What Are Special Assessments?
Special assessments are fees that condominium associations can levy against their members to raise money for expenses outside of the normal operating budget. Unlike regular assessments or fees that are paid monthly, quarterly, or yearly, special assessments are typically used for particular projects or maintenance issues that are not otherwise covered in the regular budget. Importantly, it is not necessary for associations to have a long-term obligation or contract to assess its members a special assessment.
Special assessment fees are common in condominiums. For instance, special assessments can be utilized to pay for roof leaks, plumbing repairs, electrical repairs, painting, or other maintenance items that go beyond the budget. Additionally, large scale items such as assessments for items that may be required under the Florida Condominium Act (structural changes) or for items that exceed the annual budget may also qualify as special assessments . Examples of these types of assessments include money owed under a pending lawsuit or for large-scale renovation expense that exceed the amounts in the operating budget.
Under Florida law, the board of directors is empowered to levy special assessments on behalf of the unit owners. Generally speaking, the process to levy a special assessment requires that the board conduct an open meeting and then prepare a written notice of the special assessment. The Florida Condominium Act requires that the notice of a special assessment include a detailed description of the purpose of the assessment and that the assessment be levied equally against the condominiums in the condominium but may be levied on a different basis for limited common elements.
Legal Basis in Florida
Florida statutes and administrative codes specific to condominiums (Chapter 718, Florida Statutes) place limitations and requirements upon a condominium association’s ability to levy special assessments. The statute specifically requires the approval of owners holding one-third of the voting interests in order for an association of 150 units or more to levy any special assessments exceeding 5 percent of the budgeted annual expenses for that year. 718.103(12) Fla. Stat. If the special assessment is for alterations and additions to the common elements that materially add value to the common elements or real property, it may be levied regardless of the approval of one-third of the voting interests. Id. As defined in 718.103(12), "common expenses" include "the expenses of maintenance, repair and replacement of the common elements and those expenses attributed to the general maintenance of the condominium property." 718.103(11) Fla. Stat. An owner’s assessment obligation is limited to their allocable share of common expense, as apportioned by the declaration pursuant to 718.113(1) Fla. Stat. Being required to pay the special assessment in addition to their individual obligation for common expense, owners of fewer than 150 units are incurring additional financial burdens without the ability to cast a vote on whether the special assessment should be levied at all. While requiring unanimous consent for special assessments would sound good in theory, it would necessitate full agreement among the owners and could effectively prevent condominium associations from conducting necessary repairs to the property. Requiring the approval of one-third of owners empowers the board of directors to levy special assessments and maintain the condominium property.
Procedure to Enact a Special Assessment
In order for a condominium association to impose a special assessment, the board of directors must comply with the requirements of the condominium documents. Typically, the board must call a special meeting, obtain a quorum of the owners, and then the owners must vote on whether or not to approve the special assessment.
Special Meeting
Most condominium declarations require a special meeting (rather than just relying on the board of directors) in order to impose a special assessment. Some declarations simply provide that the board of directors may make a unilateral decision to impose a special assessment, while other declarations allow the board to make a decision or the owners to vote by written consent to approve the special assessment. If the condominium documents require a special meeting of unit owners, the board must either obtain a quorum of unit owners to approve the special assessment, or a sufficient number of owners must give their consent in writing to approve the special assessment.
If the condominium documents provide that the board is permitted to unilaterally impose a special assessment, the board only needs to pass a resolution imposing the special assessment. This type of special assessment only requires that the number of votes cast in favor of the special assessment exceed the number of votes cast against the special assessment. In other words, if there is a tie, the special assessment does not pass. A special assessment that receives a favorable vote from a simple majority (50% plus one) of the voting interests will be valid.
If a special meeting of the unit owners is required in order to pass a special assessment, the board of directors will need to meet the notice requirements of the Florida Condominium Act and/or the condominium documents and additional insurance notice requirements (if applicable). Typically, to be timely called, a special meeting of the owners must be noticed at least fourteen days before the meeting is held, with notice going to all unit owners. This 14 day notice provision is found in the Florida Condominium Act. The specific details around this notice and any further requirements for calling special meetings are found in the condominium documents for the association.
Common Causes of Special Assessments
Condominium associations can issue special assessments for a variety of reasons, including but not limited to the following: To address unexpected damage to the common elements (i.e., you have roof leaks and you need to repair a significant portion of the roof), To fund major improvements (i.e., you need to repave the parking lot), To pay for construction defects (i.e., the developer did a bad job and the association needs to fix the problem, such as the drainage issues that are leading to flooding), To pay for plans to amend the Condominium Documents (i.e., the association is converting to Fannie Mae or Freddie Mac and the Documents need to be amended) At the end of the day, it is not the reason for the special assessment that is important – it is how the special assessment is approved and assessed.
Rights & Duties of Owners
When a Florida condominium association levies a special assessment, the owners within the condominium must pay their respective portions of the special assessment. It is very common for owners to question or dispute these special assessments, whether based on the monetary amount of the assessment, the necessity of the improvements being made, the allocation of the assessment among the owners and tenants in common or even the manner in which the special meeting was conducted or the notice provided. For example, if repairs are necessary to fix damage suffered within the building, some owners within the building may believe the repair work will not actually benefit their unit and they should not be responsible for that portion of the assessment . Others may claim that the repairs are not required because the damage is not significant to their respective unit. Florida law allows for owners to challenge special assessments levied by condominium associations.
