Understanding Special Assessments: What Every Realtor Needs to Know

Special Assessments can be levied by local municipalities, Homeowners’ Associations (HOAs), and Condominium (Condo) Associations. Each type of Special Assessments carries distinct disclosure obligations and payment responsibilities that can significantly impact a transaction. For realtors, having a clear understanding of these differences is essential to properly advise clients and ensure smooth closings. Below, we outline the key considerations for each category of Special Assessment and how they affect real estate transactions.

Condominium Association Special Assessments

• For properties within condominiums, the Condominium Rider governs the handling of Special Assessments and is required in any sale involving a condominium unit.
• The Condominium Rider mandates that if the Condominium Association has levied any Special Assessments as of the Effective Date, then either the Buyer or Seller (whichever box is checked) shall pay all Special Assessments in full prior to or at Closing. If the checkbox is blank, the Rider defaults to the Seller paying.
• When Special Assessments are levied after the Effective Date but prior to the Closing Date, either the Buyer or Seller (whichever box is checked) shall pay all Special Assessments in full prior to or at Closing. If the checkbox is blank, the Rider defaults to the Seller paying.
• If a Special Assessment may be paid in installments and the Condominium Association allows the Buyer to assume the installments, then the Seller pays the installments due on or before the Closing Date, and either the Buyer or Seller (whichever box is checked) shall pay the installments due after the Closing Date. If the checkbox is blank, the Rider defaults to the Buyer paying.
  • It is important to note that if the Condominium Association does not allow the Buyer to assume the installments, the Seller shall pay the Special Assessment in full prior to or at Closing.

Homeowners Association Special Assessments

• With HOA Special Assessments, the HOA Disclosure controls Special Assessments levied by the Association in Part B(2)(b) by stating “If special or other assessments levied by the Association exist of the Effective Date, or any assessment(s) are levied after the Effective Date and prior to the Closing Date and are due and payable in full prior to Closing Date, then Seller shall pay all such assessment(s) prior to or at Closing; or, if any such assessment(s) may be paid in installments, Seller shall pay all installments which are due before Closing Date, prior to or at Closing, and Buyer OR Seller shall pay installments due after Closing Date.”
• The HOA Disclosure primarily focuses on the due date of payment when determining which party shall be responsible for its payment.
• Notably, the HOA disclosure does not contain any disclosure language. However, it is prudent for sellers to disclose any known Special Assessments.

Municipality Special Assessments

• Special Assessments imposed by local municipalities are addressed in Section 9(f) of the FAR/BAR Standard and AS-IS Residential Contracts.
• Section 9(f) offers two options for handling Municipal Special Assessments:
  • The Seller pays all installments due prior to Closing, while the Buyer pays installments due after closing, with prorations applied similarly to property taxes.
  • The Seller pays the entire remaining balance of the assessment in full at Closing.
• The selected option must be clearly indicated in the contract.
• It is important to research whether a Special Assessment is levied in the property’s local municipality.
• Section 9(f) applies exclusively to local municipality Special Assessments and does not govern HOA or Condo-related Special Assessments.

Special assessments can have a significant impact on a transaction, and the responsibilities associated with each type can vary considerably based on the governing documents and contract terms. Realtors must understand the distinctions among municipal, HOA, and condominium assessments to ensure their clients are fully informed and that closings proceed without unexpected financial surprises. If you have further questions on Special Assessments, please reach out to your trusted real estate attorney.