HOA Special Assessments: Rules, Votes and Taxes

Florida's condo law: a special assessment is "any assessment levied against a unit owner other than the assessment required by a budget adopted annually" (s. 718.103). California's Department of Real Estate describes them as charges "for major repairs, replacement, or new construction of the common area or for a one-time, unanticipated expense which cannot be covered by the regular assessment", and gives a sharp rise in insurance premiums as an example.

RE 39 treats a fine as a separate charge: a monetary penalty that one owner pays for damage to the common area or for breaking a rule.

• Notice: written notice of a board meeting where special assessments will be considered goes out at least 14 days before it, for HOAs (s. 720.303(2)(c)2.) and, for nonemergency assessments, condos (s. 718.112(2)(c)1.). An HOA notice must state that assessments will be considered and what kind they are.
• Purpose: a condo must send each owner a written notice of the specific purpose, and the money may be used only for that purpose. Money left over is common surplus, which the board may return to owners or credit toward future assessments (s. 718.116(10)).
• Developer control: before turnover, a developer-run HOA board may not levy a special assessment unless a majority of the other owners approve it at a special meeting with a quorum (s. 720.315).
• Structural reserves: a condo may fund reserves for structural integrity reserve study items by special assessment, line of credit or loan, with a majority vote of the total voting interests (s. 718.112(2)(f)2.c.).
• An HOA with no reserves must print, in its financial report, that its budget "MAY RESULT IN SPECIAL ASSESSMENTS" for capital items (s. 720.303(6)(c)1.).

RE 39 (Rev. 6/16): "Without member approval, the total of special assessments in any fiscal year cannot exceed 5 percent of the gross budgeted expenses for that year." Regular assessment increases have a separate 20 percent limit, citing Civil Code 5605 and 5610. The booklet notes emergency exceptions, for example a court-ordered expense. We could not open the current Civil Code text to confirm these figures.

An HOA board may not decide special assessments, assessment increases, the annual budget or borrowing outside an open meeting (Tex. Prop. Code 209.0051(h)). Owners get board meeting notice by mail 10 to 60 days ahead, or by posting and email 144 hours before a regular meeting and 72 hours before a special one. The Chapter 209 sections we read set no cap on the size of a special assessment. A buyer's resale certificate lists special assessments and approved capital spending (207.003(b)).

• Home you live in: the IRS says you cannot deduct HOA assessments as real estate taxes, because a homeowners' association imposes them (Pub 530).
• Home you sell: assessments for improvements, beyond repairs or maintenance, are added to your basis, which lowers the taxable gain (Pub 523, Worksheet 2, line 4f).
• Rented condo: "You can't deduct special assessments you pay to a condominium management corporation for improvements", but you may recover your share through depreciation (Pub 527).