Anticipating condo special assessments

Castles in the Sand

Owning property is nothing short of waiting for the unexpected to happen. Whether you own a single-family home or live in a condominium community, you can be sure that eventually, you will have to make a major repair involving major money. The only difference is how those repairs will be funded.

When you own your own home and the roof needs to be replaced, it’s your financial responsibility. When you live in a condo community, it’s still your responsibility only it’s administered differently. Hopefully, your homeowners’ association will have anticipated major repairs and will have funded these and other expenses accordingly, however, if they didn’t, get ready for a special assessment.

Special assessments are designed so that condominium boards can pay for unanticipated expenses they don’t have the money for. These are one-time payments that can be a lump sum or spread out over a specified period of time. Once the purpose of these additional funds is met, the special assessment ends, and if there is money that was collected from the owners, it cannot be used for any other purpose and must be refunded.

Condo boards have the ability to pass a special assessment as they see fit without the majority vote of owners. Owners must, of course, be notified of a scheduled vote and the purpose of the assessment. Typically, owners know well in advance of an upcoming assessment since these matters are discussed in prior board meetings with the full knowledge of owners and a full explanation from the board of why this is necessary. Frequently boards will decide if it is more advantageous to borrow the money for the repairs and use the special assessment to repay the loan.

Another type of special assessment that many condo associations in Manatee County experienced last year was a special assessment for hurricane damage. Just like single-family homes, condo associations have a hurricane deductible as part of their insurance policies. If the association requires repairs after a hurricane, as many experienced with Irma, that are not covered because of the hurricane deductible, the owners will likely be billed for a special assessment to cover these repairs.

However, most homeowners’ insurance policies for condos have loss assessment coverage to reimburse owners for assessments levied on them for hurricane damage. Loss assessment coverage by Florida law is a minimum of $2,000, and some insurance companies have a $250 deductible from that amount.

It is particularly important for anyone who is considering the purchase of a condominium to inquire about the financials of the association. Ask if the association is fully funded, meaning that it has anticipated future repairs and is funding this amount from regular dues payments. If you have an accepted offer and contract on the purchase of a condo, you will be provided with the financials of the association and have time to understand how healthy the association is financially. Also, be sure to ask for a list of recent special assessments and their purpose. Naturally, older condo communities will face more maintenance issues, and you want to be sure that the board has recognized and planned for these events.

Expect the unexpected when you own any kind of property because for sure it will happen. Just because you own a condominium, don’t think that everything is automatically taken care of. It’s your responsibility before you purchase to understand and feel comfortable with the way funds are disbursed within a homeowners’ association.

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