Are HOA Board Members Personally Liable for an HOA Loan?
No. In the loans we arrange, board members sign on the association's behalf, not personally: there's no personal guarantee, and their credit isn't pulled. The association is the borrower and repays the loan from its assessments, and the lender cannot foreclose on owners' homes. Board members still owe the association care and good faith in how they decide.
Most board members ask the same question before an association borrows: if something goes wrong, is my name on this? The short answer is no. The association is the borrower, and the people who sign do so for the association, not for themselves. While you serve on the board, the lender keeps your name and contact information on file. That's so it knows who to call with questions or if something comes up, not so it can come after you personally.
Who is actually borrowing?
The association is. It signs the loan as the borrower, and it repays the loan out of the assessments it already collects. Board members sign the loan documents as agents of the association, not as personal guarantors. HOA loans are typically secured by assessments rather than real estate: the lender takes an assignment of the association's assessment income rather than a mortgage on anyone's home. The lender records its interest in the association's assessment income with a UCC filing. These filings are public, so anyone can search their state's UCC records to see which lender has an active loan with an association.
What do board members sign?
Any board member the board authorizes can sign. They sign as an agent of the association, and the loan documents are in the association's name. In the loans we arrange, board members sign on the association's behalf, not personally: there's no personal guarantee, and their credit isn't pulled.
Two practical points. First, the signature block should name the association and show the signer's title, which is standard in the documents lenders prepare. Second, a personal guaranty is a separate promise a person makes for themselves, and it is not part of the loans we arrange. Your association's attorney can confirm both.
Is anyone's credit checked?
No individual's. In the loans we arrange, no individual's credit is pulled. The lender underwrites the community: its budget, reserves, delinquency and the borrowing authority in its governing documents. At closing, lenders do confirm who the authorized signers are, which is identity verification, not a credit check.
Can the lender come after owners' homes?
No. The lender cannot foreclose on owners' homes. The association's own lien against a delinquent owner is a separate power and is unaffected. If an association falls behind, the lender's first step is usually a conversation: what's happening, and how do we fix it? Lenders work with the board to find a path forward long before treating it as a default. An association's loan default doesn't go on owners' personal credit, and owners aren't personally liable for the loan.
Where can board members still be exposed?
Not on the loan itself, but in how they decide. Every state sets its own rules, usually in its nonprofit corporation law and its HOA law. Here's what three of them say:
- Florida: an HOA's officers and directors have a fiduciary relationship to the members the association serves (Fla. Stat. § 720.303(1)).
- Texas: a nonprofit corporation's directors must act in good faith, with ordinary care, and in a way they reasonably believe is in the corporation's best interest (Tex. Bus. Orgs. Code § 22.221).
- Colorado: a nonprofit corporation's directors must act in good faith, with the care an ordinarily prudent person would use in a similar position, and in a way they reasonably believe is in the corporation's best interests (C.R.S. § 7-128-401).
Your state's rules may differ. Boards that decide carefully, record their reasoning and act in good faith are on solid ground. Ask your association's attorney how the rules in your state apply to your board.
What should the board do before it signs?
- Record the decision. Document the project, the options considered and the vote in the board meeting minutes. It shows the board did its homework.
- Follow your governing documents. If they require a membership vote to borrow, hold it before closing.
- Bring in your association's attorney early, but not necessarily often. Attorneys are most involved on loans over $1,000,000. They interpret your governing documents, draft the borrowing resolution and voting documents, review the commitment letter and closing documents, and write any opinion letter the lender requires. They typically aren't there to negotiate the interest rate or other financial terms.
- Check the insurance. Many associations carry directors and officers (D&O) insurance. When a loan is underwritten, lenders review the association's insurance certificates and look specifically at its liability coverage.
Boards also ask
Do board members need good credit to sign the loan?
No. The lender underwrites the association, not the individual board members.
Does a new board inherit the loan?
The loan stays with the association when the board changes. The lender just needs the new board members' names, positions and contact information.
Still deciding? Talk it through with us.
We’ll talk with any board at no charge and no obligation, just answers.