The term special assessment only applies to owners of condominiums. So if you live in a freehold dwelling, you do not need to be concerned. If, however, you live, in or are considering the purchase of a condominium, you need to understand the meaning of this term, its implications and more importantly, how you can avoid it.
The purpose in levying a special assessment is to assist the condominium corporation to pay for necessary repairs to the condominium itself. For instance, your condominium corporation may need to complete repairs to the underground garage, improve the heating and ventilation system or complete a fire code retrofit. These are expensive projects which the condominium corporation may not be able to fund out of its Reserve Fund. The Reserve Fund is a pool of money which the condominium corporation is required by law to have in order to fund repairs. Sometimes, however, the necessary repairs or replacements are so expensive that the Reserve Fund is inadequate. In cases like these, the condominium may levy a special assessment.
A special assessment will not be levied without the board of directors first considering other less dramatic options. Sometimes, increasing the monthly common expenses can pay for the anticipated cost of the repairs. In any event, the board of directors may call a meeting of all of the unit owners to outline the problem and decide on a prudent course of action.
A special assessment will not be levied without the board of directors first considering other less dramatic options. Sometimes, increasing the monthly common expenses can pay for the anticipated cost of the repairs. In any event, the board of directors may call a meeting of all of the unit owners to outline the problem and decide on a prudent course of action.
Special assessments can be levied at any time, but they are more common in older buildings. This is because the major components of older buildings have a limited lifespan and will need to be repaired or replaced at some time. Special assessments can range from a few hundred dollars to a few thousand. It is important to note that failure to pay a special assessment may result in you losing ownership of your unit much in the same way if you fail to make your mortgage payments. However, many condominium corporations will attempt to assist owners who need time to pay off the special assessment by instituting monthly payment plans.
If considering the purchase of a new condominium, there are ways to avoid a special assessment. Your real estate agent may advise you to make your offer to purchase conditional upon a satisfactory review of the condominium’s documents, including the status certificate. By making your offer a conditional one, your lawyer will then be able to assist you through the myriad of documents that will tell you something about the financial stability of the condominium. If you are not satisfied after reviewing these documents, you will be able to get out of the deal without penalty. Otherwise, you may be stuck closing the deal and risking a future special assessment. In addition, a title insurance policy can provide some protection against losses you suffer owing to the condominium corporation’s failure to disclose information that would have indicated that a special assessment was being contemplated when you purchased the property.
Getting sound advice from your team of professionals can reduce the risk of a special assessment later on.