Special assessment. Those may be the two most dreaded words in all of HOA governance. Homeowners hate to hear those words because they likely signal an increase in dues, or a one-time payment that homeowners will have to make into the HOA reserve. Either way, there’s going to be a cost involved. HOA Board members like special assessments even less, because it falls to them to break the bad news to homeowners; to sell the community on the need for the special assessment; and then to collect the funds and use them wisely.

Hopefully, your community will not need a special assessment any time soon. With that said, this is not something you want to avoid. A special assessment is what you might call a necessary evil. Nobody likes them, but if you need one then you need one, and there’s no use in trying to pretend otherwise. Delaying the special assessment will only make things worse.

The question that many HOA board members ask is simply this: How do you know when your HOA needs a special assessment? One way is to do a reserve study. Your reserve fund represents the money you have stored away for routine maintenance or for emergencies—for equipment upgrades and replacements, for scheduled updates and renovations, and so forth. Your reserve study will calculate the basic shelf life of all HOA assets, and help you determine whether you have enough money in the reserve fund to cover upcoming needs. If the answer is no, then there may be little option but to do a special assessment.

This is the primary method of determining whether a special assessment is needed, and it underscores the importance of doing reserve studies annually. However, note that even a solid reserve fund may not be enough to cover HOA needs. You may have an adequate reserve fund but inadequate insurance, leaving emergency maintenance fees much higher than they should be. Thus, insufficient insurance is another reason why special assessments are sometimes necessary.

Critically, your Association’s governing documents will provide some insights as to the limits of your special assessment abilities, and to how and when you can rightly conduct one. Make sure to review those, and to be vigilant in overseeing your Association’s long-term financial needs.

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!