When is a Special Assessment not a Special Assessment?

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Some Governing Documents (or jurisdictions) require that a Reserve Funding Plan not be based on a special assessment. But some communities wiggle around that requirement by just “temporarily increasing the monthly assessments”, not levying a one-time special assessment. What is the difference?

A special assessment is a short-term “tax” levied on the ownership to quickly raise necessary funds (usually for a special project like a roof repair). Sometimes owners are given the opportunity to pay the special assessment over a few months. So what is the difference between a temporary increase in dues and a special assessment?

An association is a not-for-profit entity. Its income is only justifiable when there are expenses to match. A special assessment is just that – a short-term fix to a short-term problem. Ongoing assessments, on the other hand, are designed to sustainably provide for the ongoing needs of the association. If the the regular dues structure is raised to a point where they are not sustainable over the long term (they lead to a net accumulation of cash), it is a special assessment. Plain and simple.

Hold your board and management to this test. In a situations where special assessments are to be avoided, make sure the Board is truly budgeting sustainably for the association. Special assessments are disruptive – even the ones billed only as “temporary increases in the monthly assessment”. See through the smoke and mirrors.