What Is a Condo Special Assessment?

Over the last year, many cases of condominium special assessments have occurred. From Calgary to Toronto, real estate markets across the country are seeing a rise in tenants facing a special assessment on a condo suite. This is forcing many owners to endure thousands of dollars in extra costs or sell their suites for below-market prices to cover these special assessments.

So, what are special assessments on a condo, anyway? Let’s examine this expense a bit more closely.

What Is a Special Assessment on a Condo?

A special assessment is a one-time charge added to condo owners’ common monthly fees. These special assessments serve two purposes. The first is to cover shortfalls in annual budgets without tapping into reserves. The second is to pay for unforeseen events, such as a damaged roof, expensive litigation, or severe floods, when the rainy-day fund is low on cash.

Condo boards can slap a special assessment on tenants without receiving their permission.

Some first-time homebuyers might have never heard of this before, and as a result, they would likely have some questions:

How Much Will a Condo Assessment Cost?

Many condo owners have one question: how much do they have to pay? The condo corporation will inform owners how much they must pay. Typically, the owner’s portion will be calculated by using the same percentage used to calculate common expense fees.

What Happens If I Can’t Afford the Special Assessment or Choose Not to Pay?

Should you not pay, the condo board will place a lien against your unit, which will help cover the unpaid amounts. The proceeds will be transferred to repair costs, legal expenses, and the interest.

How Do I Avoid a Special Assessment?

It can be hard to avoid a special assessment. Ultimately, the best strategy is to encourage financial management by the condo corporation. This can be hard to do, but one idea is to join the board and ensure it has the resources to cover emergencies. Additionally, be sure to check the building’s status certificate to find out its reserves and if there are any pending lawsuits.

Are Condo Special Assessments Tax Deductible?

Are condo special assessments tax deductible? This is a bit tricky. For now, the answer is that if your condominium is your primary residence and you are compelled to pay monthly condo fees, you cannot deduct these fees from your taxes. However, if this condo is a rental property, you might be able to deduct a special assessment or the condo fees from your tax returns. As with any tax-related challenge, it is always recommended to get in touch with the Canada Revenue Agency.

How Common Are Special Assessments?

With more buildings growing older, potential repair deferrals or a lack of maintenance could result in devastating consequences for the condo and its owners. As many boards maintain little reserves – this is becoming increasingly common for new ones – many cities and small towns are seeing condominiums facing special assessments.

Growth of the Condo Special Assessment

In June 2024, five condo buildings in a condominium complex outside of Ottawa were constructed in the 1980s on a sloping sedimentary foundation, according to CBC News. Four decades later, the buildings have leaky roofs, and the area is enduring crumbling walkways.

In December 2023, a north Edmonton building sought as much as $12,000 for a special assessment from 44 units. The Castledowns Pointe condominium building suffered fire damage in March, and engineers have also uncovered problems with the foundation, columns, walls, and students.

In June 2023, a condo complex in Calgary faced a total special assessment cost of $500,000.

These cases are popping up from coast to coast. In 2022, the Canadian Institute of Actuaries published a report warning that aging condos will need to make expensive repairs in the future.

Industry experts say it is vital for condo buyers not to assume that the only monthly cost they will have is the condo fees. When sizeable damage happens, and there is not enough in the reserve fund to cover these mishaps, special assessments will be a reality of condo ownership.

Experts warn that trouble could be brewing in the Canadian condo market in the next few decades. New condos on the market or newer projects in the middle of construction offer low monthly maintenance fees as a sales inducement. Therefore, when major upgrades, repairs, or replacements are needed, enough money might not be collected to cover these costs.

While a crowd of condo owners might petition the board to keep monthly costs down, they might have to pay it in the future when repairs are deferred for too long and conditions deteriorate quickly.

In the end, it is important to research the condo market, work with a trusted and experienced real estate agent, and determine how much is in the condo corporation’s reserve fund. With enough due diligence, you might save yourself thousands of dollars down the road.