What’s So Special About the Assessment?

 

One of the many questions commonly asked by realtors, sellers, and buyers pertains to special assessments – to whom are the special assessments owed, why special assessments are being paid, and how a buyer would be alerted to the existence of the special assessments. In short, the term “special assessments” can be used to refer to either the assessments collected by a local government or the additional fees collected by a community association.

Special assessments levied by a local government are used to fund critical infrastructure within a community such as roadways, sidewalks, street lighting, sewage, utilities, and garbage. These non-ad valorem special assessments are collected from the property owner on the annual tax bill, in addition to the property taxes, and are unrelated to the value of the property. Section 9(f) of the FR/BAR contract contemplates how certain special assessments are to be paid between a seller and buyer. Subsection (a) provides that the amount of the special assessment will be prorated at closing, whereas subsection (b) requires that the special assessment be paid in full prior to or at the time of closing.

By contrast, special assessments levied by a homeowners’ or condominium association are used to fund repairs to buildings or common areas within the homeowners or condominium property. These assessments are generally levied outside the regular maintenance and upkeep of the community and are shared among a few or all of the association members. It is important to understand how and when these assessments are charged to the homeowners as this could significantly impact the costs and fees a potential buyer could inherit at closing. A potential buyer would be altered alerted to the existence of these special assessments, either at the time they enter into a contract with the seller or upon receipt of an estoppel certificate from the association. When determining which party will be responsible for the assessment, there are few factors that should be considered including, but not limited to:

• Whether the seller received any notice regarding the special assessment;
• Whether the special assessment existed at the time the parties entered into the contract; and
• Whether the seller disclosed the special assessment at the time the parties entered into the contract.

Understanding the nuances between the two types of assessments and how they are assessed will prove to be valuable to all parties involved in a real estate transaction. As always, we recommend you contact your trusted local real estate attorney should you have any questions regarding special assessments.

Sincerely,

Kathryn Huynh, Esq. khuynh@berlinpatten.com
Berlin Patten Ebling, PLLC

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.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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