Special assessments are commonly used to pay for unexpected repairs and replacements occasioned by unforeseen, and often catastrophic events, such as a roof replacement after a wind/hailstorm where insurance proceeds are insufficient to cover the costs, or to pay for an elevator replacement when a condominium building’s only elevator unexpectedly fails.
Once you have decided that a special assessment is necessary and you have authority to levy one for the project pursuant to your association’s governing documents, you must then determine how to levy the assessment.
Generally speaking, there are two primary methods to levy a special assessment: 1) obtaining owner approval for the special assessment; or 2) utilizing the budget ratification process pursuant to the Colorado Common Interest Ownership Act (“CCIOA”).
In order to determine which process to follow, the first step is reviewing your association’s governing documents to determine whether they contain specific procedures for special assessments. This is typically found in the declaration, but sometimes this topic is addressed in the articles of incorporation or the bylaws, so make sure you check all three documents.
If there is a special assessment section or provision, review it carefully, as oftentimes such provisions stray from the norm and contain different quorum requirements and voting processes from what is required for a regular owner vote. If you are unsure as to what is required, check with the association’s legal counsel.
But be very careful that you do not fall into the trap of simply having the board approve special assessments (without owner approval or ratification) as this would be in violation of CCIOA—even if your governing documents specifically allow for this.
If your governing documents are silent as to special assessments, regardless of whether your community is pre or post-CCIOA, the statute requires you utilize the budget ratification process set forth in Section 303. The budget ratification process requires the board to adopt an amended budget to include two new line items identifying the total amount for the special assessment and the expenditure for which it will be utilized. Once adopted by the board, the proposed amended budget must be delivered to owners in writing within 90 days, and a meeting to ratify the budget must be set in a reasonable amount of time following delivery.
At the budget ratification meeting, unless a majority of all owners in the association veto the amended budget, the updated budget is ratified and the special assessment may then be levied. Additionally, budget ratification meetings do not require quorums to be present, which means the updated budget may be ratified even if nobody attends the meeting.
It is important to note that each association’s declaration provides how assessments are allocated to owners, which may be equally among all owners, based on ownership percentage, or by square footage. Thus, you must ensure the declaration is carefully reviewed to determine how to allocate the special assessment against each owner.
All of the above being said, involving the association’s legal counsel in this process is the safest option to ensure compliance with the association’s governing documents and Colorado law when moving forward with the process of levying a special assessment.
If you have any questions about imposition of special assessments, please contact an Altitude attorney at 303.432.9999 or at [email protected].