Navigating Condominium Special Assessments During a Transaction

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Special assessments are those assessments imposed against condominium unit owners, other than those assessments required by the association’s annual budget.  Regular assessments, on the other hand, are fees collected from condominium unit owners for the payment of common expenses of the association.  Special assessments can result in significant financial burden to the unit owners.  Special assessments can also create a challenge in the purchase and sale of units as disclosure issues could easily occur.

Fortunately, the Condominium Rider to the FAR/BAR Contract addresses most of the common issues/disputes that result from special assessments. Significantly, Section 3(c) of the Rider requires the seller to disclose if they are aware of any special assessment that has been levied by the association or that has been an item on the agenda, or reported in the minutes, of the association within twelve (12) months prior to the effective date of the contract.  The Rider goes on to state that the Seller shall pay special assessments levied or pending as of the effective date, that have not been disclosed by the Seller, in full at the time of Closing.  If the association imposes a special assessment after the effective date, then the Seller shall pay all amounts due before the closing date, and the Buyer shall pay all amounts due after the closing date.  Seems simple, but there are numerous instances that can occur that the standard Rider and FAR/BAR Contract fail to address!

For example, we have seen an issue arise where the seller of a condominium unit paid a large special assessment at closing and the condominium board later determined that a significant portion of the collected special assessment funds would be applied to a future assessment and not the assessment it was originally collected for.  As you probably guessed, the sellers demanded a refund of the excess funds and were reasonably upset when they discovered that they were not entitled to a refund.   Significantly, the Florida Condominium Act mandates that the funds collected for a special assessment may only be used for the specific purposes set forth in that notice.  Upon completion of the specific purpose identified in the special assessment, any excess funds will be considered common surplus and may, at the discretion of the association’s board, either be returned to the unit owners or applied as a credit toward future assessments.  The statute further provides that common surplus is owned by unit owners in the same proportional shares as their ownership interest in the common elements. Unit owners who sell their units no longer have an ownership interest in the common elements since the ownership right is “appurtenant,” meaning it runs with the title.  As such, the seller in the above example lost their right to claim an interest in common surplus upon the sale of their unit.  One way the seller could have been protected from the above example would have been by including a clause in the sales contract that required the parties to perform a post-closing reconciliation for special assessment adjustments.

As you can imagine, there are a myriad of issues that can arise when it comes to condominium property and special assessments.  An experienced real estate attorney can help guide both buyers and sellers through the transaction and ensure that their interests are being protected.   As always, we recommend you contact your local real estate attorney should you have any questions with respect to the foregoing.


Berlin Patten Ebling, PLLC

Article Authored by William McComb, Esq.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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