Communities (Condo and Homeowner) special assessments are extra, “unusual” fees that you may be charged by your board under certain conditions. Most association managers and experienced board members cringe when the term special assessment comes up. These costs are usually levied by the board only in emergencies, such as in the case of unexpected large-scale projects. However we have seen several of our communities that prefer to pay for maintenance projects via special assessment. Historically these are smaller high end association where the owners can write a large check without thinking about it. Looking further we have a number of associations that are so poorly funded that they are operating the same way but most likely have not broadcast that to the owners.
Differences Between Regular and Special Assessments
Regular assessments, also known as “dues,” are what the member is required to pay each year. These fees are often paid out monthly or quarterly. These assessments, or dues, are predictable and are often increased on a yearly basis. These dues are evaluated by the community board to ensure that the amount of money that’s being paid is sufficient to take care of the amenities and/or public spaces in the complex or neighborhood. If new amenities are constructed, or if the cost of maintenance or repairs increases, there’s a chance the dues will increase, but usually no more than 10% per year.
Special assessments are separate from the monthly dues that are paid by members and are only levied by the board to cover unexpected budget shortfalls, such as unforeseen repairs due to natural disasters or negligence. The board may, without membership consent, impose a special assessment on homeowners up to five percent of the current year’s budgeted gross expenses. This is dependent on the wording in the CCRs.
What is with wrong with relying on special assessments?
Say you bought into a community and a year later you get a notice that all the decks need to replaced due rot and water intrusion. The board is asking each member to pay thousands of dollars for the work. Since you have only been in the community for a year is that fair to you? Would you be upset if this wasn’t disclosed during the purchase process, most likely! There is also a high risk to delay the work if the monies are not available. This often backfires as the delay only results in a higher project costs (inflation is 8% at the time of this blog) and a higher risk for damages to other areas of the building. In this case a deck project that gets delayed for a couple of years could result in siding damage or water intrusion issues under the deck surface. This usually means an even higher project cost and further delays or an even higher special assessment than what was originally trying to be averted. Communities that continually have special assessments are less marketable and may be valued less than a similar community that does not have a history of special assessments.
Can Special Assessments be Enforced?
Being a part of a Community (Condo and Homeowner) means you are required to pay special assessments that are levied on you. This is usually stated in the CCRs that each community member receives and signs at closing. Unexpected costs often cause anger and frustration among members; however, transparency is key to keeping tempers low. Another consequence is that board members are less inclined to volunteer or stay on the board because of the anger projected on them.
When an community provides financial transparency to members, there’s a greater chance that members will be able to budget for potential special assessments accordingly. For example, when an community explains that the decks on the condominium complex will need replacement, and for safety reasons the work will be needed in the next years, it allows members to start setting aside small amounts of money now instead of having to scramble last minute to come up with the full amount of the special assessment.
Collecting Special Assessments
Special assessments are for the benefit of the community and enforcing them is necessary to ensure everyone carries their weight. For those who refuse to pay their portion of a special assessment, the community does have legal recourse to collect the funds. It’s not uncommon for an community to put a lien on someone’s property or levy additional fees if there is a refusal to pay. Community boards do not enjoy taking these drastic steps, but without them, others in the community would be forced to pay more to cover those who refuse to pay their portion.
