Residents hate a few things in community associations more than special assessments. While occasionally necessary, these extra charges can feel sudden, frustrating, and financially stressful. Your community association Board must consider the downsides of special assessments before implementing them.
However, it does not all have to be negative. The following comprehensive guide will help your Board plan and implement special assessments effectively.
What is a Special Assessment?
First, we should define the special assessment.
A special assessment is an additional fee that homeowners must pay in addition to their regular dues and reserve fund contributions. Often, this extra fee pays for unexpected or major expenses that the community’s reserve fund cannot cover.
Often, special assessments are used for the following.
- Emergency repairs, such as catastrophic roof failure, storm damage, and structural issues.
- Unplanned capital improvements.
- Insurance deductibles after major claims.
- Legal expenses.
- Significant infrastructure replacements.
Your Board should use special assessments only for emergency expenses, which are infrequent in your community. If the community needs regular special assessments, that could signal underfunded reserves or poor long-term financial planning.
Steps for Planning and Implementing Special Assessments
Is your Board considering a special assessment? Use the following steps to plan and implement it correctly.
1) Confirm the need and explore alternatives.
You should always begin by ensuring your community actually requires a special assessment. Ask yourself the following questions.
- Can the reserve funds cover part or all of this expense?
- Is financing or a loan available?
- Can the project be planned in phases?
- Does the community’s insurance cover any portion of the expense?
2) Ensure legal and governing document compliance.
If your Board determines that the community requires a special assessment, you must follow the proper procedures for adopting it. These may include the following.
- Advance notice requirements.
- Membership vote thresholds.
- Open meeting discussions.
- Formal Board resolutions.
Follow the procedures outlined in your governing documents and any state or local laws to remain in compliance.
3) Communicate early and transparently.
Residents are more likely to accept a special assessment if the need is communicated early and clearly. Make sure you keep residents updated on the process from the beginning. You should also avoid vague explanations and provide the following information.
- Why the assessment is necessary.
- What happens if it is not approved?
- How the amount was calculated.
- The timeline for payment.
- Any alternative solutions considered by the Board.
Always provide clear numbers, contractor bids, reserve data, and projected impacts. Doing so can increase resident trust and reduce conflict and speculation.
4) Reinforce long-term financial planning.
After you have implemented the special assessment, your Board should meet to determine the root cause of the issue and create a plan to prevent a recurrence. Strengthening your community’s financial and long-term planning can reestablish resident trust after an extra fee.
Special assessments need not be the source of extreme community conflict. But they must be planned and implemented correctly. Partnering with an experienced management company, such as Community Property Management (CPM), can help your Boards navigate the process effectively.
Contact us today to learn how we can help your community thrive!