Guide To Special Assessments Within The Community
Many new homes and condos are located in neighborhoods with established homeowner associations that help maintain the culture, curb appeal, and value of the area Homeowners that reside in these neighborhoods are subject to paying to association dues or fees on a monthly or yearly basis. The funds collected are used to pay for a variety of expenses including maintenance of common areas and upkeep of the neighborhood.
Properly managed homeowners associations set aside a portion of the fees assessed in a reserve fund. The reserve fund is utilized when big projects are necessary like repaving or installing a new roof. If a homeowners association does not have a well-established reserve fund or an unexpected expense arrives, they have to look for other ways to fund these expenses through special assessments.
What is a special assessment?
A special assessment is a fee passed on to members of the homeowners association to cover an unexpected expense or shortage in funds. This fee is charged in addition to the standard homeowner’s association fees or dues.
Why do special assessments occur?
Special assessments most often occur because of a shortage in the homeowners association’s reserve fund or an unexpected expense impacts the operating budget. A shortage in reserves can happen for many reasons including improper budgeting, lack of planning, homeowners failing to pay their dues or unplanned catastrophic events that cause significant damage to a neighborhood. An example of an unexpected operating expense is when snow removal exceeds the budgeted allocation for this expense.
Understanding special assessments
While homeowners associations have the right to instill a special assessment, there are guidelines they must follow. To fully understand the legalities, the board and residents of the community should review the by-laws and governing documents. Voting requirements, the required amount of notice and allowable expenses will be outlined in these documents.
Some states have instituted special mandates that limit the amount of money that homeowners associations are allowed to request and require that all owners have a vote before passing the special assessment.
Once a special assessment occurs, it is likely that homeowners will have questions about where money is being spent, why there is a shortage, and if they have to pay the assessment. Homeowners associations have the option to pursue legal action against any homeowner that fails to pay the special assessment fee promptly. Even if homeowners don’t agree, payment is still a requirement.
Signs of special assessments
Special assessments are usually an unwanted surprise for homeowners, but there are ways to identify the possibility of one before it actually occurs. If common areas appear to be overly rundown and there has been no mention of repairs in recent homeowner association updates, chances are there is not enough money to schedule the repairs. Homeowners should actively review the financial statements to understand the financial status of the homeowner’s association.
AR Management is a property management company that helps homeowner’s associations manage neighborhoods effectively and efficiently. For additional information, contact our team today.