When Should You Use Special Assessments?

November 4th, 2019

Sometimes, HOAs must charge homeowners a special assessment fee to cover HOA expenses that aren’t covered by regular monthly dues. If you’re helping to run an HOA, you may wonder: When is it appropriate to charge a special assessment?

Unlike regular assessments, which are included in the board-approved HOA budget, special assessments are an exception and should be rare.

HOAs that charge one or more special assessments each year are often trying to make up for poor budgeting and planning. Maybe regular assessments are set too low, and can’t cover the day-to-day operational costs of the HOA, so the HOA uses special assessments to bridge the gap. But this isn’t a sustainable way to run an HOA. Homeowners might get upset if you’re frequently surprising them with a bill.  

Special assessments should be:

    • At most, issue a special assessment every other year, or more infrequently if possible.
    • Clearly communicated to homeowners. Provide information about the proposed project, so everyone understands how the money will be spent
    • Approved by homeowners before the fee is officially charged

Confused about where regular assessments end and special assessments begin? Here’s some clarification:

 
Regular Assessment
Special Assessment

What it is.
  • Annual fee issued by HOA to homeowners usually paid in monthly increments
  • The HOA board includes regular assessments of the budget for each fiscal year
  • Amount of regular assessments is always approved by the board, but owners might need to approve too if the CC&Rs require it
  • Often require specific owner approval before being effective
  • The HOA usually must give 30 days of advance notice to owners before the assessment is due

What the money is used for.

 Operating expenses of HOA (regular, planned items) Non-operating expenses of HOA (major planned projects or emergencies)

Who approves the assessment?

HOA board only, unless the CC&Rs limit the amount of increase, which can require owner approval.

 In many cases, the HOA board only. Some CC&Rs require ownership approval.

How much advance notice must you give owners before a fee is due?

 30-day minimum. 30-day minimum but generally longer, so owners have time to gather funds. 

When do owners pay?

 The annual charge is usually broken into 12 monthly installments. It depends. The fee is typically due in full, but HOAs can choose to offer flexible payment plans.

How to charge owners.

The amount that each owner must pay is determined by the Declaration in the CC&Rs. Possible scenarios include:

  1. Each owner charged the same flat fee
  2. Each charge is based on unit’s finished square footage against the total finished square footage of all HOA units
  3. Each charge is based unit square footage plus other space (like parking stall or storage space) against the total for the HOA

Same options as regular assessments.

 

JSP Toolbox is an online suite of tools and resources that empowers homeowner associations (HOAs) to manage themselves, easily and affordably. Learn more about JSP Toolbox

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