Filed Under (Real Estate) on 01-17-2012
By Douglas S. MacGregor, J.D., M.S.W.
Check your governing documents, see the paperwork, and be nice to board members.
Almost all community associations regularly assess their members—usually monthly—for the budgeted expenses of operating the association and maintaining any common property. Occasionally, associations also levy what is called a “special assessment.”
What is a “special assessment”?
As the name suggests, a special assessment is out of the ordinary and is levied for an unbudgeted expense. The money goes to either fund a particular project or meet a budget shortfall. Special assessments can be in the thousands of dollars and generate considerable community controversy.
Colorado law sets no specific limitations on the governing board’s ability to levy special assessments. However, the governing documents often incorporate restrictions on special assessments. These restrictions may limit the purposes for which a special assessment may be levied and may also prescribe procedures for levying the assessment including that any assessment be approved by a vote—sometimes a super-majority vote—of the association members.
Step 1: Learn the Rules
So, the first thing to do when a special assessment is proposed is to examine the documents to determine the rules for levying a special assessment. Those rules will usually be found in the document called the “Declaration.” In a condominium it may be titled the “Declaration of Condominium,” and in other common interest communities it may be called the “Declaration of Covenants, Conditions, and Restrictions.”
Step 2: Examine the Documents
After you determine the rules for levying a special assessment, you have more homework. If the association has a professional community association manager (CAM), begin with him or her. If there is no CAM, the request should probably be made to the association president. Ask what precipitated the proposal for a special assessment. For example, a professional may have inspected some component of the common property and recommended a replacement or major repairs.
Generally, Colorado law requires community associations to make their “records” reasonably available to association members for inspection. So you can ask to see the professional report and any other related records, such as the professional’s invoice. Colorado law does not say that an association must provide copies of its records to its members, but if you ask politely the CAM will probably makes copies for you. Colorado law does let associations charge a fee for copies, which cannot be greater than the actual cost per page.
Don’t stop with the professional report and invoice. If the association drafted a request for proposals or received preliminary quotes from companies interested in the project, review those. Consider making a blanket written request for all documents and records related to the proposed special assessment. You may also want to review the most recent annual budget and the current status of any reserve accounts.
Step 3: Make a Judgment Call
Armed with these documents, you can now judge the need for the proposed special assessment. You may want to share your findings with neighbors to learn what they think and, if appropriate, organize them in opposition. You may find that the proposed expenditure is unnecessary or more costly than it should be. The project may be an improvement to the property (such as a community swimming pool or tennis court or a redecorated lobby or club house) desired by members of the governing board, but not by most of your neighbors. On the other hand, the project may be a necessary and urgent repair, such as the replacement of an aging roof.
If the project is going ahead, you may be able to reduce the financial impact of the special assessment. Scrutiny of the annual budget may reveal a surplus or a contingency fund that could reduce the assessment amount, also lowering the amount association members must pay out of pocket. There may be a reserve fund against which the association could borrow. Borrowing would allow the association to include the loan payments in its annual budget for the number of years of the loan. Of course, that would mean your monthly regular assessment might increase, but at least it would spread the cost out over several years. Finally, if the project in necessary but can wait for a year or two, the association could allow its members to pay the special assessment in installments.
What can you do if the special assessment is approved and you believe it was a bad decision or more than was needed? You can challenge the assessment in court. But remember, judges nearly always defer to the association’s judgment on the substantive issue—that is, the need for or wisdom of the project for which the assessment is levied. The few successful challenges to special assessments have been based on the association’s failure to follow proper procedure in adopting the special assessment. Procedural arguments are complex and will, realistically, require a lawyer. If you represent yourself, you will likely lose and you may end up having to pay the association’s attorney’s fees.
For more information see Colorado Community Association Law: Condominiums, Cooperatives, and Homeowners Associations, by Douglas S. MacGregor, J.D., M.S.W.