by special assessment. Therefore, the association would also have to confirm under the documents whether the board has the authority to levy special assessments or whether an owner vote is required. In other words, both assessment and borrowing authority must be confirmed.

To complicate things a bit more, the “emergency powers” section of the Florida Condominium Act allows associations to take certain actions in responses to damage from declared state of emergencies. These actions include both borrowing money and levying special assessments without membership approval, even where the governing documents would otherwise normally require a membership vote. An association considering borrowing money under the emergency powers law should review the issue with the association’s legal counsel to confirm that the association is able to take advantage of that provision of the statute.

In response to your second question, a loan taken out by an association is not a direct lien or mortgage on your unit. However, the association is legally obligated to assess to repay the loan, and those assessments are a lien on your unit just like any other assessment properly levied by the association.

Q: The election of my condominium association was held earlier this year. Recently, it was rumored that the ballot count was wrong, and that a losing candidate was put on the board. A group of owners requested to inspect the ballots and we did a recount. We concluded that the incorrect results were announced as far as who the winners were. When we brought this up to the board, they said that it was too late to do anything, and the matter was closed. This seems wrong. Shouldn’t we be able to right this wrong? (A.R., via e-mail)

A: Assuming the conclusions from your “recount” reflect the actual outcome, it is most likely, at least in my experience, that the miscount was due to unintentional human error.

Regardless, if the annual meeting took place more than sixty days ago, then the board is likely correct that it is too late to do anything. Section 718.112(2)(d) of the Florida Condominium Act states that any challenge to the election process must be commenced within sixty days after the election results are announced.


Originally posted on Written by Joseph E. Adams of Becker & Poliakoff, P.A.,