Condo Special Assessment Payment Plan: What to Do If You Can't Pay

A special assessment notice arrives, and the number is more than you have. You are not the only owner in that spot, and you have more room than it feels like on the first day, as long as you act before the money is due.

This page is for owners facing an assessment that has already been approved. If you are buying or want to judge the risk of one coming, see our guide to special assessments.

First Steps When You Can’t Pay a Special Assessment

1. Read the notice closely. Note the total, your share, how your share was worked out, the due date or dates, and whether installments are already offered. Many assessments are split into payments over months or years.
2. Check the assessment was approved properly. Your declaration and state law may limit how much the board can levy without an owner vote. In California, without member approval, the board cannot levy special assessments that together exceed 5 percent of budgeted gross expenses in a year (Civil Code 5605; see California condo law). An emergency can be an exception, so ask what authority the board used.
3. Ask for the facts behind it. The project, the bids, why reserves do not cover it, and whether insurance or a loan was considered. You have a stake in the answers, and they may affect how the payments are spread.
4. Ask for a payment plan in writing, early. Before the due date is far better than after a late notice.
5. Keep paying what you can. A partial payment on time shows good faith, though how it is applied depends on the association’s policy and state law.

How to Ask for a Payment Plan

Boards are more likely to say yes to a plan that is specific and realistic. Your request should say:

• What you can pay now, if anything, and what you can pay each month.
• For how long, with an end date.
• That you will keep regular dues current while the plan runs.
• What you are asking them to waive, such as late fees while you keep to the plan.

A short sample:

Subject: Payment plan request for the [project] special assessment, [unit]

Dear Board,

I received the special assessment notice dated [date]. My share is [amount], due [date]. I am not able to pay the full amount by then.

I would like to request a payment plan of [amount] per month for [number] months, starting [date], while I keep my regular dues current. [I can also pay [amount] now.] I ask that no late fees or interest be charged while I keep to the plan.

Please let me know if the board has a payment plan policy, and whether I can meet with the board or a committee to discuss it.

[Name], [Unit], [phone or email]

What Happens If You Fall Behind

An unpaid special assessment is usually treated like unpaid dues. The exact steps come from your declaration and state law, but they often run in this order: a late notice, late fees and interest, collection costs and attorney fees, a lien on the unit, and in some states foreclosure on that lien.

State rules set limits on each step. Two examples, from the statutes themselves:

• California: at least 30 days before recording a lien, the association must send a notice by certified mail that itemizes the debt and tells you about your right to meet the board, to dispute resolution and to inspect records (Civil Code 5660). If you ask in writing within 15 days of that notice, the board must meet you in executive session within 45 days to discuss a payment plan (Civil Code 5665). A plan does not stop the association from recording a lien, but additional late fees cannot accrue while you comply with it, and if you default, collection resumes. The association cannot foreclose on the lien until the delinquent assessments, not counting fees, interest and costs, reach $1,800 or are more than 12 months overdue (Civil Code 5720(b)(2)).
• Florida: late assessments carry interest at the rate in the declaration, or 18 percent a year if it sets none, and, if the declaration or bylaws allow it, a late fee of up to the greater of $25 or 5 percent of each late installment. Payments are applied to interest, late fees and collection costs before the assessment itself. The association must give at least 45 days’ written notice before filing a foreclosure (s. 718.116). Before it can charge you attorney fees, it must send a notice of late assessment giving you 30 days to pay (s. 718.121). Florida’s statutes do not require associations to offer payment plans, so ask early.

Other states have their own notice periods and lien rules. Check your state’s condo law page, and talk to a real estate or community association attorney as soon as you get a lien or foreclosure notice.

Other Options to Consider

• An association loan. Some associations borrow to fund a big project and repay the loan through higher dues over years, which spreads the cost. In Florida, owners can approve a line of credit or loan for repairs a milestone inspection requires (Florida condo law). Raise this at the meeting if the vote has not happened yet.
• Your HO-6 loss assessment coverage. If the assessment pays for damage from an insured loss, such as a master policy deductible after a storm or a leak, your HO-6 loss assessment coverage may pay part of your share. It usually does not cover assessments for upkeep, upgrades or underfunded reserves. Ask your agent. See HO-6 insurance: what it covers.
• Your own financing. A personal loan or a loan against your home’s equity can pay the assessment in one go. Compare its cost with the association’s installment terms and late fees before you borrow.
• Hardship help. Some boards have a hardship policy for owners facing job loss, illness or a fixed income. Ask whether one exists.
• Selling. If you sell, who pays an approved assessment is usually settled in the purchase contract. Assessments must often be disclosed to buyers, so tell your agent early.

Is a Special Assessment Tax Deductible?

Generally not on a home you live in. The IRS says homeowners association fees, condominium association fees and common charges are not deductible, and that assessments are not deductible as taxes because the association, not a state or local government, imposes them (IRS Publication 530). Rules differ for a unit you rent out (see IRS Publication 527). Check with a tax professional about your situation.

Frequently Asked Questions

Can I get a payment plan for a condo special assessment?

Often, yes. Many associations offer installments in the assessment itself, and boards can usually agree to a plan for an owner who asks. Some states give owners specific rights; in California, an owner who asks in writing within 15 days of a pre-lien notice must be offered a meeting with the board about a payment plan. Ask early and in writing.

What happens if I don't pay a condo special assessment?

It is usually treated like unpaid dues: late notices, late fees, interest, collection costs, then a lien on the unit, and in some states foreclosure. State law sets notice periods and limits for each step, so read your declaration and your state's statute and act before the due date.

Can the HOA foreclose over a special assessment?

In many states, yes, after notice and other steps. California does not allow foreclosure until the delinquent assessments reach $1,800 or are more than 12 months overdue, and Florida requires 45 days' written notice before filing. Talk to an attorney as soon as you receive a lien or foreclosure notice.

Does HO-6 insurance pay for a special assessment?

Only some. Loss assessment coverage on an HO-6 may pay your share of an assessment caused by an insured loss, such as a master policy deductible after a storm, up to its limit. It usually does not pay for assessments for maintenance, upgrades or reserve shortfalls.

Is a condo special assessment tax deductible?

Generally not on a home you live in. IRS Publication 530 says condominium association fees and assessments imposed by an association are not deductible as taxes. Rules for rental units differ. Check with a tax professional.

Plan for What Comes Next

One assessment is often followed by another. The CondoWorkbook has a special assessment risk worksheet to judge whether more are coming, reserve study notes and a financial health scorecard to read the association’s numbers, and ready-written questions for your board about planned projects and past assessments.

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Important Disclaimer: This article is general information for educational purposes, not legal, tax or financial advice. Assessment rules, payment plan rights, late fees, liens and foreclosure procedures vary by state and by governing document, and statutes change. Always read your declaration and your state’s statute, and talk to a community association attorney about a lien or foreclosure notice and a tax professional about tax questions.

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