Increasing Assessments Mid-Year

When preparing a community association budget at the start of each fiscal year, boards and their managers could use a good Crystal Ball; but too often they may feel like they are using a Magic 8 Ball instead: “cannot predict now” or “ask again later.” Yet a budget must still be prepared based on available information and realistic assumptions. When the board determines mid-year that the annual assessment is insufficient for the association’s needs, it must understand the available options for increasing assessments.

Special Assessment

A special assessment is an additional assessment on top of the annual assessment and can be a one-time lump sum or paid in multiple installments. The board may have the authority to impose a special assessment but sometimes the approval of unit owners is required. A common misunderstanding is that if unit owners reject a special assessment, the assessments cannot be increased. That is not true. The board must fund necessary common expenses and the needed funds will be obtained from unit owners in another way.

Amending the Budget

Governing documents routinely authorize boards to amend the budget mid-year if the annual assessment is insufficient. An amended budget can provide needed assessments in the same way as a special assessment, except the funds must be collected over the course of the remaining fiscal year.

Emergency Assessment

With sufficient authority the board can impose an emergency assessment for an immediate or emergent need. Any board imposing an emergency assessment must be prepared to provide facts—and sometimes expert opinion—supporting the need for the funds and what constitutes the immediate or emergent need.

Structural Integrity Assessment

Regardless of any approval requirements in the governing documents, the structural integrity law (S2760/A4384) authorizes a board to impose an assessment to pay for the cost of corrective maintenance of the primary load bearing system of a covered building. Prior to imposing a structural integrity assessment, the board must obtain a written report from a New Jersey licensed engineer or architect stating that the failure to undertake the corrective maintenance will:

• constitute an imminent or reasonably foreseeable hazard to health or safety;
• constitute a violation of the structural integrity law; or
• will result in a material increase in the cost of such corrective maintenance if delayed.

The assessment can be imposed over one or more fiscal years.

Boards have a duty to impose assessments which are sufficient to meet common expenses, and sometimes changes must be made mid-fiscal year. When that occurs, the board must know their options and properly implement changes. If your board is considering a mid-year assessment change, those options and procedures should be reviewed with the association’s legal counsel.