Understanding S/A's

A Guide to Special Assessments

Understanding Special Assessments

Special assessments are sometimes necessary in order for the association to meet its financial obligations. MPI works hard to help create a budget that will anticipate the needs of the association but occasionally something comes up that is not budgeted for and cannot wait until the following fiscal year. That’s when special assessments become a tool that the Board can utilize.

Per civil code, the Board has the authority to special assess the owners up to 5% of the annual budgeted expenses without a vote from the owners. This does not mean that each owner s special assessed 5%, it means that the Board can special assess a total of 5% which is then divided between the units in accordance with the associations governing documents. Your assigned manager will advise the Board of the specifics for your association.

For a special assessment that exceeds 5% of the annual budgeted expenses, the Board must put the special assessment to a vote via secret ballot. Often times Boards, especially for smaller associations, do not want to follow the secret ballot procedure because it can be lengthy and sometimes costly. However, it is very important that all the proper procedures be followed in order to ensure that the special assessment is passed correctly and in accordance with civil code. It is true that there are fees associated with the process but those fees are far less than having to retain an attorney because a homeowner disputes the special assessment’s validity. For a description of the fees you can refer to your MPI contract or discuss it with your manager.

Before the secret ballots can be mailed to the owners your manager will work with the Board to determine the following:

  • Total amount that needs to be special assessed
  • If the special assessment will be billed as a onetime fee or in monthly installments
  • The date, time and location of the meeting where the secret ballots will be opened and tallied
  • Who will act as the Inspector of Election, which is the person designated to open and tally the ballots

Typically the amount that needs to be special assessed is determined by an estimate received for the project that the special assessment is funding. If the special assessment is not very high then Boards often choose to have the full amount due all at once. If it is high enough to be a significant financial burden then Boards may choose to break it into monthly installments. It is important to keep in mind that the project should not begin until all money has been collected so that the funds are on hand to pay the vendor once the work is completed. Sometimes vendors will accept a payment plan so that the work can be completed quickly and they are then paid monthly as the special assessment is collected. Your manager can work with the vendor on the association’s behalf to negotiate a contract that the meets the association’s needs.

Once the amount and payment methods are determined the Board will need to plan the meeting. Per civil code the owners must be given a minimum of 30 day between the time the secret ballot is mailed to the owners until the meeting that is held to open the ballots. It is imperative that these timelines be followed so that your special assessment is put to vote properly. The Inspector of Election will also need to be determined as they are the one that the secret ballots can be directly mailed to. The Inspector of Election cannot be a Board member or someone who may have a conflict of interests with the outcome of the vote. If your governing documents allow for it, your manager can act as your Inspector election. This may or may not have a fee, depending on your contract with MPI.

Once all the necessary information is collected, your manager will mail a meeting notice, the secret ballot, voting instructions and the necessary return envelopes. The owners will then cast their vote, seal the secret ballot in the proper envelopes as described in the instruction and mail it to the Inspector of Election.

At the meeting, quorum must be attained in order for the ballots to be counted. Your governing documents will let you know what quorum is for your particular association but typically it is 51% of the membership. If quorum is not met then the meeting must be rescheduled. If quorum is met then the ballots can be opened and tallied.

If the special assessment passes then the first monthly installment or the full amount, depending on the Board’s decision, will be charged to the owners account on the next applicable billing cycle, typically, the first of the following month. The special assessment is due in addition to the normal monthly assessments and is subject to the same collection and delinquency policies detailed in the governing documents. Your manager will mail a notice to all the owners letting them know the outcome of the vote within 15 days of the meeting.

For more information or if you have any additional questions you can always contact your assigned MPI manager.

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