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January 19, 2024

Multi family Roofing: Smart Financing Strategies for HOAs

With so many options to maintain, repair, and replace community roofs, homeowners’ associations need to understand the options for the replacement of multi family roofing.

Homeowners’ associations play a pivotal role in protecting and enhancing the value of their residential communities through regular maintenance, including multi family roofing projects. Whether routine or urgent, property maintenance can be a difficult balancing act for homeowner associations, largely due to the costs of the work. Roofs of common areas as well as individual dwelling units are one item that is perennially on an association’s list of maintenance priorities.

Projects such as repairing or replacing a clubhouse roof may help reduce maintenance costs while increasing property values and energy savings.  Finding the right financing solution is essential, in this post, we will explore various strategies and considerations for financing new roofs specifically for homeowner associations.

First, a word about the importance of maintaining community roofs.

A multi family roofing project will last longer when it is properly maintained. A well-maintained roof is crucial for the structural integrity and aesthetic appeal of properties. Roofs protect the interior of homes and common areas from the elements, ensuring residents’ safety and comfort. Neglecting roof maintenance can lead to costly consequences, including water damage, mold growth, reduced property values, and increased insurance costs. Combined with gutter cleaning, conducting annual or bi-annual assessments of roofs across a property as well as implementing a formalized roof maintenance schedule, is the best way to forestall having to replace roofs prematurely, particularly in areas that experience all four seasons, heavy rain, wind, and snow. Operating funds are generally used to pay for the day-to-day expenses of the community, including roof maintenance services.

As roofs age, they become more susceptible to damage from weather, pests, and wear and tear, even with the best maintenance plan in place. One of the most critical components of a community’s structural integrity strategy is a financial plan for roof replacement and an understanding of financial options. New roofs are one of the most common and costliest community repairs; many homeowner associations are ill-prepared to respond to this kind of expensive repair or replacement.

Step 1: Review Financial Statements, Insurance Policies, and Governing Documents.

Reviewing the homeowner association’s financial statements, including the balance sheet and income statement, cash reserves, any outstanding debts as well as maturing investments, is a great place to start. There may already be existing funds within maturing investments that can be allocated to roof replacement. Reserve fund strategies for roof work are addressed below.

Study the association’s insurance coverage; most policies cover items such as fire, wind, and hail damage. Some policies may cover other types of damage to the roof, reducing the financial burden on the association. Roof replacement costs may be covered for non-wind and non-hail losses, depending on the age and condition of your roof, which is why roof maintenance is so important.  If the association’s roof issues are covered, insurance policies can pay for the replacement cost after payment of the deductible.

Review the association’s governing documents to understand any financial limitations or guidelines for major projects. It’s critical to comply with all legal and contractual obligations. A board member with a financial and legal background can assist with this process. However, hiring an outside professional is the best way to ensure a thorough review of all necessary documents and the creation of a reasonable action plan that justifies the project and can be reviewed and understood by homeowners, such as whether skylight repairs are the responsibility of individual homeowners. Outside professionals can also conduct a “reserve study” which is important if the association decides to use reserve fund contributions or apply for a bank loan, as addressed in the next section.

Approaches for Financing New Roofs

Reserve Funds

Almost all homeowner associations have a reserve fund, which is a dedicated interest-earning savings account that can be used for planned major repairs and replacements. An association’s reserves are considered fully funded if they can cover the cost of all the association’s major expenditures for 20 to 30 years. While a reserve fund that covers 100% percent of all estimated community expenses is rare, a typical reserve fund covers about 70% of estimated community expenses. Reserve funds grow over time through regular funding that comes from a percentage of homeowner dues and offers financial predictability through these regular contributions.

Reserve fund studies, often conducted by professional consultants, help homeowner associations determine the financial contributions needed to adequately fund the reserve and whether reserve funds can, or should, be used for large projects. These studies assess the condition of various property components and estimate the components’ remaining useful life. Reserve fund studies are often required for the homeowner’s association to obtain loans.

Associations should promote the benefit of maintaining a robust reserve fund by communicating the long-term benefits in terms of increased property values, reduced need for sudden assessments, and improved quality of life for residents of the association. Any reserve fund spent to repair or replace roofs must adhere to the community’s rules and regulations as well as its governing documents.

