Money is a topic people are often skittish about discussing—especially when the discussion involves rising fees, or having to pay more money for something. When you’re a board member or the property manager of a condo building or residential association however, there’s no benefit to skirting financial realities just because they may be difficult or contentious. On the contrary, not talking openly and candidly about a community’s financial picture, or the need for a special assessment or fee increase can have serious consequences for the entire community.
A Necessary Evil
Nobody likes fee increases or even one-time assessments—but both are periodically necessary in order to keep a community or building financially solvent. Ignoring or indefinitely postponing maintenance items or larger capital projects can lead to bigger expenses down the road, says David Sugar, a partner with Arnstein & Lehr, a Chicago-based law firm specializing in condominium and homeowner association law.
There are important distinctions between fee increases and assessments, however, Sugar continues. “Fundamentally, non-recurring expenses that aren’t in the budget should be done via special assessment,” he says, explaining that this is actually spelled out through a state statute, which says that any common expense not set forth in the budget should be funded through a special assessment.
That could include emergency situations like major storm damage, a sudden HVAC system breakdown, or a code violation of some sort that must be addressed ASAP. In such cases, the board has the power to impose an assessment unilaterally, without soliciting input from residents. According to Sugar, any assessment deemed necessary by the board and estimated to cost less than 15 percent of the association's annual budget can be enacted without unit owner approval and without the ability of the unit owners to veto the assessment after the fact.
However, Sugar says that according to Illinois state law, the key word is 'necessary.' A board does need unit owner approval if they want to do a special assessment for something non-essential—i.e., to build a new tennis court or to spruce up the building lobby.