Tuesday, December 15, 2015

Condo Special Assessments Explained

Today we are going to talk about a topic that is rarely understood by people other than those who own a condo and have experienced the situation first hand – the situation of a special assessment. A special assessment can be an expensive item for condo owners and one that unfortunately happens often. Lets start with a definition:

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 (i.e., a boiler) and there is not enough money in the reserve fund to cover for it.

Generally this special assessment is in the form of a lump sum payment or spread out over a certain term (i.e. 3-12 months) and added to condo fees. There are no provisions in the Condominium Act, 1998, that talk about special assessments. Therefore implementation and rules regarding the structure of a special assessment are up to the condo board.

Source: CTV News
Unit owners have the same obligation to pay special assessments of common expenses as they have to pay regularly assessed common expenses. A failure or refusal to pay a special assessment as and when required by the board of directors gives rise to a lien against the owner’s unit. Condominium boards do not require unit owner approval for a special assessment, unless the by-laws of the condominium specifically require it.

When a special assessment does occur, depending on the size relative to the pricing of condos in the building, certain owners might not be able to afford to pay them. This can lead to a series of forced sales in the building and an overhang of supply, leading to lower sale prices across the building. A long history of special assessments in a building can be a red flag and indicative of poor management or poor physical construction.

Source: Edmonton Downtown
When looking at purchasing a condo, make sure you ask or put in the schedule of an offer, for the seller to disclose any current or pending special assessments, so you are clear on any liabilities you are inheriting. As discussed in an earlier post, look through the reserve fund study so that a proper assessment can be made, of the finances of the condo corp and the likelihood of a special assessment in the short term.

Have you had any negative experiences with special assessments? We'd love to provide you advice.

Russel Lalovich
Office: (519) 966-0444
Cell: (519) 995-5620

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