Special Assessments and Loans a Condo Community Management Company Is Experienced With
Condo communities and associations can use special assessments and loans to finance unexpected maintenance and upgrades.
The ways associations or community management companies can use these funds are governed by the condo associations’ covenants, conditions & restrictions.
Here’s an overview of the types of special assessments and loans that condo community management companies have experience with:
Special Assessments for Condo Communities
Condominium owners associations (COAs) charge homeowners monthly fees to support maintenance and other operations in the community. Part of the money collected goes to a reserve, while the rest is spent on the year’s projected budget.
A condo community management firm can help associations create a budget to cover routine maintenance of common areas, landscaping, garbage removal, administration, and more. They can also organize reserve funds to be put toward investments or planned upgrades.
Condo communities may face unexpected maintenance or costly upgrades. If the operating budget and reserve funds aren’t enough to cover the emergency maintenance, the association can ask residents to pay an extra fee.
This is considered a special assessment that is separate from the regular monthly payments condo owners make. Special assessments cover specific, earmarked projects and fall into two primary categories: condo owners association and local government assessments.
Condo Owners Association Special Assessments
COAs may charge special assessments when unexpected maintenance or repairs are needed. The extra amount requested can cover necessary community projects like repairs after a natural disaster or unforeseen building renovations.
Condo associations can also use special assessments to fix newly identified safety concerns or code violations, such as security system upgrades or elevator replacements.
The board can charge a special assessment if the association has no funds or insurance policies to cover the repairs. Special assessment amounts are divided among condo owners using contribution percentages defined in the community’s governing documents.
Homeowners will be notified of how much they should pay and how long they have to complete payments. A community management company can help associations budget the special assessment fees and communicate transparently with the residents.
Local Government Special Assessments
County and city governments can request special assessment fees from residents in a specific area. The assessment is used to pay for urgent repairs and infrastructural upgrades.
Covered upgrades may include fire protection, street lighting, road repair, and water and sewer line installations. The assessment is typically only charged to the community benefitting from the upgrades.
The local government can also charge a special assessment tax with the usual property tax. Special assessment taxes are placed on property owners in areas where the local government has completed an upgrade or maintenance. Upgrades that can result in special assessment taxes include road, sidewalk, and park drain upgrades done by the municipal.
Condominium Owners Association Loans and Credits
COA loans can fund capital maintenance projects, insurance premium financing, real estate and equipment purchases, and land lease buyouts. Instead of charging a special assessment, the association gets a loan from the bank.
The association can repay the loan in monthly installments, spreading the cost over several months or years. COA loans can help the board maintain cash flow and continue operations without disruption.
Taking out an association loan typically poses zero risk to individual credit or property, as the association accepts the loan or credit as a corporate entity. The common types of condominium association loans that community managers are experienced with include lines of credit, term loans, and combination loans.
Line of credit loans involve an arrangement where the bank allows the association to borrow money up to a given limit. The association can keep borrowing provided they make timely repayments and stay within the allowed credit limit.
A term loan involves a bank loaning the association a specified amount. The loan features an interest and a repayment term within which the loan and interest must be repaid.
Combination COA loans are known as line of credit loans with conversion. The bank offers a standard line of credit and allows the association to pay interest only on the borrowed amount.
After a predetermined duration of interest-only payments, the borrowed amount is converted into a term loan with a fixed repayment duration. COA loans and credits may have an extended repayment duration, offering an alternative to special assessments.
Working With a Condo Community Management Company
Special assessments and loans can cover emergency condo community maintenance and upgrades. Special assessments are charged for unexpected repairs and maintenance, while loans can fund planned developments.
COAs can also take emergency loans to take care of urgent maintenance. A condo association can work with a professional community management company to receive advice regarding these loans and assessments.
Contact a condo community management company today to learn more about funding options and other specialized services they can help with.
