Defining Special Assessments in Florida HOAs
While the theme of the property’s maintenance is central to the vitality of any Florida common interest community, the obligation to make uniform and equitable assessments to maintain the property is equally important, since these assessments represent the primary source of funding for the operation of the community and the upkeep of its common elements. Occasionally, even well maintained communities need to levy extra assessments that go beyond the normal budgeted amounts to address critical unforeseen needs.
Special Assessments are unique in that they are generally used only in the most extreme circumstances. They typically are used to meet unanticipated capital expenditures , including significant repair and replacement requirements and considerable association-related legal expenses. Special Assessments should be levied as a tool of last resort when all other possible means of collecting the necessary funds have been exhausted. Their practical use is generally limited to one or two times a year, as the need for levying Special Assessments typically is of an immediate nature rather than a continued trend.
Some recent cases deal with the issue of Special Assessments in a variety of contexts.
Legal Basis for Assessments under Florida Law
It should come as no surprise that most all HOAs in Florida are governed by a Declaration of Covenants (the "Declaration" or "Covenant Document"). Covenants are legally binding contracts that, among other things, address the type and amount of assessments to be paid by each owner and when those assessments must be paid. Oftentimes the Declaration will require the board to adopt a budget annually with respect to stated items (common expenses) and that budget will subsequently help to set the annual assessment for each owner.
In addition to annual assessments, the Declaration will often provide for special assessments to fund major improvement projects that couple with unexpected expenses. Special assessments are assessed against all owners and are generally pro rata except for cases where the developer is solely responsible, or the special assessment results from activities that proportionately affect only certain owners in a discernable manner. The Declaration will sometimes require the membership to approve the special assessment, or it can grant the board the discretionary power to adopt such special assessment. In the latter case, it is wise to include some form of notice to owners of the special assessment and an opportunity for the members to object to such. The ultimate method by which special assessments are adopted is free to be decided by the parties prior to creating a development. Examples include: (1) a super majority or simple majority of the owners who actually cast a ballot, (2) the vote represents a majority of the lots or parcels in the subdivision or (3) the vote represents a majority of the members in the community.
Ultimately, it is the board’s duty to administer special assessments in a manner that is consistent with the Declaration and the laws of Florida.
Implementing Procedures for Special Assessments
Procedural Steps for Implementing Special Assessments
To impose a special assessment, the Association’s Board must first conduct a meeting(s) and vote to approve the special assessment. The HOA may have several requirements in its governing documents for consideration by the Board as to special assessments. For example, the governing documents may require approval by a majority of board members present at the meeting, or other rules governing the vote. The Board should take its time and ensure that the special assessment is properly calculated, documented (noting exactly what the funds will be used for), including noting how many votes in favor of the special assessment, and include the number of votes in favor of those present at the meeting.
Florida timeframes are very strict, and if the special assessment meets certain requirements (such as being a Construction Lien Law assessment), then the Board must send out a notice to the membership of the special assessment within 5 business days after the meeting, which sets out details of the special assessment as required by the construction lien laws. HOAs may wish to go above and beyond what is outlined in the Construction Lien Law and send out a notice to the membership including a copy of the Board resolution, the purpose of the special assessment in detail, how long the special assessment will be paid for, the due dates, and any other information the Board would like to communicate to the membership.
Rights and Obligations of Homeowners
Homeowners have several rights in regard to special assessments. First, the association cannot levy a special assessment without proper notice and at a legally permissible time and place. While Florida law does not require it, many governing documents state that the association must attempt to provide notice to owners by personal service or certified mail. Many governing documents also provide that special assessments may be implemented at regular board meetings, with or without notice, to the membership depending on the frequency of the board meetings set forth in the governing documents. Even if it is not required, it is good practice to give owners advance notice of the particular meeting at which it is anticipated a special assessment will be discussed.
An owner who receives notice of a special assessment levied by a board of directors has the right to contest the special assessment, to the extent the owner believes the special assessment was not properly approved by the board or the special assessment is not for a common expense purpose. Importantly, an owner may not withhold payment of a special assessment pending a legal challenge to the levy of the special assessment. If the owner fails to pay the special assessment, the association may foreclose on the owner’s homestead property in the same manner as it may a regular condominium or HOA monthly assessment, and/or the association may file suit for the amount of the unpaid special assessment, including attorney fees.
Notification of Assessments to Owners
Effectively communicating the purpose of the special assessment to the homeowners will go a long way toward avoiding other possible issues with special assessments outside and in addition to the four corners of the documents. Transparency and frequent communication with the homeowners can go a long way in maintaining trust and reducing other problems that may arise. For instance , many homeowners fear that the special assessment is merely a prelude to a general increase in the rates which they will be able to foresee an assessment coming should it ever be necessary. A special assessment funded by the community has a different feel than doling out $75,000 of personal cash or credit. This is understandable, but the developers’ document reviewers may not have caught this nuance and omitted a few important steps in the due process.
Dispute Resolution over Special Assessments
Dispute Resolution for Special Assessments under Florida’s Homeowners’ Association Act
After a vote on the new special assessment, it’s not unusual to have at least a few members of the association who are unhappy with that assessment. Hopefully, through diligent efforts by the board and property manager, or owners volunteering to serve on committees, most of the owners will understand the need for the assessment prior to the vote or are satisfied after the assessment is voted in. However, it is possible for the board and/or committee to not cover all of the requirements of Florida’s Homeowners’ Association Act, which may result in an irregularity in the voting and an opportunity for a member to challenge the special assessment.
Pursuant to Florida Statutes ยง720.303(5), members of the association are permitted to …"institute a civil action for declaratory judgment to obtain a declaration of rights, and other equitable relief, for any alleged violation of this act by their association." (Emphasis added) And this section also states that "Any challenge to the validity of an action taken by an association must be commenced within 60 days after the action is challenged by the board of directors…" There is a phenomenal amount of Florida law interpreting this statutory provision. The bottom line is that if the board unknowingly fails to conform to one of the procedural requirements of Florida’s Homeowners’ Association Act, a member may bring an action within 60 days after the special assessment is effective, and ask the court to declare that the special assessment is invalid.
Special Assessments and Their Effect on Property Value
Special assessments can have a significant impact on property values in an HOA. In the short term, they can lead to decreased demand for homes, as prospective buyers may be deterred by the prospect of a large one-time payment or multiple small payments over time. They may also cause current owners to become disgruntled, leading to negative word-of-mouth and reduced interest from potential buyers. In turn, this can result in longer time on the market for homeowners looking to sell their properties, which can further contribute to price depreciation. In the long term , the effects of special assessments can be more profound. If the assessment is collected and used properly, it can lead to improvements in the community that increase property values over time. For example, if a special assessment is used to repair communal storms and lighting systems, it will reduce the potential liabilities for homeowners and make the HOA more appealing to potential buyers. However, if the assessment is used for discretionary or deferred maintenance, or if it is not used at all, it can have the opposite effect.