Boston, Massachusetts may seem worlds away from New York City, but the story of one embattled condo building there represents a dire cautionary tale for boards and managers everywhere.
A couple of years ago, the residents of Boston’s Harbor Towers Condominium were hit with a $75.6 million special assessment—believed to be the highest ever in Boston—to cover the costs of repairing and replacing the heating and cooling systems of their two waterfront mid-rises. The one-time assessment, ranging from $70,000 to $400,000 per unit owner, led to a bitter political struggle and panic on the part of some residents who would likely have to sell their units to pay the huge bill, due in November of 2007. According to a letter issued by the Harbor Towers board, 95 percent of the assessment has been collected—but the close-knit building community was torn apart over the issue, and the possibility of a similarly massive assessment being charged in an New York City co-op or condo is not purely theoretical. What if it were to happen in your building, and could it be prevented? The answer is a definite…maybe.
A number of circumstances can lead a board to level a special assessment on the residents of a building. The financial need could be due to a large emergency repair, such as a leaking roof that must have extensive renovations immediately, or some other unexpected outlay. Whatever the reason, special assessments are never popular with residents, and because of that, board members usually hate recommending the fees.
This means that such assessments often come after all other options have been considered and rejected. Sometimes a special assessment is unavoidable, but it is important to know the difference between when an assessment is unavoidable, and when it would be foolish to charge residents with an assessment simply to raise some money.
Time To Pay
If a board is considering a special assessment, the situation should be fairly dire. A board often will consider a special assessment to fund capital improvements, if the capital reserve fund is too low, or even for increases in operating costs, which is a move that some experts advise against. The need for the assessment must truly be pressing for the assessment to be completely necessary, and the necessity of the fee is what will make it more acceptable to the residents who will have to pay it.