Special Assessments

A special assessment is an additional payment or a levy that a condo board has to impose when unexpected shortfalls or unexpected expenditures occur in the budget, or when an expensive system has to be replaced (ie. plumbing system, roofing systems etc.) and there is not enough money in the reserve fund to cover for it. It may be levied as a one-time lump sum or as an additional regular payment.

Special assessments are like a fee and are proportional to the % 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.

Before You Buy, what you need to know

Sellers must disclose if there is a pending special assessment that is not included in the condominium documentation. The requirement to pay the special assessment remains with the unit and becomes the responsibility of the new owner. It is prudent that in the event of any special assessments that come up, Buyer’s and Seller’s must agree in writing who will be responsible for payment of the levy. Buyer’s have the right to negotiate the seller’s payment of any known assessments vice versa, the Seller have the right to refuse responsibility for payment in lieu of risking the successful completion of the sale.

You should also consider why a special assessment was levied. For example, was it levied to repair a leaky roof? Are there ongoing issues with the structural integrity of the building? Is this work planned or have there been any repairs in the last to address this issue? Review the condo’s reserve fund documents and ask questions of the condo board, property manager, and potentially other unit owners. 

It is also important to consider if the condominium has a history of imposing special assessments. This is where a 3rd party condo documents reviewer may provide better insight as to the financial history of the corporation.

When can a special assessment be imposed?

A condo board can impose a special assessment in certain situations, for example:
If there is not enough money in the operating budget to pay for an emergency expense, or
If the reserve fund does not have enough money to pay for a capital repair or replacement.  On bigger expense projects, the board would share their findings to the group of owners, outline their findings and share options of where to go from there.  After input from owners, the board will likely begin their due diligence process in seeking out professional advice (lawyers, engineers, construction etc) to gain further insight on the scope of work being undertaken. After receiving all the information, the board can then put together the options for the Special Assessment with cost estimates and a plan to the owners on how they can pay.

Why did I get a special assessment notice when the reserve fund seems adequate?

A condominium corporation’s operating budget and reserve fund are separate and distinct accounts with their own rules. For example, money from a reserve fund can only be used to cover the cost of repairing and replacing capital common property; it cannot be used to cover operating expenses. However, a special assessment may be levied against condo owners to cover an emergency operating expense.

How is a special assessment calculated?

Each owner’s portion of a special assessment is calculated based on unit factor unless the bylaws say otherwise. The unit factor is also used to assign condominium contributions (fees).

Do I have to pay? What if I disagree with the special assessment?

As an owner, it is your responsibility to pay your portion of the special assessment when it is due, even if you disagree with it. If you don’t pay the special assessment, the condo board could take any of the following actions:
  • charge interest
  • file a caveat against your property title
  • sue you for the special assessment, interest, and any legal costs
  • if you have a mortgage, ask your mortgage company to pay the outstanding amount (note: many banks consider failure to pay condo contributions as an act of default that could result in foreclosure) or 
  • if you have a tenant, require rent to be paid to the corporation to cover the outstanding amount.
If you want more information about why the special assessment was imposed, talk to your condo board and ask questions. It is your responsibility as an owner to keep yourself informed about the finances of the corporation. Consider becoming a member of the condo board if you want to have greater input on the financial direction of the condominium corporation.

How Special Assessments Impact Condo Value

There are 3 ways to fund the work needed to be done. Taking the funds out of the Reserve fund study, levy a special assessment or apply for a loan. While Special Assessments may be painful but it isn’t as painful as seeing the effects on your property value from a higher condo fee.  Funding of the assessment through a loan will increase your monthly expenses, the higher fee will begin the effect the affordability of your condo for many buyers, hence negatively affecting value and re-saleability. The best course of action will always be proper savings early on to avoid any surprise assessments.

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