What is a Special Assessment?
In real estate, a special assessment is a levy related to a condominium for the purposes of paying for a project or replenishing an underfunded reserve.
Real Estate Agent Explains Special Assessments
Special assessments are charges that are levied by a condominium corporation on the owners in that building or complex. They are not the same as condo fees, but are similar because the money is used for large capital expenditures and increasing reserve fund amounts (which will later be used for a large capital expenditure).
Special assessments are often feared and reviled by condo owners because they are commonly large sums of money compared to monthly condo fees. Condo owners are used to paying small amounts every month in the hundreds of dollars, and special assessments are charges often in the thousands of dollars.
Example: A condominium building has a leaking roof and the problem needs to be fixed. If there are 12 units in the building and the roof will cost $46,000 to fix, then each unit owner (if all units are equal in unit factos) would have to pay a $3833.33 portion of the cost. Condo fees could be increased to take care of that cost, or the condo board could vote to special assess instead. Either way, the money needs to be raised to fix the roof. It can either be collected slowly over time with condo fees, or relatively quickly with a special assessment.
It should be noted that some special assessments can still be paid in installments much like condo fees are charged, but the difference is that the installment payments will end at some point, whereas condo fees are charged indefinitely. For example, the above special assessment could be paid in 4 equal installments over 2 years or something like that. Then each owner would have to pay . When installments are charged, there is a payment schedule made to let people know when they have to pay each installment. This choice as to whether the payments can be made in installments is up to the condo board. Don’t forget that those board members have to pay too, so it’s not as if someone is making the decision and it won’t affect them.
Why Does It Matter?
Special assessments are often misunderstood by condo buyers and owners. The bottom line is that they are not always a bad thing. Some condo corporations special assess often to keep condo fees low – which can be good for resale. Some condo corporations have mis-managed a condominium for many years, though. In these cases the special assessment is for things that have not been properly maintained over the years – this is an example of the kind of special assessment that could be avoidable. To find out whether the assessment means something is wrong, or is just a matter of management style, requires reviewing condominium documents as well as talking to the management company and the condo board to get the reasoning behind the levy. You can’t always avoid a special assessment, but you can often find out why one is being charged by reviewing the condo documents. Then you can make an informed decision as to whether the assessment is reasonable or not.
by +Alan F Macdonald REALTOR® | Copyright © – gimme-shelter.com