If your association intends to obtain a bank loan, we recommend that you check with us first to see if owner approval of the loan is required before proceeding with signing the loan commitment and paying any bank fees.  Associations often make the mistake of moving forward with the loan only to find out later that they cannot complete the loan transaction because they have not obtained the proper approvals earlier in the process. 

This is not to say that all governing documents will require owner approval.  It will depend on how the association's governing documents are worded. Often there are limitations on Board authority in the Bylaws or the CC&Rs that require the Board to obtain approval by a majority of the owners before entering into a contract that exceeds one (1) year. 

Another instance when you may need owner approval is when the loan installment payments will be funded by imposing a special assessment on the owners.  If the special assessment in the aggregate exceeds 5% of the budgeted gross expenses of the Association for the fiscal year in which the special assessment is imposed, then the Association is required to obtain the approval of a majority of a quorum of the members.  In this context, a quorum means more than 50% of the owners. 

Next time your association is considering a loan, contact us so we can review the governing documents and provide the board with a legal opinion regarding whether owner approval is will be required.