One of the great advantages to living in a condo is that your condo association or HOA has its own insurance policy to cover the community’s shared spaces and amenities. This policy has limits, however. When costs exceed the limits of the HOA master policy, it falls to the residents of the building or complex to pay the difference, what’s known as a “special assessment”.1
What is special assessment?
No one likes to hear that a special assessment is coming, but exactly what are special assessments? Residents of a condo complex pay monthly to fund their association’s master policy, as well as a kind of rainy-day fund that is used for larger expenses like re-roofing, repainting, and repaving. Yet sometimes unexpected costs emerge that the association cannot afford with monthly dues alone. In some cases condo associations may also mismanage funds, leading to a situation where large-scale maintenance that should have been financially planned for was not. In these cases, residents pay the difference in what is called a special assessment. This may be paid in one lump sum, or in small additions to monthly dues that persist until the payment is complete.1
Do special assessments cost money?
Yes, when it comes to special assessments, money is the name of the game. That’s exactly why no one in a condo community is particularly happy to hear that a special assessment is imminent. Just ask any condo resident “how are special assessments paid” and they’ll point to their wallet with a grimace. The exact cost of a special assessment varies greatly based on the particular repairs or maintenance. If repairs are being made to your building’s roof costing $50,000 and your building has 50 residents, you’re probably going to pay about $1,000. In general, the larger your property within the unit is, the larger your share of the cost will be in a special assessment.1
Pros and cons of a special assessment
The downsides of a condo assessment are simple: more money must be paid by residents. Since residents are already paying monthly fees to fund the association and the shared spaces it manages, extra costs may not be a welcome addition. Special assessments aren’t tax-deductible either, so they provide no silver lining for tax season.2
Yet while special assessments for condos are rarely seen as a good thing by residents, they certainly do have their benefits for the community. The work that special assessments fund is typically crucial, usually resulting from major damages incurred by a natural disaster, accident, or malfunction of some kind. At the end of the day, it’s work that has to be done. It might cost a lot of money, but the special assessment splits that cost evenly among residents, so they all pay a fair share.
Can you protest or veto a special assessment?
If you feel that a special assessment is being charged when it shouldn’t be, you can file a complaint with your HOA or condo association. You’re unlikely to succeed unless you have the joint support of your fellow residents, however, or if the project is deemed necessary for health and safety. Your greatest chance of success is when the special assessment is funding an unnecessary project such as tennis courts or a swimming pool.1
Does condo insurance cover special assessments?
Standard condo insurance on its own may not cover special assessment costs, however, you can purchase additional “loss assessment coverage” that does (Nationwide’s base condo insurance policy does include loss assessment coverage).
While loss assessment coverage may be optional, it can certainly help you save big. Learn more about what condo insurance covers and how it can protect you and the things you care about most.