The Rising Challenge of Special Assessments in Condos
Over the past year, condo special assessments have become a growing concern for owners across Canada. From Calgary to Toronto, more condominium owners are facing hefty, unexpected charges, sometimes forcing them to sell their units below market value to manage the costs.
What Is a Condo Special Assessment?
A special assessment is a one-time fee imposed on condo owners, supplementing regular maintenance fees. These charges usually arise for two reasons:
- Budget shortfalls that can’t be covered by reserve funds.
- Unexpected repairs or events, such as structural damage, flooding, or other emergencies.
Unlike regular maintenance fees, condo boards can impose special assessments without prior approval from owners, making it crucial for residents to understand and prepare for them.
Key Questions About Condo Special Assessments
1. How Much Will a Special Assessment Cost?
The cost is calculated based on your unit’s share of common expenses, typically outlined in the condominium’s declaration. The condo board will notify owners of their portion and payment timelines.
2. What Happens If I Can’t Pay?
If you fail to pay, the condo board can place a lien on your unit. This legal claim enables the corporation to recover unpaid amounts, including repair costs and legal fees.
3. Can Special Assessments Be Avoided?
While avoiding special assessments entirely may be difficult, proactive strategies include:
- Joining the condo board to promote sound financial planning.
- Reviewing the building’s status certificate before purchasing, ensuring it has adequate reserves and no pending legal issues.
Tax Implications of Special Assessments
For most condo owners, special assessments are not tax-deductible if the unit is your primary residence. However, owners of rental properties may be able to deduct these expenses. Consult the Canada Revenue Agency or a tax professional to clarify your eligibility.
Why Are Special Assessments Becoming More Common?
Aging infrastructure and inadequate reserves are driving the rise in special assessments. Many older condos face deferred maintenance issues, while newer buildings often maintain minimal reserve funds, leaving them vulnerable to unexpected costs.
For example, in June 2024, five condo buildings near Ottawa—constructed in the 1980s—faced severe repair challenges, including leaky roofs and deteriorating walkways, highlighting the growing need for better financial planning among condo boards.
In December 2023, a north Edmonton building sought as much as $12,000 for a special assessment from 44 units. The Castledowns Pointe condominium building suffered fire damage in March, and engineers have also uncovered problems with the foundation, columns, walls, and students.
In June 2023, a condo complex in Calgary faced a total special assessment cost of $500,000.
These cases are popping up from coast to coast. In 2022, the Canadian Institute of Actuaries published a report warning that aging condos will need to make expensive repairs in the future.
Industry experts say it is vital for condo buyers not to assume that the only monthly cost they will have is the condo fees. When sizeable damage happens, and there is not enough in the reserve fund to cover these mishaps, special assessments will be a reality of condo ownership.
Experts warn that trouble could be brewing in the Canadian condo market in the next few decades. New condos on the market or newer projects in the middle of construction offer low monthly maintenance fees as a sales inducement. Therefore, when major upgrades, repairs, or replacements are needed, enough money might not be collected to cover these costs.
While a crowd of condo owners might petition the board to keep monthly costs down, they might have to pay it in the future when repairs are deferred for too long and conditions deteriorate quickly.
In the end, it is important to research the condo market, work with a trusted and experienced real estate agent, and determine how much is in the condo corporation’s reserve fund. With enough due diligence, you might save yourself thousands of dollars down the road.
Final Thoughts
Understanding condo special assessments is crucial for both current and prospective condo owners. By staying informed, advocating for better financial management, and reviewing a building’s reserve fund before buying, you can better prepare for the potential costs of owning a condominium.
Contact RE/MAX Performance today to learn more about navigating the condo market or to find a property that meets your needs and budget.
