A special assessment (also known as a special levy) is a financial contribution that can be imposed on condo owners in addition to their monthly condo contributions (fees). It may be levied as a one-time lump sum or as an additional monthly payment. Special assessments are like a fee and are often proportional to the percentage of common expenses each unit has, as per the declaration. Therefore, a smaller suite’s special assessment will be lower than the one paid by a larger suite.
It is the duty of a condo board to impose a special assessment when necessary, and owners have to comply, as is the case for fees. Owners cannot vote on whether or not to levy a special assessment. However, a board who has failed to have a reserve fund study or has caused the situation that led to the assessment can be voted out by owners at a requisitioned meeting.
If the owners of a condo building believe that the rationale for the special assessment is not well explained or documented, they can requisition a meeting to force the board to discuss the issue. But the board does not have to stop the special assessment. If the board refuses the requisitioned meeting, and owners still believe that the special assessment is unwarranted, owners can requisition a meeting for the purpose of replacing the board. Or owners can have recourse to a lawyer in order to get a court order to stop the special assessment pending a review.
Special assessments can’t be levied if there is a large surplus or if the reserve fund is sufficient to cover the replacement. However, if the replacement or large repairs deplete the reserve fund, then the board has to levy an assessment to bring the reserve fund up to date. Or the board may choose to raise fees in order to top off the reserve fund. Special assessments can’t be levied for repairs that are merely cosmetic to embellish a condo or to accommodate someone’s taste for luxury.
Special assessments require careful consideration by boards and adequate communication with owners, including letters, advance notices, and even an information meeting to explain the necessity as well as what would happen without this assessment. There are various ways of levying an assessment: It can be added to the fees for any number of months, paid in installments, or in one lump sum payment.
It should be noted that as soon as special assessments are contemplated, they have to be noted in status certificates so that potential buyers are made aware of this forthcoming expenditure.
So what are the best methods for your condo board to go about a special assessment and get agreement from the owners?
- Determine the scope of the work to be done
- Get advice from professionals - engineers, lawyers etc. and determine preliminary costs. Is there enough money in the reserve fund for these expenses? If there is not, at the board level, discuss how this project will be funded.
- If a condo special assessment will be needed, put that in the minutes and make sure you include this information on the Information statement - the need for a special assessment has been discussed but not yet assessed. It could still be a year or more before you have all the costs to determine the special assessment.
- Once you have preliminary costs, invite the owners to an information night. Be prepared with all the documentation you have accumulated to that point to explain what is going to happen and that there is going to be a special assessment.
- Consider having the corporation’s legal counsel in attendance to explain the legalities of the board’s decision. Expect owner resistance. Your lawyer can explain to the owners that the board is the body that makes these decisions, not the owners. This can be a harsh reality for many owners.
- Once the owners have been informed of the impending special assessment and the reasons for it, keep them informed. Put out periodic updates as to when and how the special assessment will take shape.
- If you decide to assess the owners directly, decide the payment terms. How far in advance will you give them before their first payment is due.