A special assessment is an amount of money that a condominium trust needs in order to pay for a project or outstanding debt that was not part of the annual budget/assessment. The trustees of the condominium levy the special assessment against all unit owners and require them to pay their fraction interest of the money being requested. The payment of the special assessment is divided by each unit owner’s interest in the common area. The amount may be requested immediately from each unit owner or may be broken into installments depending on how the trustees have decided to handle it.
A condominium may have a major leak in a roof that requires thousands of dollars to repair or a major mechanical system like a boiler may fail and need to be replaced. When an unexpected event occurs the condominium trust may need to raise money quickly in order to fix the issue. The association may not have the resources available or the necessary credit to have it fixed. Unexpected events or poor planning do occur and sometimes the best way to generate the capital it is through a special assessment.
As a buyer, you should evaluate closely the operating budget and cash reserves of a condominium trust. It’s important to think about the risk a poorly run or maintained association may mean to your financial situation. If you’re putting down most of your savings to purchase a condo, you may not have extra money in the event a special assessment is requested from the unit owners. You want to make sure that you have a little extra cash saved up in the event that this occurs during your ownership.