In short, a special assessment is a bill sent to each owner to pay. Like with common element fees, a special assessment is mandatory. Owners are not allowed to “opt out” or decline to pay special assessments.
Why do Special Assessments Happen?
Boards do not like special assessments, and only issue them when there are no other options. A special assessment is a rapid infusion of cash into the corporation’s coffers used to pay for a specific item or group of items.
Special assessments usually result from unexpected expenses, without sufficient funds being available to finance the expense from the operating or reserve account.
Example Scenario
A corporation experiences the failure of an expensive system. Tarion coverage is not available, and all other relevant warranties have expired. This can happen with the failure of a roofing system, failure of structural elements, or a host of other systems. In these cases, the work cannot be put off to a future date and immediate repair is required. If sufficient funds are not available, the corporation must raise them from the owners directly.
How Can a Board Prevent Special Assessments?
Though special assessments often come from unexpected events and are thus difficult to prevent, a board can take a few important measures to reduce their likelihood.
Hire a qualified property manager who has experience with the particular built form of the condominium corporation. For example, if your corporation is a 300-unit high-rise, you should be wary of condominium managers with experience only in small townhouse corporations. A manager with the right experience will know what sorts of issues can occur and will incorporate preventative measures in their annual plans.
Resist the urge to make temporary “patches” or other quick fixes for larger issues. Though a patch is cheaper in the short run, it is rarely a cost-effective solution in the long run. Over time, patches degrade and underlying issues get worse until the only option is a full replacement.
Are There Any Alternatives to Special Assessments?
Yes – a board may consider passing a borrowing bylaw. This requires approval from 50% + 1 of the corporation’s owners, and would permit the corporation to borrow funds to pay for the immediate work and repay the loan over a longer period of time. However, these bylaws often present challenges of their own: they are difficult to pass and the legal paperwork takes time, as does the borrowing from the bank. It is thus only rarely the method that a board chooses.
When circumstances permit, the board may also break up a special assessment over a few months to help owners fund the assessment.
Written by Michael Trendota*, RCM
Chief Operating Officer of Alwington Communities
Michael is a property management professional with experience operating a diverse set of buildings, including high-rise, low-rise, and townhouse-style. His passion is bringing neighbors together to build exciting and vibrant communities. Michael draws from his own condo board member experience to advise board members on the opportunities and challenges facing their communities. Michael holds a Masters of Business Administration from Queen’s University and is a Certified Property Manager.
* Though written by a qualified and experienced Condominium Manager, this article is not intended as legal advice. Please consult your own experts for advice.
