When is a Special Assessment not a Special Assessment?

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Interesting question, with an answer that is not obvious. Most associations deal with the problem of replacing components too late, resulting in deferred maintenance and related costs that make the project much more expensive than if it was done on time (think of the cost of replacing siding or trim that could have been avoided if the building was painted on time, or the water damage that could have been avoided if the roof was replaced on time).

A professional Reserve Study preparer hopefully sees the association as a whole, guiding the board towards decisions that minimize cost and disruption at the association.

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.