Specific Legal Issues
Legal Impacts of Special Assessments
From the CCI Huronia Summer 2022 Condo Buzz Newsletter
Special assessments, to be honest, can be scary. Why? Because it is a demand for cash that is not expected because it is over and above the budget requirements for cash. Further, the size is not typically limited under the bylaws or Condominium Act, 1998. Accordingly, to avoid the fear associated with the delivery of a “special assessment”, Boards need to be proactive. First, budgeting realistically and accurately will assist with eliminating or reducing the need to specially assess. Second, communication strategies need to be worked through by the board of directors and property management to assist owners to understand why and how the special assessment is being levied. [We had a client work through a special assessment of 17 Million Dollars due to a deficit in the reserve fund! As you can imagine, this did not land well but thanks to a team of professionals led by a proactive communicative board, litigation and conflict has been avoided.]
It is also important that the Board think about cash flow issues. With and without the pandemic, we have seen that special assessments sometimes have to be broken into installments or delayed because of cash flow issues caused by events like the pandemic. The authority for a special assessment comes from the operating bylaws of the corporation. Often, the corporation has a right to do so in accordance with the bylaws and the Act to render a special assessment. Challenging a special assessment can be of limited value. Is it better to fight the special assessment or focus positively on what the special assessment is for; that the board ensured that the special assessment is required by doing due diligence; that the board contemplate how best to implement this special assessment (overtime); and that the board communicated with owners in a timely way so that owners could make arrangements to ensure that they have the cash when it is necessary? Failure to pay a special assessment, of course, can result in a lien and ultimately power sale. These are fear-filling events but they can be avoided with planning.
Ella Associates CCI
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