What Is a Special Assessment in a Homeowners Association? Everything You Need to Know
In managing a homeowners association, terms and concepts often arise that can be confusing for many owners. One of these terms is the “derrama” (special assessment).
If you have wondered what a special assessment is in a homeowners association and how it can affect you, this article explains it clearly and simply.
What Is a Special Assessment?
A special assessment (derrama) is an extraordinary fee that owners in a homeowners association must pay to cover an unforeseen expense or a specific need that is not included in the community’s annual ordinary budget.
Special assessments are approved by owners at a residents’ meeting and are usually related to:
- Emergency repairs: Such as structural repairs to the building, electrical system failures, or plumbing problems.
- Improvements and renovations: Such as installing a new elevator, renovating the façade, or modernizing common areas.
- Compliance with legal regulations: Such as adapting the building for people with reduced mobility or installing energy efficiency systems.
How Is a Special Assessment Approved?
The decision to apply a special assessment must be approved at an owners’ meeting, where the need for the expense is discussed and the amount each owner must pay is established. Depending on the size of the assessment, payment may be agreed in a single installment or split into several monthly payments.
Approval of a special assessment generally requires a favorable vote from the majority of owners present at the meeting, although in some cases, depending on the community’s internal regulations, a qualified majority may be required.
How Is the Amount of a Special Assessment Calculated?
The amount each owner must pay is usually calculated based on the participation coefficient, which is the percentage their property represents within the total building. This coefficient is established in the community bylaws and is based on factors such as the size of the apartment or commercial unit and its location within the building.
For example, if your property represents 10% of the total building, you must pay 10% of the total special assessment amount.
What Happens If You Don’t Pay a Special Assessment?
Not paying a special assessment has consequences similar to not paying ordinary community fees:
- Late Payment Interest: Late payment interest may be applied to the amount owed.
- Loss of Voting Rights: If you are not up to date with payments, you will not be able to vote at owners’ meetings.
- Legal Claim: The community can initiate legal proceedings to claim the debt, which could lead to asset seizure.
You can read more about this topic here.
Is It Mandatory to Pay a Special Assessment?
Yes, it is mandatory. Once a special assessment has been approved by the owners’ meeting, all residents are obliged to pay it, including those who voted against it or did not attend the meeting. Special assessments are part of owners’ financial obligations, just like ordinary fees.
If you ever face the need to pay a special assessment, remember that it is an investment in improving and maintaining your environment, which also increases the value of your property.