HOAs are typically funded by the collection of fees from their community members. These collections allow the HOA to budget and pay for all the work that goes into maintaining the community. However, in the unfortunate circumstance that an HOA falls short on coming up with the necessary funds to cover large and unexpected HOA maintenance, a Special Assessment can be enacted.
In this situation, the community board has the authority to increase membership dues to cover an unexpected expense that members are then obligated to pay.
How Does This Happen
The typical cause:
- Unexpected large expenses courtesy of life’s wonderful randomness
Other contributing factors:
- Failure to receive payment from community members on time
- Failure to truly account for the monthly operating expenses
- Failure to maintain and grow a reserve fund
Special Assessments should be only viewed as a last resort when dealing with an unexpected large expense that the community does not have the funds to cover. They damage community morale and could put a lot of your community members in a financial bind.
How To Avoid A Special Assessment
The best way to avoid the need for ever having to do a Special Assessment is for your community to have a reserve fund in place and to maintain its growth responsibly. This fund will be available for your community to use in the event of a large unexpected expense. However, the reserve fund is only as good as the collections that the community is able to make. It is vital that HOAs stay on top of collections to keep things running smoothly.
Sometimes It Is Just Simply Unavoidable
Despite a community’s best efforts to manage itself well, a Special Assessment may be unavoidable. You’ve done everything right, you’ve had your reserve study done, you’ve kept your reserve fund growing healthily, but an expense pops up out of nowhere that is outside the scope of the funds you have been saving in the reserve. Situations like this for well-run HOAs are extremely rare, but they do happen.
At Your Community Manager, we do our absolute best to ensure that our communities don’t need to rely on Special Assessments for any unexpected expenses. However, we do understand that for some communities, it is unavoidable. If your community is dealing with this issue currently or are concerned that your Board may run into it in the future, don’t hesitate to reach out to us for help.