The 11 percent jump in home prices in the past year far outpaces income growth.
What is a special assessment?
A special assessment is a levy that homeowners’ associations or local governments impose to pay for the installation or repair of common services when the cost of such work exceeds what can be met through normal budgets.
People who own property in condominiums, private housing estates and homes are responsible for the upkeep of their own property and share in the upkeep of communal areas.
The cost of this upkeep is met through a monthly levy that provides sufficient funds for the homeowners’ association to perform regular maintenance. Normally, the size of the levy is such that it covers normal expenses and provides a little extra, which is accumulated for abnormal expenses.
From time to time, the owners’ association will decide to perform additional work that cannot be covered through the monthly levy. Examples of this could include:
- Renovation of common areas.
- External painting.
- Paving and upgrading.
Usually, these upgrades are discussed and agreed on at homeowners’ association meetings, and a resolution is passed authorizing the association to charge a special assessment to cover the cost of the work.
In a similar manner, a municipality or local government may impose a special assessment on residents in a certain area that will be used for urgently needed repairs or to upgrade the area by installing pavements or paving roads. Because the work benefits certain property owners only, such special assessments or levies will be restricted to these property owners.
Special assessment example
Aaron and Olivia have an apartment in a condominium situated not far from the city center. The condominium occupies a large lot that provides generous space for children’s play areas.
Due to rising crime, a number of break-ins have occurred. At the annual homeowners’ association meeting, a decision is made to erect a secure fence around the property. The cost of the fencing is $25,000, and as there are 100 similar units, the association charges each unit a special levy of $250 to pay for the fence.