Deciding in favour of a special assessment can be one of the hardest decisions for a condo director.
Implementing a special assessment is at the sole discretion of the condo board. Owner approval is not required. Obtaining acceptance by owners and retaining their confidence in their board is more challenging.
A special assessment is acknowledgement that the condo corporation has made poor decisions in the past that now need to be rectified. In light of this acknowledgement, owners are less likely to trust decisions made by directors who participated in creating the problem.
Making a good decision in favour of a special assessment supported by condo owners involves many considerations.
Is the special assessment necessary?
Owners dislike special assessments. Deciding in favour of one is guaranteed to create conflict and bad feelings. Some owners, unable to afford a special assessment, may be forced to sell their home. Others may find it necessary to obtain a loan. Property values may drop and condominiums can be harder to sell.
Special assessments should only be considered when absolutely necessary. This means considering the implications of delaying work a special assessment is to fund. Failure to replace a roof, for example, could cause considerable internal damage after which the roof must still be replaced. For a multi-year project where funds are not all immediately necessary, a better approach may be to increase monthly condo fees.
Borrowing money, which requires repayment of principal plus interest and fees, may be a viable alternative.
Once deciding to proceed with a special assessment owners should be provided with details and reasoning. They deserve to know events leading up to the financial shortfall and decision in favour of a special assessment. They should also be aware of how funds will be utilized.
Provide advance notice of a pending special assessment and anticipated timing. This allows owners to put their personal affairs in order in preparation for paying the special assessment.
Secrets have a way of getting out. When deliberating a special assessment, make owners aware through meeting minutes and specific correspondence. Provide details of finances so that owners understand the need for funds. This requires more than legally required budgets and audited financial statements.
It takes years of poor decisions, secrecy and mismanagement to reach the point where a special assessment is necessary. Continuing this approach during a special assessment period is unlikely to instill confidence in the board or its decisions. Fixing the problems so that a special assessment will never again be necessary will likely require not only money but a change in attitude and approach.