What is an HOA assessment? This is a question many homeowners ask when that extra fee shows up on their bill. Most people know it’s something they have to pay, but not everyone knows where that money actually goes. Some think it’s just another charge, but it’s more than that. Both board members and homeowners should understand how special assessments work.
What is an HOA Assessment?
What are HOA assessments anyway? There are two kinds of assessments: regular assessments and special assessments. Regular assessments, also known as dues, are payments homeowners make regularly (monthly, quarterly, annually). These payments go toward the association’s day-to-day expenses.
Special assessments, on the other hand, are one-time fees that don’t recur. These assessments typically come up when an unanticipated cost arises that regular dues won’t cover. Although regular and special assessments are both types of assessments, the latter is commonly referred to as assessments, while the former is often called HOA dues or condo fees.
Both homeowners associations and condominiums deal with assessments. It is best to review the governing documents to understand the exact requirements and procedures.
Who Pays HOA Special Assessments?
Homeowners shoulder the cost of special assessments. When an owner first purchases a home in the community, they agree to fulfill certain financial obligations. This includes the obligation to pay regular dues and special assessments.
Even if a homeowner has never used a facility or amenity, they are not exempt from paying assessments. Homeowners share the cost of maintaining and repairing all common elements, including pools, clubhouses, and sidewalks.
Board members also don’t receive special treatment. Just because a person is on the HOA board doesn’t mean they can skip paying. Board members are just like everyone else, which means they must pay special assessments, too.
What is an HOA Assessment’s Purpose?
Special assessments are used when the HOA needs money for something big or unexpected. These typically involve major repairs or upgrades, unforeseen emergencies, new projects, and budget shortfalls. Let’s discuss each one below.
1. Major Repairs or Upgrades
When the operating budget or reserve fund can’t cover the cost of major repairs or upgrades, most associations turn to special assessments. Sometimes, the board can postpone these repairs or upgrades if they’re non-essential.
2. Unexpected Emergencies
Emergencies can happen at any time. While an HOA should have a contingency fund, not all boards plan for one. If a disaster strikes and the operating fund or insurance can’t cover the resulting damages, associations will need to levy special assessments.
3. New Projects
Not every special assessment is bad news. Some fund improvements like new lighting, better security, or community upgrades. These projects help make the community better and can raise property values in the long run.
4. Budget Shortfalls
Sometimes, an association will run short. Perhaps not enough homeowners paid their dues, the board failed to calculate the budget accurately, or vendors raised prices without notice. Whatever the reason, a special assessment can make up for the deficit.
How are Special Assessments Calculated?
It is the HOA or condo board’s responsibility to calculate special assessments. First, the board must figure out how much it needs to cover the relevant costs. Then it divides the total cost among all homeowners according to the governing documents.
For example, if a repair costs $80,000 and there are 40 homes, that’s $2,000 each. In condos, it might depend on ownership percentage. Of course, the board has to show where the amount or number comes from. When owners can see the math, it’s easier for them to understand and accept it.
Is There an HOA Special Assessment Limit?
In Washington, DC, there is no set limit on how much a board can charge for a special assessment. The DC Condominium Act allows condominiums to collect assessments as long as they follow proper procedures. This includes giving notice and clearly documenting the reasons.
Other states have tighter rules. For instance, Virginia Code Section 55.1-1964 states that before raising or adding an assessment, the board must provide notice to all members. Some associations even need a vote before approving one.
Even without a dollar limit, boards still have to be careful. Assessments should always be fair and necessary, not just convenient.
What Happens When You Don’t Pay HOA Special Assessments?
Special assessments serve an important purpose. Everyone shares the cost, as everyone benefits from what it pays for. Failure to pay means the association starts falling behind, too, and that affects the whole community.
When a homeowner doesn’t pay their assessments, they can face a number of potential consequences. These include fines, suspension of privileges, referral to a collection agency, legal action, liens, and even foreclosure.
Let’s discuss each one below.
1. Fines
The penalty for missing special assessment payments usually starts small. Homeowners must pay a monetary fine, which compounds each day the amount remains unpaid.
2. Suspension of Privileges
Depending on state laws and the governing documents, associations can also suspend an owner’s privileges. This means they lose access to the pool, clubhouse, or other amenities. They might even lose their voting rights until they clear their debt with the association.
3. Collection Agency
If the problem continues, the board can turn the account over to a collection agency. A collection agency will charge a fee or a percentage of the amount owed. For the homeowner, referring their account to a collection agency can hurt their credit score. This is because most agencies report the debt to a credit bureau.
4. Legal Action
Sometimes, the board has no choice but to take the matter to court. When that happens, the homeowner may end up paying attorney fees and court costs on top of the balance.
5. Liens
Unpaid assessments can result in liens on the property. This lien stays in place until the delinquent owner pays the amount in full. Liens make it difficult for owners to sell or refinance their homes because lenders require clear titles.
6. Foreclosure
In serious cases, HOAs and condos can foreclose on the property. This doesn’t happen often, but when it does, the owner can lose their home due to an unpaid debt.
What is an HOA Assessment? How to Avoid One
Special assessments don’t always have to happen. With good planning, the association can avoid them most of the time. Here are some best practices that will help keep special assessments at bay.
- Keep Reserves Strong. A healthy reserve fund can handle big expenses without extra charges.
- Plan Ahead. Reserve studies allow the board to predict what will need fixing years down the road.
- Stay on Top of Maintenance. Fixing small issues early can save money later.
- Watch the Budget. Boards that track expenses closely can avoid surprises.
- Keep Homeowners Informed. When residents know how the board uses their contributions, they’re less likely to resist future changes.
Still, even the best planning can’t prevent everything. Emergencies and mistakes do happen, but a prepared board is better equipped to face those challenges when they arise.
Can Homeowners Fight Special Assessments?
Homeowners have a financial obligation to pay special assessments. Provided the board followed the proper procedure and fulfilled all requirements, there is really no way out of paying it.
That said, homeowners can seek clarification. They can ask the board to present the assessment clearly and the reasoning behind it. They can request an inspection of financial records and even seek advice from an attorney if necessary.
If the board skipped a step, such as providing notice or conducting a vote, then homeowners are well within their rights to challenge the special assessment. Other than that, talking it out is the best course of action.
What is an HOA Special Assessment? Answered!
What is an HOA assessment? It’s a one-time fee that covers unanticipated expenses or major upgrades. While most homeowners dislike them, board members can prevent conflict and avoid disputes by maintaining transparency at all times.
TNWLC offers financial management services to community associations in Washington, DC. Call us today at (202) 483-8282 or contact us online to get started!
RELATED ARTICLES:
- Who Is The HOA Board? Know Your Association’s Leaders
- What Are The Average HOA Fees In Washington D.C.?
- Community Association Manager: Why It’s A Good Decision To Hire One
