Should Condo Boards Have a Contingency Plan for Loan Repayment?

When managing a condo corporation, one of the most critical financial responsibilities is ensuring the timely repayment of loans. Whether for major building improvements, renovations, or other significant expenses, loans are often essential for funding projects that benefit the entire community. However, with financial obligations come potential concerns about whether the corporation can meet these payments consistently. 

A common question that arises among condo boards and property managers is whether contingency plans should be put in place in case paying off a loan becomes difficult, especially in the face of unexpected circumstances or delinquencies from some unit owners.

After all, a contingency plan is generally seen as a proactive measure to prepare for unforeseen challenges, making it a natural consideration for boards looking to safeguard the financial health of their building. So, should condo boards create a financial cushion to address possible payment delays, or is it unnecessary when the system is structured to support the loan repayment process?

We spoke with Jim Wallace, Owner & President of Condominium Financial, to get his take on whether condo boards should worry about putting extra financial cushions in place for tough times.

Should Condo Boards Have a Contingency Plan for Loan Repayment?

Why Contingency Plans Aren’t Necessary

The short answer is “no”—there’s generally no need for a contingency plan when it comes to paying off a loan as long as the condo corporation is collecting the necessary fees to make the payments. 

The concept of a contingency plan revolves around preparing for unforeseen circumstances—such as a delay in payments or financial difficulties. However, for a condo corporation, this is not typically required. Condo fees, which include loan repayments, are collected from unit owners and should be sufficient to cover any financial obligations the corporation has, including loans.

Consider this: if a few owners fall behind on their condo fees, the corporation still needs to meet its financial commitments. The board doesn’t go to vendors such as utility companies or insurers and request a deferral because a few owners are in arrears. The payments still need to be made in full. Similarly, the corporation must continue to make loan repayments even if some unit owners are behind on their fees. The collection of the overdue amounts will be pursued, but this won’t prevent the corporation from fulfilling its financial obligations.

The Role of a Loan Fund

A solution often built into the loan repayment process—particularly in the case of opt-in or opt-out loans. When owners are part of the loan agreement, their payments contribute to what is known as a "loan fund." This fund is designed to cover any arrears from owners who are unable to make their payments. It acts as a financial cushion, ensuring that the corporation can continue paying the loan without relying on their operating or reserve accounts. As the payments come in, the loan fund will accumulate and provide the necessary buffer until any arrears are cleared up.

This system reduces the likelihood that the corporation will face a financial shortfall, making contingency plans unnecessary. The idea is that owners’ monthly payments, along with the loan fund, will keep everything on track. The board can still meet its obligations, and the loan itself takes care of any delays in payments.

The issue of falling behind on payments for condo loans has not been a significant problem. Condo corporations that follow this process are typically able to make their loan payments without issue. The system in place for collecting fees from unit owners ensures that the corporation stays financially stable, even in cases of delayed payments.

Further Resources

Read more about Financial Transparency for Condominium Board Members: A Crash Course in Managing Reserve Funds >

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.

Contingency Plan in Condos: In Conclusion

In conclusion, while contingency plans may be necessary for other businesses or organizations that face unpredictable financial situations, condo corporations are generally equipped with built-in safeguards that reduce the need for such plans. By collecting condo fees regularly and utilizing a loan fund to cover any arrears, condo boards can ensure that their loan obligations are met without issue. The loan repayment is simply another expense that is included in the condo fees, and as long as these fees are collected, there should be no need for the board to worry about having to make unexpected payments.

Condo corporations can confidently meet their financial obligations, even in the face of some owners falling behind. The payment structure is designed to account for such circumstances, providing the board with the resources needed to keep the loan payments on track. As a result, condo boards can focus on their other responsibilities without the added pressure of creating complex contingency plans. With a reliable fee collection system and a well-maintained loan fund, the corporation’s financial health should remain secure, allowing the board to confidently handle any challenges that arise.

-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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