A special assessment can come as a surprise to owners, especially if they are more used to paying regular dues. Unfortunately, regular dues just aren’t enough to cover the association’s expenses. When that happens, the board may be forced to charge special assessments to keep the community afloat.
What is an HOA Special Assessment?
A homeowners association special assessment is an extra charge the board imposes to cover costs that regular dues can’t cover. Regular HOA dues pay for ongoing or day-to-day expenses. These include landscaping, insurance, maintenance, management, utilities for common areas, and reserve contributions.
A special assessment is different. It is usually a one-time or short-term charge created to address a specific issue. Boards typically turn to this option when a budget shortfall or an unexpected event arises. Since special assessments often lead to financial stress, boards must justify them and follow proper procedures.
Can an HOA Charge a Special Assessment?
Yes. In most states, including Virginia, an HOA or condo association can charge a special assessment. Of course, boards must still comply with both state laws and their governing documents.
The CC&Rs and bylaws usually spell out the board’s authority regarding special assessments. Most documents also state when a membership vote is required to pass the charge. Some require special assessments to be approved by a board vote, while others require owner approval.
In Virginia, the authority comes from Section 55.1-1825 of the Virginia Property Owners’ Association Act and Section 55.1-1964 of the Virginia Condominium Act. If regular dues are not enough, the board may levy a special charge. Still, the association must follow its documents and notify members properly.
Why Does an HOA Need to Levy a Special Assessment?
Even the most competent board can face unexpected problems, necessitating special assessments. Here are the most common reasons associations need an extra charge.
1. Unanticipated Expenses
Some expenses crop up without warning. A pipe can burst, or a roof can collapse, leading to a large repair bill. And it’s not like board members can ignore these, as they pose safety risks.
Typically, boards turn to insurance first. If insurance can’t fully cover the damage, they might turn to a special assessment to fill the gap.
2. High Delinquency Rate
If many owners fall behind on dues, the operating budget won’t be enough to cover expenses. The board must find a way to secure more funding so the association can turn to special assessments. Of course, the board will still keep trying to collect unpaid fees.
3. Amenity Upgrades
An association might want new features such as a playground, fitness center, or security improvements. Sometimes the operating budget covers the cost of these upgrades, but more often than not, the cost is too high. This is when the board might propose a special charge.
4. Underfunded Reserves
The reserve fund is a savings account that protects the long-term health of an association. If a reserve study reveals that the community is at risk of underfunded reserves, the board needs to raise additional funds to achieve the required level of funding. Oftentimes, this comes from special assessments.
5. Emergency Situations
Storms, fires, floods, and other disasters can drain association resources. Even with insurance, there may be deductibles or uncovered losses. A special charge can help the community recover faster and keep everyone safe.
Is There an HOA Special Assessment Limit in Virginia?
Under Virginia law, there is no fixed dollar limit for HOA special assessments. Each community will rely on its own governing documents to determine caps, voting requirements, and procedures. Some associations restrict the amount a board can impose without owner approval. Others give the board complete discretion, provided they follow the notice requirements.
Boards must check the CC&Rs and bylaws first. These documents will guide the board on how much it can charge and the steps it must take before adopting an additional assessment.
Virginia HOA Rules on Special Assessments
When reading HOA special assessment rules, the two most important Virginia laws are Section 55.1-1825 for HOAs and Section 55.1-1964 for condominiums.
For HOAs (Section 55.1-1825)
- The board may levy an additional assessment if it believes the charge benefits the community.
- Funds from the assessment must be used primarily to maintain common areas and other association responsibilities, including major repairs and replacements.
- Failure to pay the assessment allows the association to file a lien under Section 55.1-1833.
- The association may also use any other legal remedies available to creditors.
- Nonpaying members may lose access to common areas, but the board can’t block direct access to their own lot.
- The board may pledge future revenue, including dues and special assessments, as collateral for loans.
For Condominiums (Section 55.1-1964)
- Additional assessments may be issued if regular dues are insufficient, and charges must be based on each unit’s undivided interest in the common elements.
- The board must send a written notice that explains the amount, purpose, and due date of any additional assessment.
- If the charge is due as a lump sum, owners must be given at least 90 days to pay.
- No unit, including those owned by the declarant, can be exempt from assessments.
- The board may charge late fees on payments more than 60 days overdue, up to the limit set in Section 58.1-3915.
- The board may pledge future revenues, including annual assessments, to secure loans.
How Frequent Should Special Assessments Occur?
Special assessments should be rare. A well-managed association should have strong budgeting, precise planning, and regular contributions to reserves. With things running smoothly, the board would only need to levy a special assessment if there’s an emergency. It’s a red flag if a community charges this fee several times a year. That means there’s something wrong with the association’s finances.
Penalties for Nonpayment of Special Assessments
When a homeowner fails to pay, the board has several options for collecting the debt. The specific actions will depend on the governing documents and state laws. In general, these include charging late fees or interest, suspending privileges, hiring a collection agency, taking legal action, placing liens, and even foreclosure.
- Late Fees or Interest Charges. Associations may charge interest or late fees if their governing documents allow.
- Suspension of Privileges. Some communities revoke access to amenities and voting rights until the owner settles their debt.
- Collection Agency. Some associations send past-due accounts to a collection agency. This can also impact their credit score.
- Legal Action. The board may file a lawsuit seeking a judgment for the amount due, which may result in a wage garnishment order.
- Liens. Under Section 55.1-1833 for HOAs and Section 55.1-1966 for condos, unpaid assessments create an automatic lien on the property. Liens make it more challenging for homeowners to refinance their mortgages or sell their homes.
- Foreclosure. In extreme cases, the association may initiate foreclosure proceedings. This should come as a last resort and follow strict legal procedures.
Avoiding Liability
A special assessment can feel overwhelming, but it is sometimes necessary to keep the community running smoothly. That said, board members must ensure compliance by adhering to the requirements and procedures set forth in state laws and the governing documents.
National Realty Partners is a leading provider of association management services in Virginia. We can help your board manage special assessments. Call us today at 703-435-3800 or request a proposal online to get started!
RELATED ARTICLES:
- What Happens If You Don’t Pay HOA Fees In Virginia?
- HOA Foreclosure In Virginia: Can A HOA Board Take Homes?
- HOA Debt Collection: What’s Legal And Frequently Asked Questions