When a homeowners association needs a major repair, the default solution is often a special assessment—dividing the cost among all owners. But that vote can take months, and even after it passes, some owners cannot pay their share on short notice. According to Jack Miller, principal at Gelt Financial, many boards do not realize that borrowing against future dues is an option until they are already stuck. Gelt is one of the few private lenders that finances associations directly, an area Miller says has almost no competition because most lenders are not set up to underwrite this type of deal at all.
Unlike a mortgage on an individual property, an association loan is not secured by real estate. There is no collateral in the traditional sense, and no personal guarantees from board members or owners. Instead, Miller explained, the loan is secured by the association’s ability to pass a special assessment or raise condo dues to repay it over time. That structure means the association is borrowing against its own income stream, not against the building itself. Once the loan closes, the board typically still passes an assessment, but instead of collecting a large lump sum from every owner at once, the repayment gets spread out and the immediate repair gets funded right away.
The biggest obstacle Miller sees is not financial. It is personal. He described a recent case involving two elderly board members, one 88 and one 92, who served as president and treasurer of a 40 to 50 unit association. Both were retired schoolteachers, and both were reluctant to raise dues because they knew every homeowner personally and did not want to be the ones asking neighbors for more money. Miller’s response to that hesitation was direct: if you own your home, the repairs need to get done regardless of how uncomfortable the conversation is. Boards that avoid raising dues because they live alongside the people they would be charging often end up with a bigger problem later, when a roof leak or a failed window becomes an emergency instead of a planned repair.
Not every association needs outside financing. Sometimes individual owners fund their own share of a special assessment directly rather than paying a lender’s rate. Miller pointed out that one owner might reasonably ask why they should pay Gelt’s rate when they could just cover their portion themselves, and for owners who can afford to do that, it is a fair question. Where private lending makes the most sense is when the board needs the repair funded now and cannot wait for a lump sum assessment to clear. Gelt is not able to help every association. Deals involving existing debt on the property typically do not work, since Gelt wants to be the first lender in, and associations that have let a problem grow too large sometimes need more repair work than makes economic sense to finance.
Miller’s advice to boards is to get ahead of the timeline rather than wait for a crisis. Associations should be planning major repairs a year in advance and building relationships with banks and other traditional lenders first, since that financing is typically cheaper. Private lending exists as the option for boards that have already tried that route and still need a way to get the work done.