Florida law states that if any unit owner fails to comply with the provisions of Florida Statutes Chapter 718 regarding his or her share of a special assessment, the same shall remain a lien upon the apartment against which the assessment is made from the date of recording of the assessment until payment of the assessment is made in full. If an owner fails to pay an assessment, the condominium association may file a lawsuit in an attempt to collect the amount due and owing from the unit owner.
Challenging a Special Assessment
Most boards play it straight with respect to condo special assessments, meaning they comply with the special assessment procedure outlined in the Florida Condominium Act. What happens if you think the assessment was not properly leveled?
You’ll only know for sure if the judge agrees.
Below are the steps you’ll need to take prior to initiating a lawsuit because you are certain that the special assessment is improper.
- Look for the special assessment procedure in your declaration of condominium. This is spelled out in addition to (in some cases) or instead of the special assessment procedures set forth in the Florida Condominium Act.
- Call the property manager or whomever sent you the notice of a special assessment and ask questions about the special assessment. For example, what’s it for? How did you guys come up with the amount?
- Send an email to your property manager (if your board allows email communication) and ask the same questions that you asked the manager by telephone. Under section 718.111(12)(b), Florida Statutes, your association has a duty to respond to your inquiry within 10 days if you send the email to the property manager. This doesn’t mean that the association will respond appropriately. It only means the Association has an obligation to respond to your inquiry.
- If the special assessment remains a mystery (or you just don’t want to play games), send a written request to your board asking it to either hold a hearing so you can contest the special assessment or asking for documentation or evidence to support the special assessment.
The goal here is to get the board to assume the burden of proving the special assessment was lawful. Section 718.112(f), Florida Statutes, says that, if the board calls a hearing all interested owners must be given an opportunity to be heard as to whether the special assessment was properly levied. The statute goes on to say that the burden is on the association to prove the propriety of the assessment.
The statute then provides two paths by which the Special Assessment may be challenged:
a. Arbitration. You can request arbitration with the Florida Division of Florida Condominiums, Timeshares and Mobile Homes under section 718.1255, Florida Statutes.
b. Lawsuit. Alternatively, you may proceed with a lawsuit within 60 days of passage of the disputed special assessment.
Arbitration versus Court – An arbitration proceedings moves faster than filing a lawsuit. It does have drawbacks, however. You have no right to a jury trial in arbitration, and it’s not always cost effective, especially if the dollar figure you have a problem with is low.
5. Get a lawyer involved. The association and the owners have the right to sue the other party. This is a fact outlined in section 718.3025(1), Florida Statutes. Having an attorney represent you in your special assessment lawsuit should be mandatory.
Effect on Financial Status & Value
Homeowners in Florida have opened their mailbox and found an announcement from their condominium board…your building is planning to levy a special assessment. Often, this announcement can raise immediate panic. These assessments can put serious dents in personal finances. If the bills are too high, and homeowners cannot pay for them, their units could be subject to foreclosure.
A special assessment is a one-time payment required of condo owners to help with the cost of major maintenance projects or repairs of existing conditions that were not covered by the budget. Examples of these conditions include roof replacement, mold remediation and major electrical repair. The assessment is calculated by multiplying the monthly condominium association payments times the number of months the special assessment is in effect for the unit. Then this figure is multiplied by the number of units in your building. If the total special assessment is $24, you pay $2 a month for 12 months. The special assessment represents $2 a month per unit. In the end, you each owe $24.
While special assessments may seem excessive, they often are necessary for upkeep and maintenance of your property. Some major renovations and repairs to older properties can cost several million dollars. If these costs are not passed on through special assessment, the end cost will be divided into larger monthly owner association fees.
Assessments can vary and depending on the state of your building your property value can vary. For example, a poorly kept building in a downtrodden neighborhood where the majority of residents are renters is not desirable to buyers. However, if the general condition of the property is good and the surrounding community is highly valued. Many potential buyers are willing to look past a special assessment for a villa by the beach.
Depending on your financial situation, you might welcome a special assessment. If you think increasing costs of living might cause you to sell your home, you might as well maximize its worth.
Condo Owner Advice
As a condominium owner, there are steps you can take to help minimize the impact of special assessments and stay financially aware of your association’s fiscal health. Here are a few useful tips and strategies to consider:
Stay Informed and Involved
The best way to avoid surprises when it comes to special assessments is to read all communication from your association and attend board meetings and community forums. As a condo owner you have a right to know about special assessments before they are announced, and you also have a voice in how your association’s money is spent.
Evaluate Your Finances
Not every special assessment is a major financial burden for a condo owner. You may not even need to dip into savings to cover it, especially if you are committed to a monthly budget.
Setting aside a portion of your monthly maintenance fee (about 10 percent to 15 percent) can act as an emergency fund of sorts, allowing you to build up savings for unexpected costs while avoiding the need to depend on high-interest credit cards or other risky borrowing solutions .
Look Into Home Equity Loans
If your association passes a special assessment that places a large financial burden on you and your family, it may be worth looking into a low-interest home equity loan or line of credit. With today’s low rates, you can potentially borrow funds at around 6 percent or less, which is a more affordable option than relying on credit cards. Since a home equity loan or line of credit is secured by your property, credit guidelines are often less strict than with unsecured credit or conventional loans. However, keep in mind that home equity mortgages allow you to borrow only up to a certain limit or assessment of your home value, so it may not be suitable for your entire special assessment when the worst-case scenario occurs.
Consider Using Community Association Management Professionals
Financial security is a high priority for condo owners, and particularly those who live in high-rise and larger properties where maintenance and upkeep can be costly. For this reason, you may want to hire a community association management professional to review your property’s finances and help you make informed decisions regarding funding for the future.