A homeowner's association (HOA) must assess fees on a regular basis to cover its responsibilities. When you purchase a home, condo, or townhome within a community with an HOA, the association assumes certain responsibilities within the community.
While HOA dues vary from community to community, the HOA's obligations generally include care and upkeep of common areas, landscaping, and amenities such as a pool, tennis courts, or a fitness center. Depending on the specifications of the covenants, conditions, and restrictions (CC&Rs) of your HOA, the association may be responsible for additional building maintenance like roofing and windows.
An HOA must ensure that they budget for daily expenses and save for future expenditures. If an unusual expenditure will exceed the association's savings, it may decide to levy a special assessment on the residents.
What Is a Special Assessment?
The monthly, quarterly or annual dues imposed by the HOA should cover the community's regular expenses and contribute to a reserve fund for extraordinary expenses. However, the need for a special assessment may arise due to a number of reasons:
the HOA board did not properly estimate monthly expenses
a number of homeowners failed to pay their monthly dues, creating a shortfall in the budget
an unexpected or unusual maintenance need has arisen due to catastrophe or natural disaster not covered by insurance
Other times, a special assessment is necessary due to an infrequent, extraordinary maintenance issue:
replacing or upgrading the community amenities
replacing sidewalks or roofs within the community
adding community amenities such as a clubhouse, fitness center, or walking trail
Signs of Impending Special Assessments
If your HOA is well managed with a substantial reserve fund, special assessments should happen rarely. However, if you notice that the clubhouse roof looks worn out or the sidewalks are in shambles, you should watch newsletters and board meeting minutes carefully for talk of a special assessment.
Can You Be Forced to Pay a Special Assessment?
In a word, yes. Read your CC&Rs carefully. The document should mention conditions in which the HOA will be allowed to levy a special assessment. Do not be surprised if the wording in that section is necessarily vague. Special assessments are levied to cover unforeseen, future financial needs, so the document will be worded generally to give as much power as possible to the HOA.
Some states have passed laws to restrict the power of an HOA board to levy special assessments. Some states may limit the amount that can be assessed in a single calendar year. Others may require a special vote of all residents within an HOA in order to approve a special assessment.
If you do not pay the special assessment fee, many HOAs have the power to compel payment through legal action that may involve a lien on your property or small claims court. You may not agree with the reason for the assessment, but you do have to pay the fees that are assessed.
Rather than being a hassle, a well-managed HOA can actually be a perk of living in a particular community. In the end, keep in mind that an HOA's overall obligation is to provide a beautiful, desirable community for the residents. The actions of an HOA that is on top of their game will work to protect property values and improve resale values.
If you have concerns about the financial management of the HOA, consider attending board meetings or becoming a board member yourself to better understand the inner workings of your community.