So many of our neighborhoods in Naples belong to either a Homeowners Association or Condo Association. Because of this, there's always a possibility that there is a current special assessment on the books or one coming. Let's talk about these special assessments and how you can protect yourself as the buyer.
What is a special assessment?
Let's start with the basics. Communities have budgets to account for HOA or Condo Fees coming in and the expenses that this income will cover. Things like landscaping, security and gates, insurance on condo buildings, and even things like social committee funds show up on the budget and are paid for with the dues paid in by the owners.
So what if the income from the owners is not enough to cover the expenses in the budget? Or, what if something catastrophic and unpredicted happens, such as a hurricane, and there is a budget deficit? An association can generally do one of two things--they can increase the HOA or Condo Fees going forward to collect more money -or- they can levy a special assessment. A special assessment is an additional charge levied on owners to cover unexpected expenses, capital improvements, or funding shortfalls that cannot be handled by regular dues or reserves.
How do I find out if a community has a special assessment that I will have to pay for?
It is the seller's duty to disclose any special assessments that are currently on the books (they are often paid in installments) or ones that have been announced and voted into place by the association's board. It's a little more nuanced than that but let's stick to the basics.
Also, when purchasing in a condo association or homeowners association, your REALTOR® (hopefully me) will provide you with the association's documents, most importantly the budget and profit and loss statements. You'll find the special assessment in those documents.
Who pays the special assessments when a property is being sold?
Our contract accounts for this happening as it is a relatively common occurrence in Naples. Here's a portion of the NABOR sales contract that addresses special assessments.
SELLER shall pay the full amount of any Association special assessments and governmentally imposed liens or special assessments (other than CDD/MSTU assessments which are addressed in Paragraph 5) (each, a “Special Assessment”), which, on or before the Effective Date, are a lien or a special assessment that is certain as to (a) the identity of the lienor or assessor, and (b) the property subject to the lien or special assessment, and (c) the amount of the lien or special assessment. Notwithstanding the above, if a Special Assessment is levied as of the Effective Date and may be paid for in installments (CHECK ONE): SELLER BUYER (if left blank, then SELLER) shall pay all installments due after the Closing Date.
Great, so the seller pays! Well, maybe. It depends on what is agreed upon in the offer. That's where a strong negotiator is needed on your side.
What about future special assessments?
Here's where this gets scary. What if there is a special assessment being discussed but it hasn't been set in stone by the board? It could be thousands and thousands of dollars! Do you want to pay for that?
If a special assessment is only being discussed and has not yet been formally approved or levied, it often does not appear in seller disclosures or financial documents — meaning a buyer could still be responsible for it after closing.
The need for an excellent REALTOR®
When I sell a home or condo in Naples, one of the items on my to do list is to get the meeting minutes emailed to me so I can pass them along to my buyer. If the board discusses potentially creating a future special assessment, it will not be in the financials, condo docs, etc. that you get when you get your offer accepted. However, it will (should) be in the meeting minutes.
Most REALTORS® don't do this. They don't even bother asking for meeting minutes. If you ask me, that's one of the most important things a REALTOR® can do for their buyers.
I would love to help you avoid pending or future special assessments
I'm tooting my own horn a bit here but because I know that I go above and beyond for my customers. You need an agent with experience. Do you want to find out that you're going to pay an enormous special assessment after you purchase and you could have avoided it altogether if you had a better agent?
Please give me a call or email me if you'd like to discuss special assessments further. I would love to help you in any way that I can.
