When a Chicago condominium association needs more money than its current budget provides, boards typically have two options: increase regular assessments or levy a special assessment.
Neither option is automatically right for every association. The best approach depends on why the association needs additional funds, how much is needed and whether the expense is ongoing or unexpected.
What Is a Regular Assessment Increase?
Regular assessments are the monthly or quarterly fees owners pay to cover the association's operating expenses and reserves. Increasing regular assessments can help an association keep up with:
- Rising insurance and maintenance costs
- Increased utility expenses
- Higher reserve contributions
- Vendor price increases
- Anticipated capital projects
Because the increase becomes part of the regular budget, owners can generally plan for the additional expense over time.
What Is a Special Assessment?
A special assessment is an additional charge to unit owners outside of their regular assessments.
Special assessments are often used for significant or unexpected expenses that cannot be covered by the existing budget or reserves. This could include a major roof repair, masonry work, mechanical replacement or another large capital project.
Before imposing a special assessment, boards should review their governing documents and consult appropriate legal and financial professionals to understand the association's requirements.
When Does Each Option Make Sense?
A regular assessment increase may make sense when the association's costs have permanently increased or when the board needs to improve long-term reserve funding. For example, if insurance and maintenance costs continue to rise, keeping assessments at the same level could leave the association underfunded year after year.
A special assessment may make more sense when the association faces a large, one-time expense that wasn't anticipated or adequately funded.
The key question is: Is this a one-time expense or an ongoing financial need?
If the association is consistently spending more than it collects, a special assessment may only provide a temporary solution. Increasing regular assessments could address the underlying budget problem.
There are situations where a combination of approaches makes sense.
An association might use reserves and a special assessment to pay for a major project while also increasing regular assessments to strengthen reserves and prepare for future expenses.
The goal isn't necessarily to avoid every special assessment. Unexpected expenses happen, even in well-managed buildings.
Instead, boards should focus on building a financial plan that allows the association to meet today's obligations while preparing for tomorrow's costs.
Choosing between higher assessments and a special assessment is an important financial decision for your condo association. Haus Financial Services helps Chicago condominium boards build practical budgets, strengthen reserve planning and make informed financial decisions for the future. Learn more about Haus Financial Services today!