Nobody likes to hear about special assessments but, they are a reality in many condominium corporations and have been quite common here in the Collingwood and Blue Mountain area. So what is a special assessment?
Part of the condo fee paid by owners each month goes into a reserve fund as mandated by the Condominium Act. The purpose of the fund is to act as a savings account for planned expenditures for replacement and non-routine repairs of common elements and assets of the condominium such as resurfacing parking areas, replacement of a roof or a security system for example.
Occasionally, an unexpected expense will arise that will lead to an unexpected shortfall in the reserve fund and this can lead to a special assessment. It is an additional levy that a condo board must levy when necessary and it should be noted that owners cannot generally vote on the need to do such an assessment.
An example would be the discovery of mold in an attic. The reserve fund studies done in the past would not have anticipated this situation yet, it must be addressed and depending on the resolution and costs, owners could be required to pay a special assessment to cover the cost of the repair. Another example might be where owners have agreed to replace wood siding with vinyl siding and the full cost is not budgeted for in the reserve fund.
In Ontario, the Condominium Act changed in 2001 and mandated that reserve fund studies be completed by condominiums and once this system was implemented, it was more common for boards to realize that they were not building up sufficient funds for future planned expenditures and special assessments became more common.
These assessments are levied on a proportional basis to the percentage of common expenses each unit has, as per the declaration. A smaller unit’s assessment will be lower than the one owed by a larger suite. You can find both your reserve fund study and declaration in the status certificate when you purchase a condominium. After that, owners are always notified as new reserve fund studies are completed and new projections are put in place.
We have seen a variety of approaches in different corporations as to have the levy and collect on special assessments. They can be a one time fee as a lump sum, they can be done over installments or spread out over several months or years.
If you are considering the purchase of a condo, you should know that as soon as a special assessment if being contemplated, it must be stated in the status certificate and as always, it is critical that Buyers make their offers to purchase a condominium conditional on review of those documents.
Marg Scheben-Edey is a Broker with RE/MAX four seasons realty limited, Brokerage in beautiful Collingwood, ON. With three decades of experience, Marg is a leader in the local real estate marketplace and is ready to help guide both Buyers and Sellers in achieving their real estate goals. Email Marg