What's Special About a Special Assessment?

If you are considering buying a condo unit one thing you will hear often is "assessments." An assessment is what you will pay monthly to the Home Owners Association. This fee is there to help pay the building's bills along with paying for any work that needs to be done on the building. Unfortuantely, sometimes the amount of work that needs to be done is far greater than the amount the building has saved up. This is where a "special assessment" comes in.

A building that is well run will be putting a portion of every units monthly assessment into something called a reserve account. This account is there in order to pay for work that needs to be done or for emergencies. Good buildings will be putting 10% of every units assessment into this account. The idea is not to have to touch this account unless it's absolutely necessary. But sometimes major projects need to happen and the amount in this account is not enough to cover it. In this case, the building will vote on levying a special assessment in order to pay for the work. 

A special assessment can vary from millions of dollars in very large buildings to even a few hundred dollars in smaller buildings. After the total amount is agreed too. It is then split up among the units based on the ownership percentage each unit has. There are typically two ways to pay for a special 1: out of pocket upfront or 2: increasing your current assessment amount by a certain amount to pay of the special over time. 

Finding out if there are upcoming specials in a building or if there are current ones is part of the buying process. You will find this info out within the first few weeks of getting an offer accepted. If you find out there are specials you can back out during this time. But its possible there might not be a special for a number of years down the road. Sice no one can predict the future it is possible you will have to deal with one at some point during your ownership there. The best advice is to make sure you are buying into a building that plans for all necessary work and is putting plenty of money into the reserve account for future work. Make sure to ask your agent about any specials in the building you are interested in. They should be able to find this info out before you ever make an offer.