Between property taxes, homeowners insurance, HOA fees, maintenance costs, and more, the miscellaneous costs that come along with homeownership can really add up! Among these fees is one known as a special assessment. So, what is a special assessment? Great question! Let’s explore the two types in the real estate industry.  

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What is a Special Assessment? 

There are two types of special assessments in real estate: special assessment tax and an HOA special assessment.  

Special Assessment Tax 

A special assessment tax in real estate is an additional property tax that is evaluated by the government to pay for the owner’s property and neighborhood projects. It’s a surtax applied to property owners to pay for certain local infrastructure maintenance or upgrades such as road improvements or sewer lines. It is unrelated to HOAs.  

The tax is charged to only the owners of the property within the neighborhood, known as the special assessment district, that will benefit from the project. The property owners in that area are the ones who will have to pay. Special assessments can be charged for a pre-set number of years and are not tax-deductible. It is also based on the assessed value of the home.  

Special assessment tax is different from property tax, not all property owners have to go through special assessments, only the ones that would benefit from the infrastructure projects. Regular property taxes may not be sufficient enough to fund a particular municipality, so a special assessment district is set up for property owners to compensate the city or municipality for all expenses related to repairs or improvements of the property. Each homeowner pays a portion of the overall expense based on the assessed value of their property. 

Special assessment taxes can be implemented for the following: 

  • street, roads, and sidewalks 
  • water and sewer lines 
  • infrastructure projects 
  • streetlights 
  • construction projects 
  • recreational projects 

HOA Special Assessment  

While uncommon, HOA special assessments are fees that may be charged by the HOA (homeowners association) board under certain conditions. Usually, these costs are applied by the board only in emergency cases, such as unexpected large-scale damage. The HOA charges homeowners to cover the costs that exceed the amount of the current budget.  

HOA special assessments can be charged in most neighborhoods under the HOA restrictive covenants, an agreement you make with HOA that limits the way you can use a property. This includes homeowners living in HOA-governed communities, cul-de-sacs, condominium owners, and more. 

Example: A couple owns an apartment in a condominium, where there are at least 200 other similar units. There have been a lot of break-ins due to the rising crime rate. So, at the annual homeowners association meeting, they made the decision to build a fence around the condominium. The cost of the fencing will be $30,000, and because there are 200 similar units, the association charges each unit $150 to pay for the fence.  

Millennial Title: Your Real Estate Industry Expert 

Whether you’re purchasing, selling, or investing in real estate property, the team at Millennial Title is here to assist you with navigating the real estate industry. If you have questions regarding special assessments or other real estate terms, please contact our team today!  

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