Special assessments are the bane of many owners in homeowner associations. An owner may pay their monthly dues on time and without complaint. But if they are not paying close attention to board actions in their community, or they do not live at the property, they may be surprised one day to receive notice of a $20,000 special assessment approved by a majority of owners, or worse, an emergency assessment approved by a simple majority of the board. Neither of these should come as a surprise, because they must be discussed at board meetings and documented in the minutes. Even when they are not a surprise, some owners still struggle with the financial repercussions.
What Happens If You Can’t Pay a Special Assessment?
Consider this scenario: a majority of owners pass a special assessment of $20,000 to replace the roofs because reserve funds are insufficient. The association does not offer a payment plan, so instead of $555 a month over 36 months, an owner must come up with the full amount within 30 days. What if that owner is on a fixed income with no additional personal savings? If they cannot pay, the board can assess late fees, file a pre-lien ($200 to $300), place a lien on the property ($300 to $500), and ultimately send the owner to collections. Collections is a mild term for what is essentially a path toward foreclosure, which can cost $10,000 to $30,000 in fees before the property is actually foreclosed upon.
What Are the Different Types of Assessments?
Regular assessments are the monthly dues paid by every owner. By law, with a majority board vote, these can be increased by up to 20% per year. So if your dues are $400, they can increase to $480 with no direct input from owners. If you disagree with the board’s decisions, you can run for a seat on the board or attempt to recall board members. A recall requires 5% of all owners to vote on removing and replacing those members with new ones.
The board can also levy an annual special assessment equal to 5% of the total budgeted gross expenses, again with a simple majority board vote and no direct owner input.
What Is a Special Assessment with a Vote, and How Is It Different from an Emergency Assessment?
If an expense exceeds what has been set aside in reserves, or if it is for a project not covered by the reserves at all, a majority of owners can approve the assessment along with a payment plan. Some CC&Rs (Covenants, Conditions, and Restrictions) allow a majority of those who vote to make this decision, but that is rare. In a 100-owner community where many owners are offsite or resistant to the idea of a special assessment, reaching a majority is not always easy. And even if a vote falls short, owners are still not in the clear, because the board retains the right to levy an emergency assessment.
Four circumstances allow for an emergency assessment:
- A court order, such as when a community enters receivership or faces a legal settlement that imposes an assessment without a board or owner vote.
- An imminent threat to health or safety, such as a sinkhole or structural failure, which allows the board to impose an assessment by majority vote.
- An unforeseen expense, such as a lawsuit or an insurance premium that spikes sharply due to changes in the insurance market.
- A utility failure tied to the community, such as a loss of water, gas, or electricity expected to take more than two weeks to resolve.
Why Do Special and Emergency Assessments Happen?
The core reason is straightforward: the association does not have enough money in reserves, or in some cases, any money at all. The board may have believed its job was to keep dues low, or assumed that future owners could foot the bill for inevitable expenses down the road. Some assessments are voluntary and done to improve the community, but that is not usually the case.
Sometimes assessments are triggered by new legislation, like the balcony inspection and repair law passed in 2019, which many associations were not prepared for. Other times, an expense was anticipated but ended up costing significantly more than projected. There are many reasons why assessments occur, but understanding your rights as an owner is just as important as understanding the cause.
What Are Your Rights as an Owner?
For regular assessments voted on by the board and special assessments approved by a majority of members, your rights are limited. If you do not pay, you may be charged monthly late fees ($10 to $50) until a pre-lien notice is issued. If you ignore the pre-lien, the board can vote to place a lien on your property. Ignoring that may result in the account being sent to collections, which is a path toward foreclosure. The process typically takes one to two years, but the associated costs can be extremely high.
If you disagree with how the board is managing the community, you can run for a board seat and lead from within. For a special assessment, you have the right to vote and to lobby other owners. For an emergency assessment, the bar is higher, the uses are limited, and the board typically engages an attorney to assist with the process. An emergency assessment also cannot be used in place of a standard special assessment.
If assessments, rules, regulations, and limitations on private property rights are not something you want to navigate, it may be worth considering selling and moving to a community without a homeowner’s association.
