A special assessment is a project that an HOA provides for the entire building. These projects can vary from a new roof to a new entertainment room for the building. The one constant in a special assessment is that part or all of the cost of the project is shared between the owners of the units of the building. Special assessments are an important part of owning a home and will almost certainly affect any person who owns a home in an HOA. There are three properties to understand when it comes to special assessments.
Discussed Special Assessments
When you are looking to buy a home special assessments may already have been discussed for the building. A discussed special assessment is when a project has been spoken about during board meetings but has not yet been planned or levied. These projects will typically be found during the board reviews portion of closing and may be of concern when purchasing your home. Often a seller will hear of a costly special assessment and then put their house on the market to try to avoid paying for that assessment. If you feel that the price including the pending assessment is fair then you may continue to move forward however this may stop you from purchasing the house. Always ask in your showing if there are any planned assessments and, if so, what they are to find out if putting an offer in is worth the effort.
Levied Special Assessments
When a special assessment has been moved from being discussed to being approved by the board the listing agent legally has to disclose that a special assessment has been levied. You can get a better understanding of the project up front and use the cost of the project as part of the negotiation process to make sure that you are getting the right price for the unit. Sometimes that negotiation is you paying all or part of the assessment but other times you can get the seller to pay the entire cost during closing.
Special assessments can be expensive and with this your association should provide you with options to allow you to pay for that project. Typically, an association will provide banking options to allow the building to pay the contractors who will complete the job and allow you to pay that loan back with some interest. Make sure to attend the board meetings and ask about options for financing when a large project comes up.
Homes need repairs and whether you are a part of an HOA or not you will have to pay in some fashion. If the water heater breaks down in a single family home you would bear the entire cost while in an HOA you bear a portion of that cost. Understand that with an HOA you will almost certainly be hit with a costly special assessment at some point and do what you can to prepare for that day.