Special Assessments

In situations where there is no reserve fund to cover a multi family roofing project, or the reserve fund is insufficient to cover the full project cost, a special assessment can be considered. A special assessment is a one-time fee imposed on homeowners to raise the necessary funds for a specific project, including roof replacement. This approach is often used when unforeseen or urgent expenses arise and there is a significant shortfall in the reserve fund. While special assessments provide quick access to funds, unfortunately, they are often perceived by some homeowners as fundamentally unfair.

While special assessments impact every homeowner equally, a second or third purchaser who has lived in the community for less than two years may feel that historic roof issues are the responsibility of other long-term residents. For newer residents, a large special assessment can be particularly burdensome with new home payments, variable mortgages, and other new homeowner costs, such as relocation costs or moving expenses. Even for a well-run association, these kinds of special assessment issues can create ill will, disputes between homeowners, and a sense of dissatisfaction with the homeowner’s association, as well as legal action against the association, if not well-communicated and well-planned.

Roof Replacement Loans for Multi Family Roofing Projects

As with any construction project, associations can explore loans to finance roof replacements. These loans provide the necessary capital for a roof replacement project and can be secured through various financial institutions or government programs. Loans avoid many of the unpleasant optics that special assessments often present, without requiring large upfront contributions. Loans that can be structured to meet the specific needs of an association’s roof replacement project, including flexible repayment terms. Loans can help the association maintain its financial stability by preserving its reserve funds and avoiding the need to tap into emergency funds or delay necessary maintenance and repairs. There are several loan options depending on the association’s specific needs and the type of roof repair or replacement.

  • Reserve Loans

Some financial institutions offer loans specifically designed for association reserve funds. These loans help associations cover major repair and replacement costs for existing assets, such as roof projects. The loan is repaid over time, typically through monthly assessments.


  • Bank Loans

Associations can apply for traditional bank loans to finance roof replacements, these could be loans or lines of credit. The terms and interest rates may vary based on the association’s creditworthiness and financial history. Fannie Mae and Freddie Mac support around 70 percent of the U.S. mortgage market, according to the National Association of Realtors. Most conventional loans offered by private lenders to associations end up being backed or purchased by Fannie Mae. Therefore, any loan an association is seeking to cover the expense of roof repair or roof replacement needs to comply with Fannie Mae’s requirements, of which there are many. Here are links to the requirements enacted in September of 2023: Fannie Mae Lender Bulletin.


Several banks specialize in homeowner association loans for roof projects. Association boards can check with groups such as the Community Associations Institute for referrals. Before selecting a loan option, it’s crucial for associations to thoroughly research and compare terms, interest rates, and repayment schedules, as well as the significant administrative burden these kinds of projects demand. Consulting with financial advisors and legal experts can help ensure that the chosen financing aligns with the association’s financial goals and obligations as they decide how to finance a multi family roofing project.

Roofing Contractors and Financing Programs

Some roofing contractors offer financing programs specifically tailored to associations. These programs can include options for deferred payments, low-interest rates, or extended repayment terms. Reputable roofing contractors who routinely work on large projects and have a demonstrated history of success working with associations are familiar with their financing needs and can streamline the process from financing to groundbreaking to project completion. Unlike banks that are required to follow one-size federal lending guidelines, roofing contractor terms can be negotiated based on the specific project and association’s financial situation. When considering a vendor-financed option make sure to conduct due diligence on the roofing contractor and make sure the contractor’s specific offerings are exactly in alignment with what is needed for the association’s roof replacement project. Association boards should ask for references as well as representative roofing projects that can be shared with residents.

Considerations and Best Practices

Maintaining the integrity of a residential community’s roofs is a vital responsibility for homeowners’ associations. Proper roof maintenance not only preserves the aesthetic appeal of properties but also protects residents and their investments. Financing new roofs can be achieved through various strategies, such as reserve fund contributions, special assessments, loans, and contractor financing programs. Each approach has its advantages and disadvantages, and the choice depends on the specific financial situation and needs of the association and the multi family roofing project.

Ultimately, successful financing of new roofs within homeowners’ associations requires careful planning, transparent communication with homeowners, and adherence to legal and regulatory requirements. Open and transparent communication with homeowners should provide clear information about the necessity of the project, the financial impact on homeowners, and the expected benefits. Regardless of whether you choose to finance through a roofing contractor, associations should obtain competitive bids to ensure they are receiving a fair price for the work. This also provides an opportunity to discuss financing options with contractors and comparison shop funding terms. With the right strategies in place, associations can ensure that their communities remain safe, comfortable, and valuable for years to come.