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Assessments for condominiums

Started by PeggyW3 • 12 replies • 230 views

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PeggyW3 (Michigan)
Posts: 73
Posted:
What is the difference between a regular assessment and a Special Assessment. Maybe the rules vary by state, but and Michigan is where we live. Our documents say that a regular assessment is just something smaller, added to the fees for the year. But a large Special Assessment is considered a Special Assessment and with these you need a majority vote. In our documents it basically says for a regular assessment the Board has authority to just say we need hundreds of thousands of dollars to take care of the roads and the co-owners can do nothing about it. I find this totally unfair as the co-owners need to understand and buy in on the fee changes....but maybe not.

Can someone tell me if I am correct with what I have said so far. It looks like it all complies with our
current documents, but I am left with feeling it is unclear. What should I do?

Thanks so much. Is Augustus still around?

KerryL1 (California)
Posts: 14,550
Posted:
Your documents, probably your CC&Rs (AKA covenants, declaration. Deed restriction), will tell you how much an association, via its Board, may vote to raise annual assessments each year,. In ours and, I think, Calif. (and many states?) it’s 20%.

In Calf, any an mount above a 5% special assessment must approved by owners with their vote.

Are you on the Board? Whether or not, read your documents to find out the limits in your HOA. We are unable to see your documents.

You may need tp research your state's condo statutes if your have them for fiorfurther info.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Our BOD can raise our annual assessment as much as they wish without owner approval. There is a procedure, but no limit.
TerriS6 (California)
Posts: 3,284
Posted:
A regular assessment is for regular, planned maintenance. A special assessment is for something unforeseen.
TerriS6 (California)
Posts: 3,284
Posted:
Quote:
Posted By PeggyW3 on 09/21/2024 5:38 PM
What is the difference between a regular assessment and a Special Assessment. Maybe the rules vary by state, but and Michigan is where we live. Our documents say that a regular assessment is just something smaller, added to the fees for the year. But a large Special Assessment is considered a Special Assessment and with these you need a majority vote. In our documents it basically says for a regular assessment the Board has authority to just say we need hundreds of thousands of dollars to take care of the roads and the co-owners can do nothing about it. I find this totally unfair as the co-owners need to understand and buy in on the fee changes....but maybe not.

Can someone tell me if I am correct with what I have said so far. It looks like it all complies with our
current documents, but I am left with feeling it is unclear. What should I do?

Thanks so much. Is Augustus still around?


Are there specific requirements in your governing documents about how to "take care of roads."? For example, does it specify the type of road surface you must have?
SheliaH (Indiana)
Posts: 6,964
Posted:
Generally regular assessments are what you pay every month, quarterly or yearly, depending on how your documents require. They cover routine expenses like property management fees, landscaping if tge common area, or master insurance premiums. Special assessments typically pay for something specific that's not covered by the operating budget or reserves - or there's not enough money between the two.

For example. If you live in a townhouse community and the roofs were blown away by a tornado, you might not have enough in reserves or insurance to pay for replacement. This might require a special assessment to pay the rest. Or you might do a special assessment to provide initial funding for reserves or build a clubhouse.

Special assessments usually require approval by a certain percentage of homeowners (read your documents) and are paid in addition to regular assessments.

Boards can't just say "well, X will now cost Y, so you have to pay Z from now on." They should be setting a budget, homeowners should receive a copy and they should ask about anything they don't understand. If you haven't spoken to your board, get busy. And keep reading your documents to see what they say about the budget.

PS - I think you were referring to Ellen (formerly known as AugustinD) and I think she quit the forum. When you see a zero next to a name, that's usually what it means. Sometimes people simply stop posting or change their name and keep going.
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
CathyA3 (Ohio)
Posts: 6,299
Posted:
A regular assessment is money paid regularly, usually annually in HOAs and often monthly in condo communities. Regular, routine operating expenses are paid for by these assessments: water, electricity, maybe trash collection, building maintenance, landscaping services, management services, accounting and tax prep, and contributions to the reserve account if required by state law.

A special assessment is needed for something unexpected - or it is the predictable result of years of keeping assessments too low and/or not funding the reserves properly. Essentially the association hasn't got enough funds to pay for something that can't be delayed: some roofs are leaking and must be replaced NOW, for example. The only alternatives to a special assessment is letting an urgent repair go undone (not recommended) or taking out a loan. A loan is just a special assessment with interest and fees attached (also not recommended, and the association may not even be able to get a loan if their finances are shaky).

This is why Keeping Assessments Low is not a good thing despite the prevailing "wisdom" out there. It will come back to bite you, and you will be sorry when it does.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Regular or Annual assessments are often referred to as "Dues". These should be set every year based on the projected budget that the board creates. Some governing docs or state laws limit how much these can be raised each year, but many don't. Anything beyond that is a special assessment.
Escaped former treasurer and director of a self managed association.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By DouglasK1 on 09/22/2024 10:45 AM
Regular or Annual assessments are often referred to as "Dues". These should be set every year based on the projected budget that the board creates. Some governing docs or state laws limit how much these can be raised each year, but many don't. Anything beyond that is a special assessment.

Typically Annual Assessment (Dues, Regime Fees, etc) can be raised by the BOD with the amount usually being limited to say20%.
Typically Special Assessments require a majority of owners (typically 2/3rds) approving.
Of course there are exceptions to every rule.
KerryL1 (California)
Posts: 14,550
Posted:
To repeat: In Cali, the Board a vote to letvy a spciial essessment up to 5% in any given year. Above that amountmut b approved by the ownrs with thier vote.

Th qestioion is: What about Michigan??/. Or Peggy'd governing documents?
MarshallT (New York)
Posts: 414
Posted:
Hi,

Rules about assessments and special assessments really differ depending on your condo's governing documents and state laws. In some places, the board can increase regular assessments each year without owner support up to a certain percentage (for example, 10%). After that, owners would need to approve the increase.

If your documents don't mention anything about limits for assessment increases, then unfortunately the only way to change that is to vote to change the bylaw.

JohnC46 (South Carolina)
Posts: 14,265
Posted:
Our Covenants allow the BOD to increase Annual Assessment (Dues, Regime Fees, etc.) as much as they wish to. There is a procedure but it can be easily done. For a Special Assessment, 2/3rds of all owners must approve.
DeanJ
Posts: 1,786
Posted:
In practice, a regular assessment is funds collected to pay for the operating expenses and to fund reserves for repairs and maintenance. These are included as part of an annual budget and lied on a monthly, quarterly or annual basis.

A special assessment is additional funds collected to fund a repairs, maintenance or capital improvements. This can be a single payment or spread over time and usually is the result of a board’s failure to maintain adequate reserves. In many cases, this is an emergency action of a board. It may or may not require owner approval depending on the declaration and state.

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