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I lived in a condo for almost eight years.  As a single guy, having my ‘bachelor pad' was great and I loved it.  I got my feet wet in home ownership, actually built some equity with a rising housing market, and had a sense of pride that I never had while previously renting.

When looking around, I did a lot of research and knew pretty much exactly what I was getting myself into before I finalized the purchase.  I knew what my mortgage entailed, I understood the rules, I even understood the monthly association fees.

One of the things that I knew about but never really thought too much about, though, was what I now call the ‘wild card' risk.  That is the special assessment.

Well, I did learn about it, and chances are if you live in a condo for any length of time, you will too!

With condos, you're typically not responsible for many of the things that a regular homeowner would be for the ‘common' areas, typically the exterior of the buildings and the grounds that the condos sit on.  The upkeep of those items is handled by the association dues.  What should happen is that a portion of your association dues is set aside and banked to handle the routine maintenance and upkeep items.

In an ideal world, the amount collected and set aside would always be enough to cover anything that came up.  But, we don't live in an ideal world.  In my case, it was determined that all of the buildings needed new roofs.  Part of the dues had been diligently funded toward replacement roofs, so this wouldn't have been a problem, except that the roofs needed to be replaced sooner than had been anticipated.

Essentially, the math worked out that if the roofs lasted fifteen years, there would have been enough collected and set aside to pay for them, but when they wore out after twelve years, as you can imagine, not enough money had been collected.

Waiting three more years wasn't an option, so the board had to move forward with the roof replacement.  In order to fund the difference, a special assessment was levied on all units.  I think it worked out to a total of $900, which is pretty steep for many.  In our case, the board was able to split the payments over two years, so it was a little less painful.

Still, if you're planning on buying a condo, make sure you understand that this is a risk.

It's probably possible to understand that risk, though you never really know for sure.  Some things I'd advise to think about are:

  • Look at the age of the units – There is nothing wrong with buying an older condo, but realize that as buildings get older, they require more and more upkeep.
  • Understand what is considered common: Roofs, windows, doors.  Make sure you understand exactly what is covered and what isn't.
  • Look at the current condition of the units – Keep an eye out for potential big ticket cost items, and examine their condition.
  • If possible, try to get some history: A nosy neighbor seeing who might be looking at a place could be engaged in a conversation and could probably let you know if there's a history of assessments.

I wouldn't let special assessments, or the possibility thereof, scare you off from buying a condo, as it can be a great experience.  But, make sure you understand the risk and implications and plan accordingly.