Nothing Special about this Condo Special Assessment!

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L.F. from Fairfield County writes:

Dear Mister Condo,

We have received an assessment for 2014 – 2017 for $112.00 per unit per month (total of $5,400.00) to fund five capital projects totaling 2 million dollars. As of the last Board or Managers meeting minutes distributed in October of 2013 from a June, 2013 meeting where all of these projects were listed as ‘Deferred’. The funding for these projects will fully be funded by the unit owners; no money is coming from Reserve or loans. The owners share my concerns with this four year assessment. We feel we were blindsided and that something shady may be going on with the involvement from a previous Board member and his using his “friends” for these major projects. I sent a letter asking for further details on this assessment as we have not received any details other than the amount being charged and a bulleted list of the projects with no itemized details.  What should we do?

Mister Condo replies:

L.F., I feel your frustration. Even in the best of situations special assessments often feel like they are being thrust upon the unit owners of any association. So many questions arise about why wasn’t this money set aside years ago. In a nutshell, the answer is that since volunteers manage the association’s finances, it is very easy for necessary maintenance projects to get labeled as “deferred” while the association deals with more pressing issues and pressure from unit owners to keep common fees low. I saw a recent study that indicated as much as 70% of the nation’s condominiums and HOAs are currently underfunded with regards to their Reserve Funds! There is no reason to expect that your community is immune from the same problem.

That being said, the unit owners have a voice in how items are to be paid for. You haven’t mentioned whether or not this assessment was voted on by the entire membership or just the Board. Board members are elected by the unit owners and therefore do provide unit owner representation when deciding to levy a special assessment. However, if a community association loan would have accomplished the same financial objective and given owners a better option or better terms it should have been discussed. For all you know your Board did speak with a bank only to find the association wasn’t eligible for such a loan. Banks do require pretty good finances before they will lend money to an association. If you have delinquencies or lawsuits pending against the association they might not have been able to get financing.

Your allegation about a previous Board member using his “friends” for major projects is concerning but unless you have specific proof that malfeasance occurred I doubt you will get much traction from that. Records for these projects are available to unit owners (perhaps for a fee) but you should be able to research requests for bids, bids, and contracts if you need closure on the issue. Of course, if you determine theft or foul play occurred, I encourage you to speak to an attorney who can advise further action.

Other than that, the special assessment is the only method of collecting the needed funds that is left to the community. The Board is obviously working with unit owners by spreading out the payments. I know of many communities that would simply levy the assessment as a one-time fee and force unit owners to pay within 30, 60, or 90 days. At least you have four years to come up with the money. It is unpleasant and my guess is that it may not be the only assessment or increase to common fees your community will see. If common fees that were too low to begin with are what caused the assessment, you can bet that fees need to be increased substantially or the community will face the same problem time and time again. Good luck!

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