Everything You Need to Know About Special Assessments in Condo

Do you have a condo and are wondering about the ins and outs of special assessments?

Jared Chamberlain invited Rebecca Hewitt of Condo Savvy to talk about special assessment in condos, how it works, how much it costs and how to deal with it.

Rebecca owns a condo inspection business where she does condominium document reviews for purchasers of condominiums. You can check out her company at www.condosavvy.ca.

What is Special Assessment

A special assessment is basically a cash call. It is called for when the condominium corporation doesn't have enough money for operations or certain projects. To levy a special assessment, the board sends out letters to the owners with the details and purpose of the dues.

The condo owners are required to pay the special assessment as they are considered shareholders of the property. If the owner’s unit is for sale, the special assessment is payable before the unit is sold. In selling a condo, any payables should be covered by the seller until the possession day and anything after is to be paid by the buyer.

Condo Insurance

When looking for a condo insurance policy, it is good to look for one that covers special assessment dues. Not all insurance is the same, so you need to be keen to review the contract and make sure everything aligns with what you need.

Jared Chamberlain had two condo units that required around $4,500 each for a special assessment. Good thing the units were insured, and the policy covered the payment for the special assessment.

Reserve Fund Study

A Reserve fund is a pool of money that is sitting in an account. There are no set guidelines or amount for reserve funds to be considered healthy as it varies from project to project. If you have a building with an elevator, underground parking or a building that used to be a rental that converted into a condo, they will have very different needs.

Because of the complexities in reserve funds, the condo board needs to have a reserve fund study and follow the recommendations. Reserve fund studies are reports done by qualified professionals to assess all the components of a condo. This is done to determine how long a condo will last, when it needs a major repair and sustains its funds.

Sometimes, those studies state a special assessment during a particular year, so there’s transparency ahead of time. There are times that it might not make sense to follow the reserve fund study, though. For example, lumber is very expensive this year; doing simple projects like replacing decks will cause a fortune. It’s best to postpone the project and issue a special assessment in the next coming years.

When to Expect Special Assessments

The meeting minutes of the condo board tell a beautiful story. They provide insight into how things are being managed and when they are considering a special assessment. For this reason, condo owners need to get the most recent minutes to stay updated.

Some management meets every month, and some meet once a quarter. During the pandemic, meetings are fewer, but the board is still required to record their decisions.

Rebecca Hewitt did a document review for a client in July. She requested a copy of the meeting minutes for the last 12 months, but what she got was until January 2021 only. Within a week, after her client moved in, there was a special assessment. They didn’t know about it because the minutes shared with her were incomplete.

When her client went on the owner’s portal, she saw a section talking about a special assessment. Thankfully, it was only $1,000, and she could absorb it.

Some people get scared by special assessments. For others, special assessments are acceptable because they add value to their property. The key is to always look at the most recent meeting minutes, audited financials and reserve fund study so you can anticipate when a special assessment is coming.

Maintenance Cost

Maintaining any property certainly needs funds. It doesn’t matter what type of home you own; as long as you have a well-run and well-managed corporation you are buying into, that is okay.

Condo fees and special assessments are how a condo company and a corporation get their money for repair. Some corporations raise condo fees like crazy and never have special assessments, but that hurts the property’s value.

There are many beautiful buildings in Calgary, but their condo fees are so high that it's pushing their values down. As a rule of thumb, for every $100 in condo fees, your qualifying of that condo goes down by $10,000 versus buying a single-family home with no condo fees.

If you have more questions about special assessments, you can reach out to Rebecca directly at 403-999-1686 or info@iamcondo.savvy.ca. And if you have any other questions about real estate in Calgary, email us at info@chamberlaingroup.ca or call 587-316-5400.