H.H. from New Jersey writes:
Dear Mister Condo,
Does a special assessment, one that is designated and collected for monthly for three years, have to be put in a separate account or can it be transferred to a reserve account where it could be used for work other than originally specified?
Mister Condo replies:
H.H., it is customary for Special Assessments to be used specifically for the purpose for which they were assessed. Any other use of the money may be illegal and challenged by unit owners. Where the money is physically banked is not necessarily a problem; how the money is spent certainly is. Unit owners, such as yourself, have every right to demand an accounting of the moneys collected and spent from a Special Assessment. For instance, if $200K was assessed to unit owners for a new roof and the job was completed for $175K, the remaining $25K should be returned to unit owners according to the same formula used to collect the Special Assessment. The Board cannot just hold on to the remaining $25K and throw it into the general operating fund and pay for regular expenses like trash removal, management fees, etc. with that money. It was assessed for a particular purpose and must be used for that purpose or returned to unit owners. Hope that helps!
2 thoughts on “Condo Board Changes Use of Special Assessment Funds”
Our Board assessed each unit $1200 for termite prevention protocols (Sentricon) that were never installed, because the Board changed their mind. However, the homeowners were never informed or offered a refund. I felt this was fraud and said so, yet the Board had no problem with this action. Your thoughts?
J., that sounds awfully fishy! Even if the Board has the best of intentions and is going to use that money for pest control as proposed or some other item, they need to follow the rules for levying and spending Special Assessments. Sine I am not privy to your governance documents, you should read what they say about special assessments. Typically, Boards can levy Special Assessments up to a certain dollar amount per unit or a certain percentage of the budget. If they exceed either they have to allow the homeowners to vote on the Special Assessment. Further, they are typically bound to either spend the Special Assessment funds completely on the item the Special Assessment was to pay for or return the funds to the unit owners. I don’t think it qualifies as “fraud” but you might want to speak to an attorney to see if they have violated the rules for levying and spending the Special Assessment. I would need a few more facts before I could fully agree with you but from what you have outlined here, it would appear they have made a mistake and should return the Special Assessment money to the unit owners. If they need more money for another project or to bolster the association’s Operational or Reserver Funds, they should add it to next year’s proposed budget. Good luck!