It’s a very unfortunate development here in Calgary, but more and more often we run into condo buildings with special assessments. Old buildings, and even newer buildings, are subject to special assessments. in this article, we will try to pass on more information on this ‘subject of hell’.
What is a special assessment?
Just a quick explanation about special assessments. When you buy a condo, you buy a unit, but you also become part owner of the entire building. Simply put, a condo has a parkade, a heating-and-water system, a roof, an elevator etc., and everything has to be paid for. Those costs are shared among all unit owners. All unit owners pay condo fees and a portion of the condo fees go into the reserve fund. This reserve fund must be saved to cover the bigger expenses or repairs, which may be incurred in the future. When a big ticket item needs repair or replacement, and there is not enough money in the reserve fund, current owners may receive a notice of special assessment. Unit owners then have to pay the difference out of their own pockets.
Special assessments are not always about big numbers and big defects
Reasons for a special assessment
The fact is that special assessments may be caused by not enough condo fees saved up for big ticket items like new windows or unexpected repairs. Special assessments may be a result of bad board decisions. And they may also be caused by poor workmanship. In the latter, the question becomes: what other flaws can be expected in the building?
Special assessments are not always about big numbers and big defects. The amounts of special assessments vary greatly. They may be a few hundred dollars, or there may be a case where the amount runs into thousands, even tens of thousands of dollars.
Why are there so many special assessments happening in the Calgary market at the moment? There may be several reasons. Buildings can be from the 70’s and 80’s and need major maintenance. Newer buildings could have been poorly built. The economic boom in 2007, here in Calgary, had an impact on quality. There may be (financial) mismanagement of a condo board or a management company etc. Also, the 2013 flood got some condos in trouble.
At this moment, we see more and more assessments caused by poor workmanship which is a very sour thing to overcome. Sometimes, with luck, builders get sued for the costs. But very often, the owners are ‘on the hook’ and have to pay the bill for the condo problem.
How can buyers and sellers handle the subject of special assessments? And how can a buyer protect himself for a special assessment?