Loans 
“It's easy to get a loan unless you need it.”
—Norman Ralph Augustine
    
There are times when a condo corporation needs so much money that a special assessment would cause a huge financial burden upon many of the owners.



An example would be when the condo needs to raise $6 million to repair concrete work in an underground parking garage and fix water leakage penetrating the building envelop.

Why take on a loan?
A special assessment in these cases may cost each owner $30,000 or more and it would be difficult for many owners to obtain a second mortgage to pay their share of the assessment.

The monthly payments could be much lower with a loan depending on the length of the term and the amortization period.

Obtaining a loan
Usually the management company will find a finance company to to offer a loan. There are a few of them that specialize in giving condos loans.

The interest rates are much higher than what a corporation can get from a bank but a condo that needs that much money may not qualify for a bank loan.

Yet, there are signs now that the major banks will give loans to condo corporations. (2017) If a condo board is planning to bring a loan by-law to the owners, the owners should start asking questions if the loan will be with a finance company rather than a bank.

Special Owner's Meeting
Unlike condo fees and special assessments, a loan requires 50% plus one of all owners to vote in favour, either in person or by proxy, at an owners meeting.

The finance company will have a representative at the meeting to explain the terms of the loan. The chair of the meeting will usually tell the owners that if the loan is not approved, the board will impose a special assessment on them.

Disadvantages
There are several disadvantages to taking on a loan. First of all, the owners end up paying a lot more in interest payments because of the high interest rate and the payments are spread out over several years.

Then there are huge commissions, appraisals and fees that need to be paid.

The loan payments drags down the property values for the entire length of the loan as it raises the monthly condo fees. This makes the units less attractive to potential buyers.

Finally, once a condo takes on a substantial loan, the monthly payments become so high that it becomes almost impossible for the corporation to replenish the reserve funds so the owners will need to renew the loan when, or even before, it is paid off. It is like getting caught in revolving credit; once you get hooked, you never get off.

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