Special Assessment

What a special assessment is

Regular assessments fund the annual operating budget and the reserve contribution. A special assessment is different: it is an extra, usually temporary, charge for something outside that plan. It may be billed as a single payment or in installments, and unpaid amounts are generally collectible the same way regular assessments are, according to the governing documents and state law.

Owners often confuse a special assessment with a regular assessment increase. An increase raises the recurring dues for the year, usually through the budget process, while a special assessment is a separate charge tied to a specific need. Both are limited by the governing documents, and both can trigger owner rights to notice and, in some cases, a vote.

Why associations levy them

Typical triggers include the following.

• Major repairs or replacements, such as roofs, siding, paving or structural work, when reserves fall short.
• Insurance deductibles or uninsured losses after a casualty event.
• Unexpected legal or regulatory costs.
• Operating shortfalls caused by unusual expenses or uncollected assessments.
• Capital improvements the owners choose to fund.

Who approves one

Authority comes from the declaration, bylaws and state statute. Some documents let the board levy a special assessment up to a limit, while larger amounts require an owner vote. Read your documents for the exact threshold, because the same dollar amount can need a board vote in one community and an owner vote in another.

Notice requirements also matter. Many documents and statutes require the board to explain the purpose, the amount per unit and the due dates, and to hold a properly noticed meeting before the charge is imposed. If you think a special assessment was imposed improperly, ask for the documents the board relied on and consider speaking with an attorney.

California and Michigan notes

In California, section 5605 of the Civil Code provides that, notwithstanding more restrictive limits in the governing documents, the board may not impose special assessments that in the aggregate exceed 5 percent of the association's budgeted gross expenses for the fiscal year without the approval of a majority of a quorum of members. The same section limits annual increases in regular assessments to 20 percent without that approval, and defines quorum as more than 50 percent of the members. Other California provisions may create exceptions, such as for emergencies, so consult an attorney before relying on this summary.

In Michigan, the master deed and bylaws generally control how and when a condominium association may levy a special assessment. Statutory requirements in other states vary.

To plan for them, boards can use a current reserve study and a reserve funding plan, and owners can review the budget and financial statements. APM's explainer on condo special assessments covers how they are structured and what owners can ask. Owners should also expect a special assessment to show up on an estoppel certificate at sale.

Related

• Condo special assessments explained
• Reserve study glossary entry
• What do HOA fees cover?
• Estoppel certificate glossary entry