An HOA special assessment plays an important role in a homeowners association. However, board members should not often use it. Understanding the purpose of a special assessment and the laws surrounding it in Texas will help HOAs function better.
What is a HOA Special Assessment?
An HOA special assessment is an extra fee a homeowners association may charge under certain circumstances. The HOA board only collects it regularly.
A special assessment covers unexpected expenses, ranging from emergency repairs and property enhancements to budget shortfalls and insurance. Sometimes, an HOA will charge a special assessment to raise its reserve funds. The HOA governing documents may dictate a special assessment’s appropriate reason or purpose.
Special assessments should be rare. If the board plans the budget well, the need for an HOA special assessment shouldn’t arise. However, the board can sometimes make a mistake when preparing the annual budget, allocating insufficient funds for certain expenses.
What is the Difference Between an HOA Special Assessment and HOA Fees?
A special assessment is different from regular fees or dues in an HOA. As previously explained, an HOA special assessment is an extra fee. It is unusual and should only occur sometimes. On the other hand, HOA dues are regular fees that the association collects from homeowners. Homeowners usually pay this fee monthly, quarterly, or yearly.
Sometimes, an HOA will charge a special assessment as a one-time fee when it is in dire need of the added funding. However, an HOA may collect the special assessment in increments or installments if it is not an urgent expense.
Generally, all homeowners in an HOA must pay the special assessment. No one is exempt from the fee – not even the board members themselves.
What States Have Special Assessments?
Many homeowners associations in Texas charge special assessments, as authorized by their governing documents. However, special assessments are not exclusive to Texas HOAs.
Most states allow HOAs to charge special assessments under certain conditions. Laws may limit how much an HOA can collect in special assessments in a calendar year. Some laws also require a majority vote from the membership before special assessments can be charged over a particular amount.
Some examples of states that have HOA special assessments include California, Florida, and Washington.
How HOA Special Assessments Work in Texas
Certain laws in Texas affect how homeowners associations can handle special assessments, including requirements on open board meetings, ballots, and payment plans. Board members in the Lone Star State should understand these laws to avoid liability.
Open Board Meeting Requirement
An HOA board can discuss and vote on some things outside of an open board meeting. However, the decision to levy special assessments is different from one of them.
According to Section 209.0051 of the Texas Property Code, an HOA board must discuss or vote on charging special assessments in an open board meeting. An open board meeting is a meeting that all community members can attend. The board must provide prior notice to all owners of this meeting first.
The same requirements apply to an HOA in the development period. Even during this time, the board must discuss or vote on special assessments (or any increases of them) at an open board meeting.
Ballot Requirement
Any vote that an HOA member casts concerning special assessments must be in writing and signed by the member, according to Section 209.0058 of the Texas Property Code.
However, the HOA may choose to vote using secret ballots. With this method, members do not need to sign their vote. The HOA, though, must reasonably ensure that members can’t cast more votes than they are allowed to and that the HOA tallies every eligible vote.
Payment Plan Requirement
It is not uncommon for homeowners to fall into financial hardship. They may not have the extra funds to cover the special assessment charge, resulting in delinquency.
Section 209.0062 of the Texas Property Code addresses this, too. According to this law, HOAs with at least 15 lots must allow owners to enter a payment plan for delinquent special assessments without further monetary penalties. A payment plan lets owners make partial payments until they settle the whole amount.
The minimum term of the payment plan must be 3 months. Additionally, only some are eligible to enter such a plan. If a homeowner has been on a payment plan in the past 12 months, they are no longer eligible, and if they have previously defaulted on a similar plan, they are also no longer eligible.
How Much Can HOA Special Assessment Increase in Texas?
Sometimes, an HOA board will raise a special assessment to compensate for shortfalls or emergencies. Homeowners in Texas might wonder if there is no limit to the amount an HOA can increase.
What is the maximum special assessment for HOAs in Texas?
Unfortunately, Texas law does not cover this. No law in Texas stipulates a maximum amount or an increased limit for HOA special assessments.
That said, an HOA’s governing documents may contain special assessment restrictions. Both the HOA board and homeowners should check their CC&Rs and bylaws to understand the limitations on special assessments, if any.
How to Avoid HOA Special Assessments
Special assessments should not happen regularly. An HOA board can avoid levying special assessments through proper budget preparation and allocation. The board can also avoid such fees by preventing owners from defaulting on their regular dues.
On the other hand, homeowners generally can’t avoid paying special assessments. Otherwise, they can face several potential consequences.
What Happens if You Don’t Pay HOA Special Assessments?
Depending on the governing documents, an HOA may impose certain penalties when homeowners fail to pay their special assessments.
- Late Charges or Interest. An HOA might charge interest or a late fee when homeowners pay their special assessments late. These charges tend to accumulate the longer the assessment remains unpaid.
- Collections Agency. An HOA may refer the homeowner’s account to a collections agency or firm. However, there are certain requirements if the HOA decides to proceed with this.
- Liens. An HOA may file an assessment lien against an owner’s property. As with collections, certain requirements must also be met before an HOA can file a lien.
- Foreclosure. An HOA may choose to foreclose on a home to satisfy the unpaid assessment judicially.
Keep in Mind
An HOA special assessment is sometimes necessary to keep an association’s finances afloat. However, board members should not charge this fee regularly. They should strive to prepare and allocate the budget appropriately to avoid imposing an extra fee on homeowners. If the need does arise, though, board members should remember that there are certain requirements under Texas law and their governing documents.
Graham Management offers exceptional HOA management services, including assistance with special assessment collection, to Houston communities. Call us today at (713) 334-8000, request a proposal, or contact us online to learn more.