Real Estate

How an Assessment Works and What to Know

HOA Special Assessments Explained

What is a Special Assessment

When buying a condo or a townhome, you should have a firm grasp of the meaning of special assessments. So, what is a special assessment, and how will it affect you?

A special assessment is a designated amount of money that all owners in a development run by an HOA will pay for necessary improvements.  Typically, a special assessment is a one-time fee that covers the essential repair or modification.

If your homeowners’ association has announced a special assessment, you would be right to have some concerns.

An HOA special assessment will usually be created to deal with an unexpected expense in the development.

For example, if a hurricane-damaged all of the roofs in the neighborhood and they need replacement, a special assessment could be collected to handle construction costs.

Whether you have a tight budget or not, you’ll probably want to know about any upcoming expenses associated with your purchase.

Finding out whether there are any upcoming special assessments is one of the most vital questions when purchasing a condominium or townhouse.

Let’s take a look at everything to know about special assessments.

What is a Special Assessment in Real Estate?

When you buy a home in an HOA-managed community, you will have signed your name on contracts and agreed to follow their bylaws. And when the board members on the HOA decide that repairs are needed, homeowners could be required to pay a special assessment.

A property owner will sign governing documents that explain how assessment fees will work when needed.

The homeowners association should have a reserve fund to cover repair bills, but it doesn’t always work out that way. If repairs are required that will cost more than is available in the reserve account; an HOA special assessment might be needed.

When the HOA hasn’t been as well managed as possible, they will need to ask the homeowners for more money. Sometimes an emergency could arise from natural disasters, like hurricane damage to properties, as previously mentioned.

If, for example, a hurricane damaged the clubhouse roof, the condos association would need to pay for it.

Ultimately these expenses would be passed along to the unit owners in the form of a special assessment. Unexpected costs are not that uncommon when buying a condo.

Capital Improvement Assessments vs. Special Assessments

Sometimes confused with special assessments, capital improvement assessments are slightly different. A capital improvement assessment is concerned with improving the community areas. This could mean making structural alterations, for example.

The capital improvement should increase the value of the homes in the development and possibly provide more facilities to residents. Typically, improvement projects like this are more costly, so the HOA has to take more care before implementing them.

Examples of capital improvement projects could include building a fitness center, clubhouse, tennis courts, or additional parking lots. All of these are improvements to common areas that unit owners can take advantage of. These HOA assessments help improve the property values of all the community members.

The HOA board will often propose capital improvement projects, and all property owners will discuss assessment fees. Voting will take place to ensure the majority approve of the capital expenditures.

Government assessments

Municipal governments can also create special assessments if they don’t have enough reserve funds. Perhaps the government hasn’t collected as much tax as they budgeted for, or they need to make repairs or improvements that can’t wait.

How to Deal With a Special Assessment

How to Deal With a Special Assessment

Special assessments typically happen because of something that went wrong or failed unexpectedly.

Perhaps the weather has caused damage to the roof of the complex building, and the insurance isn’t going to pay. When something unexpected takes place, even the best homeowners associations could get caught off guard.

These problems are more likely to happen with HOAs that aren’t well run and haven’t budgeted successfully. This is one reason why researching an HOA is very important before buying a home in this type of community.

You need to check the HOA’s financial details to ensure they have the funding reserves to deal with unexpected events.

It’s also prudent to check that other people in the community have been paying their HOA fees. Doing so will mean that the association is better managed and has the finances available when needed.

While your mortgage lender might ask for these details anyway, it doesn’t hurt to check how many homeowners are behind on their monthly fees yourself.

Special Assessments When You Are a Homeowner

As a homeowner in an HOA-controlled community, it’s more difficult to pack up and leave should the association do things you disagree with. However, you do have the option to give your opinion and possibly vote on any planned projects.

Having input will require you to attend board meetings to offer your opinion on any assessments before they happen.

While larger special assessments that are more costly to undertake will generally need the board to notify everyone, this is less likely to be the case with smaller projects.

If you don’t attend HOA meetings, you probably won’t hear about some of these smaller assessments until you get the bill. Lower value repair projects don’t normally require a vote either, but you will have more control over how these things are handled if you attend the meetings.

