What is a special assessment?

A special assessment is a levy that homeowners associations or local governments periodically charge homeowners under certain circumstances. The money may be used to pay for repairs, installations or other community-related construction or maintenance expenses that cannot be covered by the existing operating budget or cash reserves.

What is a special assessment?

There are two types of special assessments — one that is charged by a homeowners association (HOA) and one that is charged by municipalities.

HOA special assessment

In communities managed by HOAs — like condos — and residential co-ops, homeowners pay monthly dues or fees to fund the upkeep of the community. This money is generally used to cover the cost of routine maintenance of community facilities, landscaping and sometimes even water and trash bills.

However, an HOA (or co-op board, in the case of co-operative buildings) may periodically levy what’s known as a special assessment that is separate from monthly homeowners dues. Special assessments are typically charged when the community experiences an unexpected or particularly large maintenance expense that cannot be covered by the association’s operating budget or its reserve funds.

When special assessments arise, the HOA may require homeowners to pay the fee in one lump sum or it may tack on a little bit extra to the monthly homeowners dues until the special assessment is fully paid off. The authority to levy these assessments is typically outlined in the HOA Covenants, Conditions and Restrictions (CC&Rs) document.

Local government special assessment

The other type of special assessment involves the dues that county or city governments may charge homeowners. A municipality may impose a special assessment on residents in a certain area to fund urgently needed repairs, maintenance or to upgrade the area with infrastructure – such as installing pavements, water and sewer lines or repairing roads. The money may also go towards regular services such as street lighting or fire protection.

Because the work benefits people who have purchased homes in specific areas, such special municipal assessments or levies will be restricted to only a limited group of property owners.

How does a special assessment work?

Special assessments are typically imposed in an emergency situation when something in the community breaks or a large unexpected expense occurs. They may also be charged to cover the costs of more significant or infrequent maintenance projects if an HOA does not maintain an adequate reserve fund to cover such infrastructure or maintenance expenses.

Special levies are paid for by the homeowners in the community directly impacted. In some cases the amount may need to be paid all at once, or the HOA may decide to charge extra dues each month until the assessment is paid in full.

As a homeowner, you can review the governing documents of your community, which include the Declaration of Covenants, Conditions, Restrictions, and Easements, as well as the articles of incorporation and also the bylaws for the community, to find out what sort of notice the HOA is required to give you regarding special assessments. These documents may also detail how such assessments are to be handled — whether the community is allowed to vote on the assessment and if there are certain specific conditions under which an assessment is allowed to be charged.

How much are special assessments?

The exact amount of a special assessment varies based on the work being done. In the case of a homeowners association the amount of the repair or special project costs would be divided evenly among the number of homes in the community.

Say there are 100 homes in the association and the levy is being used to cover the $25,000 cost associated with installing a new irrigation system because the previous system unexpectedly broke, then that cost might be divided among the 100 homes. In this example, each homeowner would have to pay $250 towards the special assessment.

Special assessment vs special assessment tax

Special assessments charged by an HOA are different then a special assessment tax. As a homeowner, you will have to pay standard property taxes to the local government. Periodically, your local government may also charge a special assessment tax in addition to your property taxes, in order to pay for neighborhood projects. (See “Local government special assessment,” above.)

The money from special assessments is generally used to cover the cost of necessary infrastructure projects or other community improvements that benefit your specific area. Examples that may involve a special assessment include sewer and water system work, upgrading and maintaining roads and sidewalks, installing park drains or other public utility projects.

Only residents who will benefit from these upgrades or additions will be taxed. In addition, these projects typically increase the value of the real estate in area, which can benefit the homeowners funding the special assessment.