SBA LOANS
Q.
If a homeowner association accepts a prepayment from a homeowner
on an SBA loan, is the association required to use the proceeds
of the prepayment to make a principal repayment on the SBA loan?
A.
No. While it may be prudent to do so, it is not required by law
and the board may have a good business reason to apply the funds
elsewhere. Top
PREPAYMENT
OF SBA LOANS
Q.
I own a property management company that manages two condominium
associations that obtained Small Business Administration (SBA)
loans shortly after the 1994 Northridge Earthquake. Can the associations prevent
individual owners from prepaying their portion of the loans?
The SBA will not permit the association to reamortize the
loan if it is prepaid.
A.
The association cannot prohibit a prepayment by a member. The amount owed is based
on a special assessment which can always be prepaid. Top
LOANS AVAILABLE
TO ASSOCIATIONS
Q.
Our homeowners association is twenty-one years old. We need to
upgrade our common areas but do not have the funds to do so. Is
it possible for an association to borrow funds for the purpose
of making improvements?
A.
Absolutely. Your association attorney, accountant or management
company should be able to recommend various sources for HOA loans.
These loans are made by certain commercial banks and private investors/pension
plans.
HOA loans are made directly
to associations and are secured by an assignment of a special
assessment. Generally, the proceeds can be used for improvements,
correcting defective construction, litigation and establishing
reserves. The loans are typically made for terms of two to seven
years. Top
