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If you’re a condo owner, here’s what you need to know about a special assessment, the purpose of the assessment, and the potential reasons for it.
A special assessment is a financial charge imposed on condominium property owners to cover costs that exceed the funds available in the condominium’s operating or reserve accounts. These costs usually pertain to repairs, maintenance, or upgrades that cannot be addressed through the annual budget.
This levy is designed to address shortfalls in the annual budget or fund unexpected expenses. It is often used for costs such as damage repairs, essential maintenance, legal judgments, or property improvements that were not accounted for in financial planning.
Condominium boards may impose a special assessment for various reasons. These could include repairs for unforeseen damages like roof leaks, structural issues, or weather-related damage. Boards may also use it to fund capital improvements, such as renovating shared spaces or complying with updated building codes. Additionally, it may be used to cover costs from legal disputes or damages not covered by insurance.
The condominium board follows a structured process when deciding to impose a special assessment. First, they determine the total cost of the necessary repair, maintenance, or upgrade, considering quotes from contractors or service providers as well as additional legal or administrative fees. Then, the board evaluates the financial status of the condominium, including reserves and the annual budget. Any shortfall is divided among unit owners based on the ownership percentages in the condominium’s governing documents. Owners are informed about the reason, cost, and payment terms through written notices or meetings, as stipulated in the condominium’s bylaws.
The approval process for special assessments depends on the condominium’s bylaws and regional regulations. In some areas, a condominium board can impose the assessment independently, while others require owner approval. The specific approval thresholds vary, with some jurisdictions requiring a majority or supermajority vote from the unit owners.
Special assessments can be collected through lump-sum payments or added to monthly contributions. The chosen method depends on the condominium’s financial situation and the urgency of the expense.
Boards are within their legal rights to impose special assessments if the governing documents and local laws allow it. While owner approval may not always be mandatory, boards must adhere to the procedures outlined in the bylaws. Professional consultations, such as with attorneys or engineers, might be sought to ensure the assessment is necessary and fairly applied.
Potential buyers of a condominium unit must be informed of any ongoing or future special assessments. This information is often included in the unit’s resale certificate, helping buyers understand their financial responsibilities upon purchasing the property.
Condominium corporations are expected to maintain a reserve fund for planned maintenance and repairs. A depreciation report is often used to project future expenses and guide long-term financial planning. If the reserve fund is not adequate to handle unexpected repairs or other unplanned costs, a special assessment may be used to address the budgetary gap.
