Term loan
Provides borrowing under an agreed repayment schedule. Review whether funds are advanced at once or drawn as work proceeds.
What is an association loan?
The association borrows money from a lender under a contract and repays it through an identified funding source. Owners commonly fund debt service through assessments.
This page concerns borrowing by the association. It differs from investing available funds or an owner taking a personal loan.
Line of credit
Allows draws within a limit under specified terms. Availability, expiration, interest, and repayment conditions require careful review.
When might borrowing help?
A board may evaluate financing for major repairs, replacements, or other authorized costs when available funds do not cover the need. It may spread payment over time while allowing work to proceed.
Compare borrowing with available lawful reserves, special assessments, staged funding, and other feasible options. Financing does not remove the project cost, eliminate risk, or cure an ongoing operating deficit.
Confirm authority before seeking final approval
Review the declaration, articles, bylaws, statutes, and proposed collateral with association counsel. Do not assume every loan requires the same vote or that a lender’s willingness establishes legal authority.
Section 718.112 provides specific requirements for certain SIRS-related funding: loans, lines of credit, and special assessments under that provision require a majority of total voting interests, with additional conditions and disclosures. These rules do not establish a universal approval standard for every association loan. [1]
Section 718.111 addresses association powers and approvals for certain association real-property transactions, including mortgaging. Counsel should evaluate any proposed security arrangement. [2]
Borrowing authority, project approval, and assessment approval are separate questions.
Identify every required action and notice before signing. Confirm which people are authorized to execute the loan documents.
Compare the complete financing terms
| Term | Question for the board |
|---|---|
| Principal and draws | How much can be borrowed, when can it be drawn, and what conditions apply? |
| Interest | Is the rate fixed or variable? If variable, what index, margin, and limits apply? |
| Amortization and maturity | Does the payment schedule fully repay the debt before maturity? |
| Balloon payment | Will a large balance remain due, and how will it be funded? |
| Fees | What origination, legal, unused-line, closing, and ongoing charges apply? |
| Security | What assessment revenues, accounts, property, or other rights secure the loan? |
| Covenants and default | What financial tests, reporting, restrictions, and remedies apply? |
| Prepayment | Can the association repay early, and at what cost? |
| Guarantees | Who is liable? Directors should obtain advice before any personal guarantee. |
Request proposals using the same project scope and funding assumptions. An advertised interest rate alone is not the total cost.
A repayment example
For illustration, a $100,000 loan at a fixed 6% annual rate, fully amortized over 10 years with monthly payments, costs about $1,110 per month. Total payments are about $133,225, including approximately $33,225 in interest.
If 26 units share debt service equally, that is roughly $43 per unit monthly, in addition to other assessments.
This is a mathematical example, not a lender quote. It excludes fees and assumes equal allocation; actual assessment shares and loan terms may differ.
Plan for repayment before borrowing
- Identify the assessment or other lawful source supporting each payment.
- Include ongoing operating expenses and reserve contributions in the forecast.
- Test slower collections, higher costs, and variable-rate increases.
- Address any balloon or refinancing risk without assuming another lender will be available.
- Allow for project contingencies and payment timing.
- Explain the total owner cost and duration clearly.
A longer repayment term can reduce periodic payments but increase total interest and extend the obligation.
How loans relate to reserves
Loan proceeds, existing reserves, and regular contributions serve different roles. Maintain clear records for each and follow restrictions on use.
A loan does not automatically authorize stopping reserve contributions or redirecting reserve cash. Evaluate the applicable statutory funding plan and conditions with counsel, the accountant, and the reserve professional.
What happens when an owner sells?
The association’s debt generally continues under the loan agreement; a unit sale does not itself repay it. Owner obligations can depend on the assessment structure, governing documents, sale contract, and applicable law.
Coordinate disclosures and financial certifications with counsel and the closing agent. Do not assume every selling owner must immediately pay a fixed share of the remaining loan or that a buyer automatically pays the seller’s share on the same terms.
The Association’s Role in a Unit Sale →Before approving the loan
- Is the work authorized, necessary, and properly scoped?
- Have alternatives and project contingencies been evaluated?
- Has counsel confirmed borrowing, security, notice, and voting requirements?
- Do owners understand payments, total costs, and duration?
- Has the board reviewed rates, fees, covenants, maturity, and default terms?
- Is the repayment plan realistic under less favorable conditions?
- Are recordkeeping, reporting, and lender monitoring assigned?
- Have conflicts and signing authority been addressed?
After closing, keep oversight active
Track draws against approved invoices, reconcile balances, make timely payments, and monitor covenants and reporting deadlines. Retain approvals, contracts, statements, and project records.
Ask for advice promptly if repayment or compliance becomes uncertain. Loan oversight should continue through board and manager changes.
Official sources & scope
- Florida Statutes § 718.112 — certain reserve funding and loan requirements.
- Florida Statutes § 718.111 — powers, duties, and property transactions.
Reviewed October 17, 2026. General education for Florida condominium boards. Consult counsel and qualified financial advisers about your documents, proposed loan, approvals, collateral, disclosures, and repayment plan.
Use a decision packet and a debt calendar
Compare proposals using the same borrowing amount, draw schedule, repayment period, fees, and project assumptions. Include a base case and a less favorable case showing the effect on owner assessments and available cash.
- Keep project, borrowing, collateral, and assessment approvals identifiable.
- Record closing conditions, draw deadlines, payment dates, reporting covenants, rate-reset dates, and maturity.
- Assign a primary and backup reviewer for lender notices and covenant compliance.
- Track outstanding principal separately from unspent proceeds and reserve balances.
Use the decision and action worksheet and board transition checklist. Transfer the loan file, lender contacts, and upcoming obligations when directors or managers change; share credentials securely.
Board Synergy Club · Watch & learn
Loans
A loan may help an association spread the cost of a major project, but repayment becomes part of future financial planning. Use this BrainyBoard program as a discussion resource when comparing financing options, interest rates, fees, repayment schedules, collateral, and the effect on owner assessments. Consider the full cost of borrowing alongside reserves, project timing, and other funding options.
LoansWatch on BrainyBoard ↗This program opens on BrainyBoard. Access is subject to the provider’s current sign-in and viewing requirements.
Education, not an individual decision. This externally hosted program is offered as a discussion resource; its contents have not been independently verified for this webpart. Program information may reflect requirements or practices in effect when recorded and may address association types with different rules. Have qualified Florida counsel confirm borrowing authority, required approvals, permitted collateral, and the proposed agreement. Have the association’s financial professionals review repayment capacity, total borrowing costs, and budget implications before a commitment. This webpart does not determine whether a particular loan is authorized, affordable, or appropriate for an association. Viewing the program does not by itself establish required director education credit. This resource does not establish official UCO or WPRF policy.
Understand the terms. Plan the repayment. Protect the future.
Connected financial and community resources
Authority matters: Florida law establishes statutory duties; governing documents define association authority subject to law; contractual duties come from applicable agreements. UCO procedures address separate UCO functions. The added registers and workflows are Board Synergy recommended practices, not prescribed statutory forms. Historical articles provide background rather than current legal instructions.