Do Condo Boards Have the Authority to Approve Loans on Their Own?

When it comes to managing condo finances, there are a lot of rules and processes in place to ensure everything is handled fairly and transparently. One common question that often comes up in condo meetings is:

Can a condo board authorize a loan on its own?

We spoke with Jim Wallace, Owner and President of Condominium Financial, to get some expert insight on the matter. While the board holds significant responsibility for managing the corporation's finances, their authority has limits—especially when borrowing money is involved. Here's a detailed exploration of the process, shedding light on the role of owners and the legal requirements in various regions.

Do Condo Boards Have the Authority to Approve Loans on Their Own?

Understanding Condo Loan Authorization

The short answer is no: a condo board cannot independently authorize a loan without involving the owners. While there are rare exceptions, they are dependent on specific bylaws or thresholds. For example, in Ontario, a borrowing bylaw may already exist within the condominium’s governing documents, allowing certain loans under predefined conditions. However, this is uncommon, and in most cases across Canada, owners' approval is required through a formal process.

The Role of the Borrowing Resolution

In most jurisdictions, a borrowing resolution is the primary mechanism for authorizing a condo loan. This resolution ensures transparency and gives owners a say in critical financial decisions. Here's how the process generally works:

1. Proposal and Justification: The board identifies the need for a loan—typically for major projects such as repairs, upgrades, or infrastructure improvements.

2. Owner Consultation: The board explains the purpose of the loan, its terms, and the potential impact on owners (e.g., increased fees or special assessments).

3. Vote of the Owners: A formal vote is conducted, requiring a majority or a specific threshold of owner approval (depending on provincial regulations and the condo's bylaws).

4. Loan Approval: If the resolution passes, the board is authorized to proceed with the loan on behalf of the corporation.

Why Do Owners Need to Vote?

So, why is this the case? Why do condo owners

need to weigh in on such financial decisions? Well, it’s all about ensuring accountability and transparency. The owners are the ones who will ultimately feel the impact of a condo loan, whether through increased fees or other financial adjustments. Therefore, it’s only fair that they have a say in whether the corporation should take on debt.

But Jim also clarifies that the vote is not about individual owners deciding whether they personally want the loan. Instead, the vote is focused on whether the condo corporation as a whole can borrow money. Depending on the loan structure, this might involve different options, like an opt-in or opt-out plan, or even a combination of both.

The key here is that every owner has the right to vote, and that vote ultimately decides whether the condo corporation can move forward with borrowing the money. This means that the board's job is to present the loan option to the owners and then let the owners decide what makes sense for the community as a whole.

How the Vote Works

In practical terms, when a condo loan is on the table, the board will typically present the loan details to the owners—what the money will be used for, the terms of the loan, and how it will impact the community. From there, the owners vote on whether the condo corporation is allowed to borrow the money.

It’s important to note that this isn’t a vote about whether individual owners agree to take on the loan personally. The vote is about whether the corporation can borrow the money for the project in question. So, while you may or may not personally need a loan for repairs to your unit, the corporation as a whole must get permission from all the owners to borrow money for common property repairs or upgrades.

Key Considerations for Owners

When voting on a condo loan, owners are not directly deciding whether they personally want the loan. Instead, the vote is about whether the condominium corporation as a whole should be allowed to borrow. Factors influencing their decision might include:

• Type of Loan: Is it an opt-in loan where only participating owners are responsible, or an all-in loan where all owners share the financial burden?

• Repayment Terms: What are the interest rates, repayment periods, and potential impacts on condo fees?

• Project Importance: How critical is the project being funded? Is it addressing urgent repairs or long-term investments?

Further Resources: Approve Loans in Condos

Read our article about The Shortfall of Condo Reserve Fund Studies and What To Do If Your Condo Corporation Needs to Borrow Money > 

Our blog also offers a wealth of information on relevant condo law topics, making it a valuable resource for property managers and boards alike. Or, explore Stak’d, our library with over 10,000 hand-curated condo-related resources for additional summaries and tools, or dive deeper into our blog for more detailed discussions on topics that matter to you and your community.

Authority to Approve Loans in Condos: In Conclusion 

While the condo board plays a key role in managing the day-to-day operations of the condo, they cannot authorize a loan on their own. Owners must vote on whether the corporation is allowed to borrow money, ensuring that every owner has a say in the financial decisions that impact the community as a whole. This process helps maintain transparency and accountability, giving the owners the chance to decide if taking on debt is the right move for the corporation.

Whether the loan is for essential repairs, upgrades, or other needs, the board’s responsibility is to present the loan option to the owners and let them vote on it. This ensures that the financial decisions made are in the best interest of everyone in the condo community.

So, while the board can help guide the process and explain the benefits of the loan, the final decision is always in the hands of the owners—and that’s how it should be!

-Stratastic Inc.

P.S. Need expert financial advice for your condo? Connect with Jim Wallace, the Owner and President of Condominium Financial, or explore more financial professionals on our My Condo Vendor.

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