Boston, Massachusetts may seem worlds away from the serene Garden State, but the story of one embattled condo building there represents a dire cautionary tale for boards and managers everywhere.
A couple of years ago, the residents of Boston’s Harbor Towers Condominium were hit with a $75.6 million special assessment—believed to be the highest ever in Boston—to cover the costs of repairing and replacing the heating and cooling systems of their two waterfront mid-rises. The one-time assessment, ranging from $70,000 to $400,000 per unit owner, led to a bitter political struggle and panic on the part of some residents who would likely have to sell their units to pay the huge bill, due in November of 2007. According to a letter issued by the Harbor Towers board, 95 percent of the assessment has been collected—but the close-knit building community was torn apart over the issue, and the possibility of a similarly massive assessment being charged in an New York City co-op or condo is not purely theoretical. What if it were to happen in your association, and could it be prevented? The answer is a definite…maybe.
For many HOA residents, learning of an impending special assessment can be unsettling. With maintenance fees increasing yearly, yet another residential fee can seem to be too much. But the reasons for leveling a special assessment on the residents of a condo building or HOA are varied: the fee might be necessary for a large emergency repair to the building, or for some other unexpected outlay, such as an exponential increase in utility costs that the board feels must be recouped.
Like new taxes, special assessments are never popular with residents, and so board members are loath to recommend such fees. Sometimes however, special assessments are unavoidable. Knowing when and how to navigate an assessment—and how to avoid them, when possible—are part of what’s needed to make sound decisions as a board. Handling the assessment process smoothly is the other part of the work. Unfortunately, some boards neglect that part of the process because they are focused on fixing the maintenance problem that led to the budget shortfall in the first place.
Timing is Everything
A board should consider making a special assessment if there’s an immediate need for the funds, and there are no other options to come up with the funds, says Gary Sherman, a CPA and a partner with Rosenberg Rich Baker Berman & Co., in Bridgewater. “For instance, ridiculous amounts of snowfall… Several years ago, many of the associations had special assessments to deal with snow-related costs that were large—like an $8,000 budget ballooned to $50,000,” Sherman says.