Q&A: Special Assessments vs Regular Increases

We’re often asked the pros and cons of special assessments versus the pros and cons of regularly increasing homeowner dues to cover escalating expenses.

Generally, SKSP advises against issuing special assessments. The truth is that prices–whether utilities, supplies, labor, etc. tend to increase over time. When your HOA issues regular small increases to cover inflationary pressures, it means that the costs associated with maintaining common areas and paying for services, etc. increases for owners gradually and predictably over time. This allows homeowners to budget for these increases and plan for the additional cost. There isn’t much planning to be done considering special assessments, since they’re often sudden and of varying costs.

When your HOA keeps dues low and then issues special assessments when funds are needed, homeowners aren’t often prepared for the additional cost, and it can be financially burdensome and frustrating for them. Additionally, if your HOA keeps dues low and then has to issue special assessments when funds are needed, it generally means that your HOA has not been saving enough money to cover expenses in the long run, which can mean owners should expect more frequent and/or larger special assessments in the future. Regular small increases help the HOA to keep up with expenses and avoid the need for large special assessments. The general gist here is that if funds aren’t available to complete whatever project the association is considering, it means that there have been owners over the years who haven’t paid their fair share of upkeep.

SKSP encourages HOA boards to be transparent, accountable and efficient in their decision making to avoid special assessments as much as possible and if they are unavoidable, they should be communicated clearly and well in advance, with a clear explanation of the reasons. Special assessments are sometimes necessary, especially for unforeseen emergencies–but if it’s unavoidable, they should be communicated clearly and well in advance, with a clear explanation of the reasons and a plan to prevent it from happening in the future.

Fianlly, special assessments can make a property less attractive to buyers, and make it harder for homeowners to sell their property assessments. They can scare potential buyers away from the property, and for good reason. It’s hard for buyers to know whether an HOA treats special assessments as an absolute last resort or as common budgeting item. It makes sense to fear that it’s the latter, because if an HOA isn’t managing its funds well, and needs to call for special assessments often, that might not be a place a buyer would want to live.