Monthly Fees and HOA Special Assessments

While you might want low HOA fees to pay each month, and who wouldn’t, there are downsides to this when it comes to special assessments. Lower HOA fees will allow you to get a larger mortgage, as your lender will factor that into your other monthly costs to see how much you can afford to repay each month.

Homeowners associations with low fees are less likely to have the funds available to take care of significant repairs to the development. They are also unlikely to be ready to undertake improvement projects that will increase the value of your home.

It’s easy to assume that higher HOA fees will protect you against expensive special assessments. The association should have the funds to deal with repairs and upgrades without needing homeowners to pay more. However, this may not be the case.

Even with higher fees, if the association hasn’t collected the funds from everyone, their financial situation might not be as good as you would assume. More considerable HOA fees could still result in an expensive special assessment if their funds aren’t well-managed.

You need to make sure you find out about these things before you buy a home.

How to Know A Special Assessment May Be Coming

How to Tell a Special Assessment is Coming

Is there a way to tell if a special assessment will be coming shortly? As a home buyer, you should be looking around the neighborhood carefully to see any significant repairs needed.

Look specifically at any common areas. Is there a swimming pool or tennis court? If so, what is the condition?

Are there are buildings such as a gym or clubhouse? What does the siding look like? Is it in good repair? Do any of the buildings look like they need a new roof? What is the condition of the pavement? These are the kinds of things you should be looking at.

It might also be wise to speak with a board member or even the property manager to get their thoughts on the potential need for a special assessment.

Make Sure You Look at The Reserve Fund

When buying a townhouse or condo, one of the essential things you need to do is look over the amount of money in the reserve fund. You want to ensure there is enough money to cover a considerable extra expense. When disaster strikes without a solid reserve fund, a special assessment will be needed.

The financial statement will detail the amount of money in the reserve fund. Fiscally responsible HOA’s will have an annual budget to ensure the reserve fund has ample money set aside.

Usually, an outside accountant will determine how much money should be set aside by doing a reserve study for the entire community.

Are There Limits on Special Assessments?

When there is a need for a special assessment within a homeowners association, specific procedures must be followed. There will be governing documents that usually include the following: the articles of incorporation, declaration of covenants, Conditions, Restrictions, and Easements, and bylaws.

There could also be separate rules and regulations documenting how an HOA community can charge special assessments. It’s likely to be a specific assessment process that must be followed.

Usually, the documents will spell out if there are notice or voting requirements. It is possible there could be limitations under what events a special assessment is possible.

Prospective purchasers within a condominium association should always thoroughly review the governing documents and restrictive covenants.

Some state laws also have restricted a homeowners association’s power to charge special assessments. In some states, there are limits on the amount of money in special assessments that can be collected in a calendar year or limit a special assessment over a certain amount without taking a vote.

Before signing a purchase contract, it makes sense to research what you’ll potentially be on the hook for if a special assessment is needed.

Can Special Assessments Happen if You Don’t Own a Condo?

An HOA special assessment can happen even if you don’t live in a condo or townhouse. Any community governed by the rules of a homeowners association or a residential owners association can have to deal with special assessments.

Even if you aren’t within an HOA, local government special assessments could still affect you. These will only be an issue to you if you are directly affected by them. So if some repairs are needed right outside your home, you might find the local municipality asks you for more money.

This is how a special assessment from local government and an HOA differs. When there is a repair required in an HOA development, everyone has to pay. It doesn’t matter if you will benefit from the special assessment or not; you will still have to pay.

What is a Special Assessment Tax?

A special assessment fee for taxes is different than regular assessments charged by an HOA. Special assessment taxes in real estate is an extra property tax levied by the local government to pay for their neighborhood and property improvement projects. The additional charged tax is allocated towards a specific area often referred to as a special assessment district.

Property owners in this designated area are the only ones who pay a special assessment tax. In some areas, the special assessment will be listed on the non-ad Valorem tax line of the tax bill bit not always.

Typically, a special assessment tax will be enforced through the use of a special assessment tax lien. The lien will be recorded at the local registry of deeds. A property lien ensures that the bill will be paid to the local government for the special assessment.

