Condo Special Assessment Fees – What Are You Responsible For?
July 30, 2018
One of the benefits of being a condo owner is access to the amenities that your condo offers such as gyms, event rooms, pools, and terraces. But access to these shared spaces comes with a price that is typically paid monthly in the form of maintenance fees and sometimes through condo special assessments.
The facilities that maintenance fees cover typically vary from condo to condo but can include hydro, water, heat, and most importantly, common area maintenance. This maintenance extends to any space outside of a unit: roofs, hallways, lobbies, elevators and stairwells. Your payments contribute to your building’s reserve fund. Whenever work needs to be done within the building, whether it be roof repairs or updating common areas, money from the reserve fund is used to finance the projects. If a project depletes a reserve fund because of under budgeting or due to unforeseen expenses, a condo’s residents are responsible for replenishing the fund. The condo board sets an amount that each unit must contribute so that the reserve is sufficient.
This require fund replenishment appears in the form of special assessments. Payment of special assessments are part of your duties as a condo dweller, therefore you and the rest of the residents of the condo community are financially responsible for any necessary updates or repairs. Failure to pay special assessment fees will result in the same penalties when regular maintenance fees are not paid. Some condos may place liens on units who do not pay their portion.
There are several ways to make sure that you don’t get stuck paying large special assessments.
Condo boards may opt for larger maintenance fees to increase a condo’s reserve fund to lessen the possibility of a special assessment. Although condominiums with lower maintenance fees are more enticing to prospective buyers, the risk of a special assessment being charged to residents is higher because costs may be underestimated. New legislation in Ontario is aiming to prevent large hikes in fees by putting responsibility not only on condo boards but on developers when shared space expense increases are imminent. The mandate will require developers to communicate when yearly repairs are approaching so that people can budget accordingly. This legislation will also limit a developer’s ability to rent, lease or sell a condo’s amenities which may also contribute to an increase in fees.
As a condo owner, you have the right to elect board members, vote at specific meetings and ask for an issue to be addressed at a meeting. If special assessments are an area that you feel your condo board could do a better job at anticipating, you can request an owner’s meeting and discuss your concerns. You can also review documents citing the reason for the assessment.
Condo Owner Insurance
Finally, condo owner insurance offers coverage for condo special assessments. Even the best-managed places can have an unforeseen incident resulting in the need for a condo special assessment. Aside from most banks requiring insurance to get a loan to purchase a condo, the number 1 reason to purchase condo insurance is protection against special assessments. You never know when something will go wrong in a common space, this makes it hard to budget and being covered by a condo policy can give you peace of mind knowing you won’t be on the hook for the broken elevator.
Being a condo owner has its perks and its pitfalls, one of the pitfalls being lack of financial certainty. Current by-laws allow for drastic changes in monthly fees and additional special assessment charges. Although this isn’t the ideal way to manage a condo, it is the way things are. So, as a condo owner, you need to be prepared for any unforeseen expenses that you may be faced with, and we can help you do that with a condo insurance policy!
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