Otherwise known as Condo corporation financing or condo corp loan. A Condominium Corporation Loan is a product designed to help condominiums receive money to complete required repairs to their building. Receiving a loan is the best option. Generally, because it will help keep a healthy reserve fund and stop a special assessment from happening to the unit owners.
“Why would the condominium need or want to borrow?”
Condo corporation financing is generally required due to repairs are needed to the common property and there is not enough in the reserve fund to cover the costs. This response is true if the property is 35 years old needing repairs for wear & tear and upgrading. We've also seen newer properties less than 10 years old that require corrections to construction defects. Ultimately, taking on a condo corporation loan and amortizing it over 5 to 10, even up to 20 years will help keep the reserve plentiful and the condominium financials in a healthy state.
Condo Board must repair the common property!
Condo Boards are required by law to repair common property when necessary and cannot refrain from completing necessary repairs. This means they need to have the money in their reserve fund or acquire the amount needed for the repair. If they currently do not have the money the Condo Boards, and the Property Managers would have to approve a Special Assessment. This is where each owner is responsible for paying their share of the total repair costs. Instead of undertaking these options, our mortgage brokerage can provide condo corporation financing. This is generally the best solution to eliminate a special assessment and make the owners pay a large lump sum of money.
What are the challenges with the Special Assessment model?
There is a strong possibility some of the owners cannot obtain the funds within the timelines of the Special Assessment. This can negatively impact the ability of the Condo Board to sign the repair contract as the full amount of funds are not readily available to cover the repair costs due. One of the benefits of borrowing through the Condominium Corporation, it offers immediate relief for Condo Boards and owners. Alleviating a large level of anxiety to the owners who cannot raise the funds and also taking the stress away from the Condo Boards needing the work to be completed.
The Process
Condominium corporation financing is a loan that is placed against the corporation itself. In order to achieve this our mortgage brokerage will present a funding package to our approved lenders. Each lender has different lending criteria and requirements for documentation. Each package generally contains all the Condominium Corporation documents. Documents such as the year-end financials, 2 years of audited financials, bylaws, minutes, financial proforma, construction budget and any architectural plans. Once the loan is approved the condo’s lawyer will review and present the package to the board for final review and signing. The whole process takes roughly 2 months to complete. Funds are dispersed right away or in some cases in multiple stages. Once construction is complete, we assist you in converting the construction loan segment into an amortized loan that works best with the condo financials.
The Solution
A major hurdle facing a Condo Board, unit owners or their Property Manager is finding a proper borrowing solution. Most of the major banks and financial institutions in Canada are unwilling or unable to provide this lending due to the simple fact that common property cannot be put up as collateral. Our mortgage brokerage has over a dozen lenders from institutional banks to private lenders, ready to fund your condo loan. We are highly trained with years of experience, ready to package and present your condo loan.
Condominium Corporation Loans are a beneficial option for Condo Boards, property managers and owners. This solution generally maintains or increases the equity value of their property and condo financials.
If you have any questions please contact us anytime.
