Special Assessment or Borrow for Needed Funds

July 2017

When condo corporations require money for repairs and improvements, special assessments are one method.

While there are benefits to this approach, there are drawbacks to consider.  One is that it takes time to collect money from condo owners.  Many just do not have available cash to pay the assessment.  It also takes time for condo owners to obtain any loan they may require.  A second drawback for some is that the burden of financing improvements or repairs falls entirely on current condo owners.

An alternative to special assessments is for the condo corporation to borrow funds.  Borrowing results in interest costs and principal repayment over an extended period of time with payments being made by those who directly benefit from improvements or repairs.

Another approach is “split funding”.  This allows those who prefer paying a special assessment to do so.  This would reduce the amount of external borrowing required.  Condo owners that prefer not to pay a special assessment could choose to borrow necessary funds through a condo corporation loan.

“Split-funding” requires that the condo corporation identify which owners prefer each approach.  Those preferring the special assessment would make payment when directed to do so.  Those preferring financing would have their monthly condo fees increased until principal, interest and any fees are fully repaid.


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