RealManage Insight

What is an HOA Special Assessment, and When Should It Be Levied?

by Terry Bascher on Jul 1, 2021 9:15:00 AM

If you live in a planned community, there is a possibility you are part of a homeowner's association (HOA) which requires members to pay fees. The regular dues cover the daily operations of the association, such as simple repairs. However, there are moments when these dues won't cover all the expenses. For example, when unexpected expenses arise due to natural disasters.

If there are any costs the regular dues can't cover, a special assessment, which is charged separately from your HOA fees, comes in. Let's dive deeper and get a better understanding of an HOA special assessment.

When Are Special Assessments Necessary?

HOA board predictions while coming up with the budget for your community will not be accurate at all times. Sometimes, they will find themselves in situations where they need extra funds. In such situations, the board of directors has the power to levy special assessment fees to pay for major improvements and repairs.

Here is a brief synopsis of when you may be required to pay a special assessment:

  • Because of a shortfall in the reserve account: This can arise due to a major repair that has gone over the budget, bringing the need for an assessment.
  • Unforeseen occurrences: Those disasters resulting from fire, flood, or wind that can cause damages the amount in reserve can't cover. And considering most reserve accounts aren't intended for such expenses, the need to use a special assessment may arise.
  • Insufficient insurance: Your HOA's insurance may have some limitations on what to cover against certain events. If that is the case and such an event strikes, an assessment may be necessary.

What Limitations Are There on Special Assessments?

The power that your board of directors has to levy special assessments is limited to the bylaws and governing documents that govern the day-to-day operations of your association. These bylaws and governing documents often outline what needs to be done before imposing any special assessment.

Some associations may require advance notice and voting to approve the use of a special assessment. So, to avoid any misunderstanding likely to occur as a result of wrongful levying, always make sure all bylaws and governing laws are adhered to.

When to Anticipate Special Assessments

Sometimes, even before you are slapped with a bill, you may be able to tell a special assessment is about to be imposed. Poor conditions of your community's swimming pool, sidewalks, or gym are some of the common indicators that you need to be prepared for an incoming assessment. Any other major repair you feel the amount in your association reserve account can't handle is also a good indicator.

Is It a Must That You Pay a Special Assessment?

If your board of directors has determined that a special assessment is required and all governing laws (including your state laws) allow them to do so, then you must pay. The only time it is safe not to pay is when the board has overlooked some of the laws. Any other time requires you to abide by the resolution once adopted.

Not paying can put you in some awkward situations. For example, you may prompt your association to place a lien on your property. Most of the consequences likely to befall you for lack of payment are permitted by state laws, so it is best to pay.

The Bottom Line

Special assessments are very important to facilitate the smooth running of operations of every HOA. But they are not to be levied without a good reason. Equally, they shouldn't be used as an alternative to the regular fees. The best thing is that with the right regulations in place, you can stop your board of directors from levying them without a good reason.  For more information on special assessments, feel free to contact us.

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