When is a Special Assessment not a Special Assessment?

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.

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3 Responses to When is a Special Assessment not a Special Assessment?

  1. pam Stone says:

    I reside in a 36 condo unit in Stockton. Since 2006 I have been provided with on reserve study done by Browning. Every subsequent year I have been provided with a report done by CPA’s office. The last one says we will be falling short $5600. (each individual unit). this was done March 2012. Brownings said we should not be required any other assessments for another 30 years. Albeit my monthly dues go up every year by the allowed 20%. Now for the “Big One”, in 2005, there was a huge assessment of $45,000 to every homeowner due to renovations. My Board operates outside the CC&R’s until I remind them of the rules. They apparently, they did do a visual inspection of the property this year. This was done by our Management Co. cohorts, Contractors friends. Should the visual be done by an engineer ? Or a reserve specialist? Thank you for comment. Pam Stone

    • Pam – thanks for your comment. I believe there is value having a Reserve Study prepared by an independent, credentialed (RS or PRA) professional on a frequent basis (at least every third yr in CA), but updated annually. But a requirement for having the Reserve Study done by a RS or PRA does not exist in CA. I can’t comment on other matters of your association’s specifics. It sounds unfortunate. Please contact Bob Browning (a good guy… at http://www.browningrg.com) to see if he can shake things loose, or a local condo attorney. If your Board wants a proposal from our firm, they can do so online (select the “request a proposal” button). We make the proposal request task easy, and we provide understanding, not just Reserve Studies.

      • pam Stone says:

        Robert , Thanks for response. I will contact Mr Browning to see if perhaps he can be of any help. Obviously, this board is out of control and cannot control funds. They need some accountability. Unfortantely, it is difficult to take on by myself as they are a “Good ol Boys club”. I am not going to give up though. This is a beautiful project I live in just mishandled.

        Thank you,