Condo Association Management Blog

Your logic is backwards. The money you have paid out was not for the replacement but rather for the use of the existing roof during the period of time you lived in your unit. I hold little expectation that regardless of your argument that you are entitled to any consideration by your board in this matter,

Amen Scott! Well said.

The money you paid into the reserve fund no longer belongs to you. You paid it to the assn! It was NOT put into a fund with your name on it, to be returned when you sell your unit. The money you paid will be kept in the reserve fund until it is needed to make the necessary repairs to your building. Can you imagine what condition the assn would be in if everyone were entitled to receive all the monies they paid the assn over the years when they decide to sell?

As I understand it, you are not expecting the association to give you $5,000 back from the reserve fund, but are instead asking your Ex to deduct $5,000 before splitting the money from the sale of the condo. Your condo is worth an extra $5,000 when compared to similar condos in your complex that have not voted for a reserve fund for their individual buildings.  
 
Normally, your Ex would be right that funds contributed to a reserve are normal condo fees, because a reserve fund is the normal/best way to handle reserve expenditures.  
 
However, in your condo complex some individual buildings have a reserve and some do not, depending on how individual buildings voted. So you could make the argument that your reserve contribution is similar to a capital improvement to your condo, like installing a new bathroom. A roof is considered by the IRS as a capital improvement rather than a repair. Does your court order allow improvements to be deducted before splitting proceeds with your Ex? Perhaps you could get an independent appraisal supporting the value of the reserve contributions as an improvement (or whatever term works). I'm not sure it will work, but good luck.

Paying into the reserve fund is just like paying into social security. You think you will get back what you paid in, but you don't!

Reserve funds are not a "refundable" item. Everyone is paying into the reserves for "FUTURE EXPENSES" of the association.

Larry, 
 
 
 
What planet have you been living on? Most retirees get much more out of SS than they ever put in!! My father-in-law collected SS for 41 years; if you think he paid in more than he got out you are sorely mistaken.

Your issue is one for the divorce lawers or you and your ex to work out. If it was in fact a "special assessment" and not normal operating expenses / HOA dues that you paid an extra $5K into during your stay, that clearly effects the net value for tax purposes. It also effects your cost basis as 1/2 owner in the condo, which should be equalized at the time of sale. Profits / equity if any, should be split after an offset (equalization)for half of the $5K you put into the special assemssment. However if you took those fees as any kind of tax deduction or expense along the way, it gets more complex. Get the accountant involved for clarification here. Good Luck.

John D., 
 
 
 
A special assessment has the same meaning as a regular assessment except that it ususally must be passed by the members. It does not add to the value of the condo. There is no legal way to take the payment of a special assessment as any type of tax deduction. The OP stated she is living in the unit.

You are right in that I should have been far more clear about some things I referenced & assumed. If their divorce decree defines their payment obligations and those obligations changed / went up under the special assessment, that could be grounds for adjustment. Not paying the "special assessment" would have left the place subject to a lien which would have resulted in those monies being withheld from the owners at sale, effecting each of their "net" proceeds or values, which at the end of the day, is a lower number or net value to them and as such might need to be equalized for the sake of their divorce decree ...again depending on how the asset condo was specifically divided. As for the write off or deduction referenced, If the person living in the home was taking a home office deduction for example and got creative in their accounting for the assessment expenses, it could be another issue, as I have witnessed a similar scenario from very close by.

Mary, of course this condo has more value (to a buyer or appraiser) due to the reserve, compared to one of the condos in the same complex that has not voted to pay into a reserve.  
 
John D, I don't think there is a special assessment here. It sounds to me like the OP's building voted for a reserve, not a special assessment, to handle the future roof replacement. 
 
The OP should try to get the $5,000 back by asking a higher price for the condo when selling it. The contribution of $5,000 by the OP (and not by the ex) has raised the value of the condo (or at least prevented it from losing value compared to the other condos). It sounds reasonable to deduct this contribution before splitting with the ex, but the ex can argue that the reserve is the normal and accepted way to maintain the condo value. Yes, look at the divorce decree as John D suggests. Good luck convincing the ex. 

JT, 
 
 
 
I doubt that a $5,000 special assessment has any bearing on the value of the condo. That would be like saying that the $5,000 I spent to have my roof repaired adds value to my home. Maint. expenses do not add value to a home, in this case a condo!

Mary,  
 
Please read the original post. The $5,000 is not a special assessment -- it is money in a reserve fund. The OP's building voted to have a reserve fund instead of a future special assessment. So the association has money in a reserve fund for this condo, but similar condos in a different building do not have a reserve fund. Which condos are worth more? Obviously the condos with a reserve fund are worth more than similar condos in the same association that are going to get hit with future special assessment(s). A buyer will pay more for a condo that has a reserve ready to go, compared to a condo that is facing a giant bill for a new roof. 
 
A new roof is a capital improvement that adds to the value of a house, not just a maintenance expense. A house with a new roof is worth more than a house with an old roof.

JT, 
 
 
 
Maybe you should read the OP's original post. Here's is what was said: 
 
 
 
"My condo development has condo association dues and the individual buildings vote to establish special assessments or reserve funds for future repairs when deemed necessary." 
 
 
 
Special assessments are not reserve funds, however the SA monies can be used to establish or fund a reserve account. This is what I believe occurred - the members voted to fund the reserve account with a special assessment. 
 
 
 
Sorry, but I think it's only in your mind that value is added to your condo if there is a reserve fund. Perhaps a saavy person would choose to purchase a condo in an assn that has an adequate reserve fund but that doesn't mean he'll pay more for the condo or that the seller can even ask for more money because of the reserve acct.  
 
As for the new roof being a capital improvement; that would apply if it were a co-op or perhaps even a single family home, but NOT for a condo. First of all, the expenditure is being made by the HOA not the homeowner. Secondly, the roof is more or less a "common area"; meaning the HOA is resp. for it's maintenance/repair. And lastly, the expenditure is shown as an expense, not a capital improvement on the financial statements, and, more importantly, on the tax return. The IRS has very strict rules governing condo assn's and what can be shown as expenses and what can be considered capital improvements.

Mary, 
 
I believe that the members had a choice and voted for either special assessments to handle future repairs or else reserve funds. Either your interpretation or mine is possible. In either case, I think we agree that a reserve fund was established into which the OP somehow paid $5,000 in five years. So the issue becomes a reserve fund. 
 
Sorry, but I am not the only mind that thinks a reserve fund protects and enhances property value. Property value is widely cited as a reason for condominium reserves.  
 
The extent of added value (if any) to this condo might be established by an appraisal that the OP could use it to argue with the ex. An accountant or attorney might find a way to make a similar value argument within the divorce decree. The OP's point that “this is my $5,000 of value I have paid for the condo” may have some merit, although I'm not sure it is a perfect argument and there may be counter arguments. 
 
I like your points about the capital expenditures, so I'll drop the issue as a new roof has not yet been installed anyway. 
 

JT, 
 
 
 
I interpreted the OP's main concern to be wanting to be reimbursed, by the HOA, for the $5,000 she paid into the special assessment because the roof has not been repaired. Once monies are paid to the HOA they cannot be refunded to the member. I think we all agree on that point. As to whether she can require her ex to add this amount to her share of the proceeds from the sale of the unit is something she may want to discuss with an attorney. 
 
Paying into a reserve, or the HOA having a reserve fund, does no add value to your property. I doubt that an appraiser would not agree. It may make the s/d a more attractive place in which to buy a home but I doubt that it would command a higher price. That's just my opinion, of course. :-)