A special assessment is a charge imposed by an HOA on its members for a specific purpose, such as capital improvements or repairs and maintenance. Special assessments are typically levied in addition to the regular monthly or annual assessment. Special assessments are imposed to finance certain improvements or services that will directly benefit the property owners who are being assessed.
Some benefits of special assessments include providing a dedicated funding source for specific projects, improving the appearance of an area, and increasing property values.
When a Special Assessment is Impossible: Condo Terminations
A condo association may vote to terminate a condo in a few different scenarios, such as if the property is not being well-maintained or if there is considerable damage or repairs that need to be made.
If a special assessment is paid, then the condominium association will have the money to pay for the repairs to the building that are needed. Of course, if the condo association has the money to pay for the repairs, then the repairs will be made, and the condo association will continue on. The problem with this option is that it will likely cost the condo owners money.
If the damage is caused by an event like a hurricane and the association has the right insurance coverage, the repair bill for the damage should not incur a special assessment. But if there was a need to catch up on deferred maintenance, the money to pay for the repairs would likely fall to the owners of the condo association.
For example, if the special assessment is $1,000,000, and there are 100 condo owners, each condo owner will have to pay $10,000. If the condo owners cannot pay the special assessment, then the repairs will not be made, and the condo association will have to look at other options. Sometimes this can be to get a loan to pay for the repairs, but there are times when banks are recalcitrant to offer a loan. In those instances, we have seen times when a reduced special assessment plus a smaller loan amount is approved, but there are times when that will not work either. On those occasions, a Condo Termination is worth considering.
All that being said, a special assessment may be a better option than a condo termination if the association is in good financial standing and the owners are willing to pay for necessary repairs and improvements.
If you have any questions about special assessements or just want to look at all the options on the table, please don’t hesitate to contact me.