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Applicable to that year only

Started by EdR6 • 9 replies • 196 views

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EdR6 (Tennessee)
Posts: 16
Posted:
Our CC&R contains a fairly stock section, "In addition to the annual assessments authorized above, the Association may levy, in any assessment year, a special assessment applicable to that year only..."

I am not looking for legal advise, just opinions. Does the wording "applicable to that year only" prohibit a Board from allowing a special assessment to be paid in increments over the course of two years? And if so, would it be appropriate for those who choose to pay in increments to be charged interest?
CathyA3 (Ohio)
Posts: 6,299
Posted:
I don' t remember ever seeing such a wording. It does sound like the special assessment has to be collected (and spent?) within the year.

If this is the case, one thing it will do is force an association to look to a loan if they need additional money for a project that's big enough to cross calendar years. Surely that's an unintended consequence? Communities often look at special assessments to dig themselves out of a financial hole which is probably the result of years of under-funding their reserves. These tend to be big, expensive projects that are now urgent (for example, replacing roofs that are leaking).

A loan will be the most expensive option for an association that's already in financial distress. And loans often are paid off over a number of years, so the time constraint makes even less sense to me. But lawmakers often don't consider how the laws will play out over time.

It's also common to assess some kind of finance charge/interest if people can't pay their share immediately.

I look forward to others' comments.

EdR6 (Tennessee)
Posts: 16
Posted:
I think that phrase could mean different things. I wondered if it might have been used to differentiate the special assessment from the annual assessment, i.e., the special assessment will only be charged once and is not repetative, and was not meant as a restriction on ollection or spending.
KerryL1 (California)
Posts: 14,550
Posted:
charged Hmmm, interesting. It looks to me like it means the sp. assess. is FOR that year only. It cannot be assessed again next year.

It doesn't seem to me that anything prevents payments from being spread beyond that year. Payments plans are approved by the Board, and, with Cathy, it's common for there to be extra charges of some kind or another
DeanJ
Posts: 1,786
Posted:
Quote:
Posted By EdR6 on 01/22/2024 11:58 AM
Our CC&R contains a fairly stock section, "In addition to the annual assessments authorized above, the Association may levy, in any assessment year, a special assessment applicable to that year only..."

I am not looking for legal advise, just opinions. Does the wording "applicable to that year only" prohibit a Board from allowing a special assessment to be paid in increments over the course of two years? And if so, would it be appropriate for those who choose to pay in increments to be charged interest?

Special assessments are basically an emergency measure. Assessments are made against the owner of record on the date of the assessment. No matter what you decide, the full assessment must be placed on the owners account as due and not an installment value each month.

I believe your declaration language prohibits passing a multi year assessment and the proposed payment plan is a de facto multi year assessment because the principle of the payment plan is applicable to 2 different years. Or in other words, the installment payable assessment is $500 in 2024 and $600 in 2025. Your declaration is prohibiting these stupid board games.

The proper procedure would be to pass a special assessment for 2024 with a payment plan and preferably increase the regular assessment in 2025 to cover the short fall or pass another special assessment in 2025 with a specific due date.

Your declaration says “any assessment year”. You could pass the special assessment for 2025 and offer a voluntary prepayment plan interest free until the due date in 2025. Of course few will pay early, but you can offer it to make the board feel good.

DeanJ
Posts: 1,786
Posted:
Quote:
Posted By EdR6 on 01/22/2024 12:42 PM
I think that phrase could mean different things. I wondered if it might have been used to differentiate the special assessment from the annual assessment, i.e., the special assessment will only be charged once and is not repetative, and was not meant as a restriction on ollection or spending.

I don’t believe that section requires the money to be spent in the same year. It simply means the board can’t pass a continuing special assessment resolution that covers multi years.
TimB4 (Tennessee)
Posts: 21,059
Posted:
I don't think so.
The special assessment should be for something that is being done that year (paving of streets, replace xyz, pay legal fees, etc.)

They shouldn't pass a special assessment for an item that includes a special assessment in 2024 and in 2025.

However, there is no reason why they can't have a payment plan, providing they have funds available to borrow (from reserves perhaps) until the assessment is paid in full.

Typically, I've seen special assessments with 3, 6 or 12 month payments.
Example: The board has adopted a special assessment in the amount of $1,200 that can be paid over 6 months but must be paid in full by mm/dd/yyyy
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By TimB4 on 01/22/2024 7:59 PM
The special assessment should be for something that is being done that year (paving of streets, replace xyz, pay legal fees, etc.)
I think imposing a special assessment for the sole purpose of improving the 'percent funded' value of the reserve fund is perfectly lawful. Especially today when it appears many insurers and lenders alike are checking the health of reserve funding.
JoeN6 (Virginia)
Posts: 94
Posted:
My interpretation is that the association may do both . Authorize a special assessment for one year only , or specify multiple years.

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