Special Assessments

Special Assessment
A real property tax proportionately levied on homeowners and landowners to cover the costs of improvements that will be for the benefit of all upon whom it is imposed.
A condominium special assessment is a a property tax that the board imposes on all the owners to pay for a large expense that cannot be covered by the operating or the reserve funds.

The exact amount paid by each owner is determined by the size of their unit and the number of parking spaces and lockers they own.

Notice
A special assessment notice is sent to the owners stating the size of assessment, the owner's share and the reason the assessment is required. Often there is no prior notice and the owners are taken by surprise.
The status certificates must state that there is a special assessment in place or that one is being considered within the current fiscal year so buyers will have a clear understanding of the corporation's financial status. (Or they would know if they can read the status certificate or their real estate lawyer picks up on it.)

Depending on the amount needed, the special assessment may be required almost immediately in one payment or the payments may be spread out over several months or years.

A special assessment is passed by a majority vote by the board of directors. The owners have no say on the matter.

Bad omen
This condo building in China fell over due to water-soaked soil.

A special assessment was devised to enable a board to fund unexpected repairs or upgrades. However they have often become a substitute for an inadequately funded reserve fund or for a corporation that runs large operating deficits so they are often a sign that the corporation is in serious financial difficulties and has been mismanaged.

What is worse, special assessments are seldom one-time occurrences. If you get one, you are likely to have more in the future.

Property values
A special assessment is a strong signal that the corporation is in trouble and it may be wise to cut your losses and sell.

However, property values drop whenever there is a special assessment. In order to sell their units, some owners offer to pay the cost of the special assessment, in effect taking a further price cut.

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