An HOA special assessment is a fee that is charged to each housing unit within a development, to be used to cover an unexpected expense or other short-term occurrences. Special assessments are charged separately from your HOA fees, and they usually arise due to a shortfall in the reserves of the HOA.
This article will explore more about HOA special assessments.
When Special Assessments Arise
Most special assessments arise due to a shortfall in the reserve accounts of the HOA when certain major repairs are necessary. The anticipated repairs may have gone over-budget, or the HOA board did not adequately assess the expected costs. Other HOAs simply do not plan ahead for such major repairs, bringing about the need for an assessment.
Unexpected occurrences such as natural disasters (damage from fires and floods) are another common cause for special assessments. Such events often cause damage that may be beyond the amount that the reserves can cover. Also, most reserve accounts are not designed to cater for such expenses.
Insufficient insurance may be another reason that necessitates a special assessment. Your HOA insurance policy may have limited coverage against certain events, making an assessment necessary should such events occur.
Limitations on Special Assessments
Each HOA has a set of bylaws and governing documents (the Covenants, Conditions, Restrictions and Easements- CC&R’s) that set specifications on how the HOA can levy assessments. Some associations require voting requirements, an advance notice, or even limitations on what expenses can be covered through an assessment. Please refer to your HOA governing documents regarding special assessments.
Anticipating Special Assessments
There are several ways in which you can anticipate a special assessment before you are slapped with a bill. You can monitor state legislation for changes in legal requirements, and if you notice poor conditions of common areas such as shared buildings, sidewalks, the pool or the gym, you can prepare yourself in advance for an incoming assessment.
Failure to Pay
Special assessments are normally mandatory for homeowners to pay once the resolution is adopted. A lack of payment may prompt the HOA officials to place a lien on your property, upon which the association can initiate a foreclosure on that lien, as allowed by state law.
In conclusion, special assessments should not be used as a substitute of proper budgeting. They should simply be a means to cover those unexpected-occurrences-that-are-necessary-to-be-satisfied.