Owners planning to sell can’t sidestep special assessment

Q. My association has sent a letter assessing a $3,000 payment for siding that they are going to replace in four to five years. Homeowners can pay the assessment in full, pay in quarterly payments or monthly payments. I selected the monthly payments of $50 per month. When my neighbor sold his condominium, he had to pay the $3,000 or he couldn't sell. I can't see why we should have to pay for something that they are going to do four to five years from now if we are planning not to continue living at this community. You will note that on my resale certificate the association is not anticipating a special assessment.

A. First, some general comments. For an association to establish a special assessment, the board would have had to discuss this assessment at a duly noticed board meeting where homeowners could first comment. If the motion to enact a special assessment passed at a board meeting, the association would then be legally obligated to call for a meeting of the owners to approve the special assessment, per NRS 116.31151 subsection 3, if the special assessment is part of its operating or reserve budgets. If the assessment is not part of an operating or reserve budget, then the association would be obligated to follow procedures for special assessments from its covenants.

Generally speaking, special assessments that are not part of the budgets would require the approval of at least a majority of homeowners if not more, per your covenants. In the reader's case, at the 2006 annual meeting with more than 60 percent of the owners represented, there was significant support for funding new siding. At that meeting, there was an actual vote to pay an additional $600 per home per year for at least the next five years. A quorum was present at the meeting. The reader would have to review his covenants to determine what vote of approval is needed for the association to legally assess this special expenditure. According to a letter sent to the reader from the association, the Homeowners Association's current reserve schedule does not include funds for the replacement of siding. The board should contact the company that prepared the current reserve study as it would appear that it is flawed since it omitted this capital item in the study. The study should be revised to include the siding.

Many associations will allow homeowners to pay a special assessment over some period of time. In the reader's case, the board has given owners three options. In a sale mode, the special assessment is an obligation of the homeowner of record at the time the assessment was passed. In the resale certificate, the association should note that there is a special assessment and it should indicate the current balance of that assessment against the unit and the seller. It should then be noted in the sales documents that the balance of the special assessment, if any, would become the obligation of the new owner, since the selling owner had selected the monthly payment option.

In the reader's case, the resale certificate fails to note the special assessment taking place and fails to note the balance owed on the special assessment or the monthly special assessment payment. Technically, based upon the association's resale certificate, the selling owner would not be obligated to pay off the special assessment as part of the sales transaction if the buying owner failed to do so. It should also be noted that according to NRS 116.4109 subsection 5, the buyer would not be obligated to pay this special assessment since the association failed to set forth the amount of money owed for the assessment in the resale certificate.

As to whether the special assessment has to be paid in advance as a result of a sale of the home, this would depend upon both the motion that was originally passed and the financial information stated in the resale certificate. In some cases, particularly during a weak sales market, the seller may agree to absorb part or all of the special assessment in order to close escrow.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. She is a past president of the Greater Las Vegas Association of Realtors. Questions may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759.