You may have heard of a condominium special assessment, these can be quite scary for the prospective condo owner and buyer.
When a condominium all of a sudden needs an emergency repair – for example, the boiler breaks or the exterior is crumbling – the cost is passed on to owners in the form of a special assessment. Owners will pay a lump sum to help cover these costs, and this payment is in addition to their monthly fees. While owners can vote out a board that hasn’t done a good job of managing the condo’s money, they have to pay the special assessment.
Condominiums have reserve funds to avoid such situations. This reserve fund is a special fund used to cover such repairs or maintenance, but if the reserve fund is poorly managed or not big enough there could be the possibility of a special assessment.
It should be noted that these types of special assessments occur in older condos (built before 2001) when the Condo Act was changed. Previously, the Condo Act did not mandate that condos needed to have reserve funds.
You and your real estate agent, as well as a real estate lawyer, can review reserve fund studies and status certificates for condominium buildings before you buy a unit there to determine if there reserve fund is in good health and if the building seems well managed before you buy.
Have you ever experienced a special assessment? Tell us about it!
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