About Condo Association Special Assessments

For most condo associations and condo owners, these words are almost guaranteed to bring out some anger and set off a barrage of phone calls to the board and community manager. However, there are two words that will truly raise the blood pressure of condo owners and incite irate owners to take action: "special assessment"! A condo manager needs to understand the reasons for such an condo association assessment, the different ways of handling special assessments, the relevant requirements in an association's governing documents, and be ready to work with and hopefully calm the condo owners to help them understand why the condo association assessment is needed.

In 2005, I had my first encounter with the special condo association assessment process and all that it entailed. Although I have more than 12 years of experience as a community manager, it was a learning process. By sharing my experiences, perhaps others may learn some of the pitfalls to avoid as well as some strategies to help make the process less painful to all.

The property involved in this special assessment was a complex of 44, 4-
bedroom/2-½-bath units. The condo association complex was built in 1974, so it was facing many of the problems associated with any older home. The condo association complex was dealing with tree root damage associated with older trees, damaged sidewalks and parking area, expensive tree maintenance, the need for fence repairs, painting, termite contract renewal, and, most seriously, re-roofing.

The condo association recently had to pay for several large expenses involving major interior repairs to some units that had been damaged by roof leaks. These expenditures had put their condo reserves dangerously low. (Note: This association is a PUD in Hawaii and, as such, not required to have condo reserves. They did, however, follow their property manager's suggestions and developed a condo reserve fund.) The board understood that the only way to prevent additional damage and continuing high repair bills was to re-roof. If they deferred re-roofing until condo reserves built up, more
units would experience leaks and water damage. To deal with the problem in a timely manner would mean a special condo assessment. The condo board had to make some difficult decisions regarding how to most wisely spend the condo association's existing funds and ask the membership for more money.

The condo board members had several long meetings to discuss the issues. Finally, they determined that the special condo association assessment was the only viable solution to the problem. Their first task was to determine how much they would need to 1) re-roof all units, 2) have some condo reserves for anticipated interior repairs resulting from the roof leaks and 3) treat the grounds for termites.

The property manager arranged for contractors and roofing companies to prepare estimates to submit to the condo board. With a specific dollar amount now in hand, the condo board instructed the property manager to convene a special condo association meeting to vote on the special condo associaiton assessment and a HOA loan or condo associatio loan for the amount needed. According to this condo association's documents 67% of the condo owners must approve the condo association assessment and HOA loan or condo association loan. At the meeting, approval for the HOA loan was secured.

Following this meeting, the condo board had to obtain at least 3 HOA loan proposals from HOA loan providers. At the next regular meeting, the condo board selected an HOA lona provider. The property manager was asked to submit necessary condo documents to the HOA loan and proceed with the HOA loan process. The condo board also selected the vendors for re-roofing and ground termite treatment. Once the HOA loan process was completed, the condo owners were informed of the HOA loan payment plan: owners would pay their normal monthly maintenance fee and an additional amount for the special condo association assessment.

For this particular condo association property and its situation, an HOA loan and monthly payments was the best solution for their urgent problems. Other condo associations may find other
alternatives more suitable. For a small condo association assessment amount, a lump sum payment may work, or condo owners may agree to make monthly payments over a specific time period. Typically, the condo board would provide payment options to the condo owners. Throughout this process the condo board and/or property manager may at some time find themselves dealing with angry condo owners who are already feeling the financial pinch. Paying condo fees or HOA fees may be difficult enough; adding an additional condo association assessments on top of that is bound to frustrate some condo owners. There may be accusations of mismanagement of reserve funds and poor decision-making. The condo board and property manager should work together.

To minimize confrontations or volatile reactions, condo boards should be very proactive in keeping condo owners current on condo association fiscal matters. To that end, condo boards should actively encourage attendance at annual condo association meetings or HOA meetings as well as at regular condo association meetings or HOA meetings. They should also keep condo owners informed via newsletters of the cost of major repair projects and how vendors were selected. With such efforts, condo owners would be more in touch with the condo association's fiscal issues and not be surprised should a condo association special assessment be necessary.

Community managers need to encourage condo boards and HOA boards to actively pursue "transparency" on condo association matters. Condo owners also may need to be reminded that condo boards are given the task of making decisions that sometimes may be difficult, but condo board members are also condo owners and are always seeking solutions that are in the best interests of the whole condo association.

If all three components of a condo association (condo owners, condo board members and property managers) work together, the best results will be achieved for everyone. This was my first experience with the process of a condo association special assessment and although stressful at times, it was a valuable learning experience. Hopefully this information will provide others with some insights into the process and how to make it run smoothly.

Source: Association Times