Special assessments not unheard of
In a condo building, owners and managers are responsible for maintaining common areas and making repairs. However, they charge dues to cover these costs, also known as homeowners association (HOA) fees. Ideally, the regular dues will be large enough to pay for everything the building needs, and some of the money collected will even be put into reserve in case of emergency expenses.
Sometimes, though, major damage happens and the cost of repairs exceeds the funds available. That’s what has happened in the First Creek Farm complex. The hailstorm did around $4 million in damage, and management now needs to charge a special assessment to pay the insurance deductible to make the repairs needed.
Special assessments are extra fees that can be charged in situations like this one. These fees aren’t just imposed on condo owners but can happen in pretty much any HOA neighborhood where the neighborhood covenants allow for their collection.
Accord Property Management manages this particular property, and told 9 News that the fees are necessary. The company said they’ve implemented eight different assessment classes based on allocated interest percentages. All of the 320 homeowners have to pay something, but 72 of them with larger ownership shares are being charged $8,341.
Jacob Lively, a resident of the condo building, had been planning to sell his property and was shocked when he saw the large assessment from the HOA.
“I don’t see how they can charge that much. It’s outrageous,” Lively told 9 News. “Not everybody just has that amount of money just to throw away.”
Because he has an interior unit, Lively’s own condo didn’t sustain any damage in the storm. Still, as a resident of the neighborhood who agreed to follow HOA rules when he moved in, he’ll have no choice but to pay the association the money they’re trying to collect.
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Learn MoreWhat to do when you're faced with huge HOA fees
If you’re charged a special assessment fee that you can’t afford, you’re in a pretty difficult situation. The rules of the community typically require you to pay by the deadline the HOA imposes. If you don’t, you could be charged late fees, interest and penalties.
HOAs also have legal methods of forcing you to pay. They could place a lien against your property, for example, which would mean they’d have an ownership interest in it because of their claim against you. You’d have to resolve the lien before selling or refinancing.
The association could also sue you for breach of contract, or potentially even initiate a foreclosure on your home to try to force its sale to recoup the unpaid money.
Now, many HOAs won't do that and will work with you to create a payment plan that’s within your budget as long as you ask and are acting in good faith.
Still, you’re going to get stuck paying the fee at some point — and this is something you can’t insure against as your homeowner’s insurance will usually cover only damage to your immediate property and not to the condo building you live in.
Ultimately, before you buy a condo or move into an HOA neighborhood, you must be aware of the rules in your covenants for when special assessment fees can be charged and how much they can cost. You may also want to research the HOA’s finances, including whether they have a generous rainy day fund to reduce the chances of big bills you’ll have to pay.
If you feel your condo funds are being mismanaged, your state laws may allow you to request a copy of financial records — or the HOA may make them available voluntarily. Or, you can run for the HOA board yourself in the future to change how it’s being run and try to improve its finances.
Unfortunately, none of those steps eliminate your obligations to pay fees like the ones these residents are being charged, though. So, residents of First Creek Farm will need to cover the costs.
If you do decide to live in an association neighborhood and this could happen to you, having a generous emergency fund is essential to ensure you’re prepared if the worst occurs and your building comes to you looking for funds to rebuild.
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