Special AssessmentA Special Assessment is a way to collect funds from members of the association (unit owners) to pay for a one-time expense that cannot be funded by the existing operating budget or reserve funds.

For example, at Del Boca Vista, several owners were complaining about water leaks in their units, which ultimately required major repairs/rebuilds to several of the walls in all of the buildings. In order to address the issue, the Board determined (with the help of an engineer and bids from several contractors) that the cost would be about $500,000. This expense was not anticipated by the Board and was well beyond the building maintenance budget and there were no funds allocated for this expense in the reserve fund. According to the documents of the association, this expense would need to be equally paid for by all 200 units, at a cost of $2,500 per unit.

The Del Boca Vista Board decided that a special assessment of $2,500 per unit was the best way to pay for this project.

Figuring out the cost and initiating a special assessment is not really that difficult. The difficult part of a special assessment is in gaining the support and cooperation of the members/owners.

Critical questions to consider include:

• At what point do you make owners aware of the need for an assessment?
• Do your documents require owner approval? Even if they don’t, how important is it to communicate the details and rationale for the expense?
• Should you consider getting a line of credit from the bank to cover the project cost?
• If you have a line of credit do you delay the assessment until the actual cost of the project is determined at the end? Or, stretch the assessment payments out over the life of the loan making it easier for owners to pay?
• Should you offer more than one payment option for owners (i.e. lump sum, 6 months, 36 month etc.)? How many options do you allow?
• How will the board respond to owner questions about why the cost was not budgeted, why the issue emerged or why there were not adequate reserve funds?

What lessons have you learned from special assessments that you community has been involved with?

by Evan Bradley, CFO, Campbell Property Management