Home buyers sometimes steer clear of condos because they've heard horror stories about the additional expenses that might come with owning a condo - special assessments in particular. Special assessments are typically regarded as additional costs owners are asked to pay above their regular condo fees. While it's true extra costs can arise over the years, this is highly unlikely when you're purchasing a new condo in a new development.
There are other reasons why you shouldn’t let the possibility of a special assessment prevent you from purchasing your new dream condo. Once you learn more about this fee, you’ll see that it’s not much to worry about.
When Special Assessments Occur
The condo board makes an annual budget intended to cover the maintenance costs of a condo community. This should include things like snow removal in the winter, landscaping when the weather’s nice, replacing worn carpets in the hallways, or keeping the roof in good shape. In most cases, the board knows ahead of time that an expense is coming up, and will plan for it. Other times, unforeseen damages could be covered by insurance or warranty.
Special assessments only happen when there’s a big, unexpected expense. This is why brand-new condo developments rarely have special assessments - since things are so new, they’re not likely to break.
How It’s Calculated
Each condo in a development has its own unit factor. This is how much a condo owner is expected to pay in proportion to the size of their unit. For example, a three-bedroom unit in a prime location is likely to have higher fees than a smaller, two-bedroom model on the opposite side of the building.
The condo board will take the total cost of the repairs, then divide them up based on unit factors.
You Have to Pay
The downside of special assessments is payment is mandatory. Even if you don’t agree with the repairs, think the board is paying too much for the service, or resent having to pay for repairs on an amenity you don’t take advantage of, you’re still responsible for your portion.
On the other hand, these repairs ensure the community and its property values are maintained. Again, this is far more likely to occur in an older development where maintenance and upkeep are ongoing.
The Board is on Your Side
Fortunately, condo boards are made up of people just like you who don’t want to pay special assessments. They work hard to anticipate upcoming costs and to plan for them in the budget. This means special assessments aren’t really as common as you might think.
Additionally, all condo associations should have a reserve fund intended to cover these unexpected expenses. It’s only when the repair cost exceeds the amount available in the reserve fund that the association will levy a special assessment.
Other Homeowners Have “Special Assessments” as Well
It’s natural to worry about paying extra fees, but you also need to realize those living in detached homes also have their own “special assessments" in the form of maintenance and repairs. Any type damage to a home means the homeowner could have an unexpected repair bill - and you also wouldn’t have many other people there to help chip in on the bill.
Whether you own a detached home, a townhome, or an apartment-style condo, it’s important to set aside a bit of money in an emergency fund each month. This means you’ll always have what you need to cover any unforeseen repairs without worry.