New Condo Owner Caught Off Guard by a Special Assessment

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Y.D. from Tolland County writes:

Dear Mister Condo,

I recently purchased a condo. It hasn’t been two months for me in the condo and I have received a notice from the Board of Directors saying that I need to pay for my share of repairs that needs to be done to the building. My share is 13,000 dollars, which I need to pay by October 31, 2012. Since I recently paid the down payment for this condo I can’t pay that amount. I need your good advice as to how I should go about telling the Board that I can’t pay the full amount at this time. What would be the repercussions if I do so? Thanks!

Mister Condo replies:

Y.D., what a terrible way to learn about special assessments and a potential problem of purchasing a common interest property like a condo! I am sorry for your financial concerns but, hopefully, I can give you some advice to ease your burden.

First off, I assume you used an attorney for the closing of your real estate purchase. You should contact that attorney to discuss this assessment and whether or not it is your responsibility or the previous owner of the condo. You mention that you just moved in so the date that special assessment was levied is critical in determining responsibility for the payment. Also, if the special assessment had already been announced to the community before you purchased, was that information disclosed to you? You may have recourse against the previous owner. However, even if you do have recourse, that doesn’t stop the association from moving forward with the special assessment so let’s call this plan the possible light at the end of the tunnel for you.

Special assessments can occur for many reasons in a condo. The bottom line is that the association ran out of funds for a major renovation project on your building. The good news is that you will enjoy these renovations for years to come. The bad news is that, once passed, the special assessment is due to the association as soon as it is levied. You are wise to contact the Board of Directors and discuss your situation at everyone’s earliest convenience. If you were to simply not pay the assessment, you could face a lien on your property and eventual foreclosure by the association if the assessment were not paid. That is a worst case scenario so there is no need to panic about that now.

Many associations offer short term payment plans for special assessments. Perhaps you can ask if you can spread the payments out over the next year, or however long you think it will take you to make the payments. The shorter the term you propose, the more likely the Board would be to accept it. Keep in mind that during this repayment period you are also expected to make your regularly scheduled common fee payments. Be careful not to propose more than you can reasonably afford.

Believe it or not, this same situation befell me shortly after I bought my first condo almost thirty years ago. The special assessment was $5,000 to all unit owners as the money was needed by the Board to sue a developer who went bankrupt, leaving the association several dozen undeveloped units. The lawsuit lasted years with little relief back to the community at its conclusion. As no payment options were offered, I found myself borrowing the money from my father which was a very humbling experience. It took several years for me to pay him back but I learned my lesson.

There are always risks when purchasing real estate and a few extra risks when buying into a common interest community. Always take a good look at an association’s finances before deciding to purchase. Communities under construction run the risk of default by the developer. Older communities run the risk of necessary or emergency repairs that may not have been properly budgeted for, which sounds like what happened to you. Any community can find itself on the wrong end of a lawsuit or with a dearth of foreclosures and bankruptcies disrupting normal financial activities. I wish you all the best as you learn this lesson about special assessments. Good luck!

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