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COLLATERAL FOR HOA LOANS

Special Assessment as Collateral. Association loans are secured by a special assessment approved by the membership. Some will rely on a pledge of assessments from the association's revenue stream. (Civ. Code §5735.)

Common Area Lien. If the bank requires a lien be recorded against the common areas as security, it means the bank is unfamiliar with how associations work and the board should contact other lenders.

Personal Guarantees. Directors should never personally guarantee loans made to the association--directors are volunteers and should not be putting their own assets at risk for such loans. If the bank is not satisfied with an assignment of assessment rights, look for another bank.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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