Examples of Special Assessment Taxes

What Are Special Assessment Taxes

Here are some of the common examples of projects that could be allocated to a special assessment tax:

  • Road and sidewalk paving
  • Street lights
  • Water or sewer lines
  • Public safety projects
  • Recreational projects such as building baseball fields, basketball courts, jogging trails, and bike lanes
  • Parking areas
  • Other miscellaneous improvement projects

Will Special Assessments Make a Difference When Buying or Selling a Home?

If you are selling a home that has a special assessment, it could affect your sale. It will end up being either your or the buyer’s responsibility, so potential buyers have to be told in advance.

If you are buying a home within a homeowners association, you should find out if there are any special assessments currently or any expected soon.

If there are, you need to find out the expected costs and when the special assessment will need to be paid.

You might be able to negotiate with the seller so that they take care of these extra expenses.

Your real estate agent should be able to help you find out these details and then deal with negotiations if required.

Most HOAs only use special assessments for unexpected emergency repairs. Even if the association has had to use special assessments, they should be open about it.

So if you discover a special assessment on a home you want to buy, you shouldn’t automatically start looking for another property.

HOA Special Assessment Warning Signs

When an association has to implement special assessments because of a lack of funds, there are two possible reasons.

  • Too many owners not paying the fees
  • Bad management of the finances

If a lot of the homeowners in the community have chosen to not pay their fees, this indicates bad management of the association. If homeowners aren’t going to pay their fees, why would they pay this special assessment? Since the HOA isn’t going to do anything about it anyway, this isn’t going to be good for anyone else living in the community.

These special assessments could also mean getting a home loan is more difficult. Your lender will check finances and find out how many homeowners are in arrears before they will approve your loan. If things look bad in the association, you might find it very difficult to get a mortgage.

How Do You Pay Special Assessments?

If the board of the HOA has decided that a special assessment is necessary, it will then be the responsibility of every homeowner to pay their share.

Normally, there will be some flexibility about how these extra payments can be made. An agreement might be reached to pay more each month for a certain amount of time or at different predetermined dates during the project.

The HOA might want to be paid in one go, perhaps if the total cost isn’t too high. Sometimes payment plans will be allowed for cash-strapped owners who are not prepared for unanticipated expenses.

More extended payment periods may be necessary be allowed for these unexpected expenses.

Challenging Special Assessments

If you aren’t happy with the special assessment, you can try to challenge it. Though if you are alone in this or not many other homeowners are interested, legal action could get very expensive. If you end up losing, you could find yourself responsible for the legal costs of the HOA as well as your own.

Before you consider taking legal action, you should make sure you exhaust all your other options. Discuss the matter with the board to see if there is a way to avoid getting your attorney involved.

You should also check the HOA’s covenants and rules to make sure they have done things correctly. If they haven’t followed the procedures correctly, that might be a way to stop the special assessment.

You can’t simply decide not to pay the special assessment without contesting it formally, however. Failure to pay could mean that the HOA puts a lien on your property.

FAQ on Special Assessments

1. Are special assessments tax deductible?

No. An HOA assessment is fees, not taxes, so, therefore, they are not tax-deductible.

2. What happens when you can’t afford a special assessment?

The HOA will place a lien on your property to ensure they get paid at the time of transfer of ownership. You might be able to work out a payment plan with the HOA to pay back what’s owed over a more extended period of time.

3. When does a special assessment become a lien?

Once a special assessment becomes due, an HOA can add a lien on your property to ensure the bill gets paid.

Final Thoughts on Special Assessments in Real Estate

Monthly dues with condos are expected. Unexpected expenses, however, are never pleasant. They can leave a bad taste in condominium owners’ mouths. Special assessments in real estate happen frequently, so if you’re not interested in surprises, make sure you add them to your real estate due diligence list.

When looking up the history of the property, it might also make sense to look over the historical record of any prior assessments.

You should now have a much better understanding of how special assessments work.


About the author: The above Real Estate information on special assessments in real estate was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 35+ years.

Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.


HOA Special Assessments: How an Assessment Works and What to Know

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HOA Special Assessments: How an Assessment Works and What to Know


See what you need to know about an HOA special assessment and how they work in real estate when buying a condo or townhouse.


Bill Gassett

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Maximum Real Estate Exposure

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