Condo Special Assessments: Why Owners Are Forced to Sell

Why condo special assessments are forcing some owners out

A special assessment is a one-time charge an owners' association levies on top of regular monthly dues when it needs more cash than its budget and reserves provide. For some condo owners, that bill now runs well into five figures. The question for buyers and current owners is simple: how do these charges push people to sell, and what can you check before you sign a purchase contract?

The short answer, based on a recent video from the channel Michael Bordenaro Clips and on general condo practice, is that the trigger is usually underfunded reserves. When an association postpones saving for roofs, structural work or other big repairs, the cost eventually lands on owners all at once. If an owner cannot absorb it, or the unit's value does not clearly exceed what they owe, selling becomes tempting. Selling inside a building that is under construction is not easy, though.

The examples: $26,000 roofs and a $49,000 bill

Bordenaro, a Miami condo owner, opens with his own numbers. He says he and his wife have paid roughly $80,000 in special assessments since buying. He argues that it was tolerable only because they purchased well below market value and still hold meaningful equity. In his words, that instant equity kept them from going "completely upside down."

He then points to two California cases. Figures below are as he presented them; they come from news reports he references, which we have not independently verified.

One detail needs a flag. The captions of the video appear to state the Torrance work as "$19,000," but the math the creator gives (499 units at $49,000 each, about $24.5 million) only works with a project of about $19 million. We treat the $19 million figure as the intended number.

What the payment-plan arithmetic looks like

Using the San Clemente schedule as described, six payments of $2,000 total $12,000, leaving $14,000. At $400 a month, that is about 35 more months, or roughly three and a half years in total, before any interest or fees. The video does not say whether interest applied in that case. Bordenaro's general point is that longer plans usually cost more, much like a longer auto loan. Ask any association whether a payment plan carries interest, and whether the balance must be paid off at sale.

Why the bills arrive: deferred reserves

In the San Clemente case, Bordenaro says owners reported that the association had known for years that the roofs would need replacing but had not raised reserve contributions. That is the common pattern. A roof, elevator, plumbing stack or facade has a predictable lifespan. A well-run association commissions a reserve study, estimates when each component will need work and what it will cost, and sets monthly dues high enough to build a fund.

When boards keep dues low to avoid owner complaints, the arithmetic does not disappear. It is simply pushed to a later year, and often to a different set of owners. Rising construction costs make the eventual bill larger.

For more on how reserve requirements are reshaping condo values, see our coverage of why reserve rules may be housing's next problem.

Why one assessment is often not the last

Bordenaro offers an observation worth treating as a pattern rather than a rule. Associations sometimes levy a large assessment that gets a project started but does not fully fund it, then return for another one a few years later. He also says some boards deliberately collect more than the estimated cost because projects tend to run long and over budget. The Torrance figures he cites, about $24.5 million raised against a roughly $19 million project, fit that description, though the excess could also be a contingency or reserve top-up. Whether any surplus is refunded, held for future repairs or used for related work is a question owners should put to the board in writing.

The reserve test: what 50% to 70% funded means

Bordenaro's rule of thumb is that buyers should look for a building with at least 50% and up to about 70% of its reserves funded. In his view, that level makes a large assessment unlikely, and any that does occur is likely to be modest. He adds that such buildings generally charge higher dues, but that owners get predictability in return. His example: a $900 monthly fee rising 3% a year is an expected cost, while a surprise $50,000 invoice is not.

That is a reasonable starting point, with caveats. "Percent funded" compares the reserve balance with the amount a reserve study says should be saved by now, and studies use different methods. Industry groups such as the Community Associations Institute generally describe 70% or higher as a healthier range, and under 30% as weak, but those thresholds are guidance, not law. The number is most useful alongside the answers to these questions:

• When was the reserve study last updated, and by whom?
• Which major projects are planned in the next five to ten years?
• Does the board have a funding plan, or is it relying on future assessments?
• Has the association borrowed money, and how is the loan being repaid?
• What share of owners is behind on dues?

Lenders also pay attention. Mortgage investors such as Fannie Mae set project standards for condos, and buildings with serious deferred maintenance, high delinquency rates or large pending assessments can be harder to finance. That narrows the buyer pool, which affects resale value. For Florida readers, our look at condo prices by county shows how this can play out in a market where reserve rules have tightened.

Why selling a building under repair is hard

Bordenaro describes the owner's bind clearly. A renter can leave when a lease ends. An owner generally cannot, unless they sell. And a building with decades of deferred maintenance, he says, makes a poor first impression: closed amenities, partial parking, dust and workers. He suggests that until work is finished, owners may have to accept a low offer.

There are at least three reasons this tends to be true.

1. Buyers price in the unknown. If a project is incomplete, a buyer cannot be sure whether more assessments are coming.
2. Financing can be harder. Lenders may decline or restrict loans in buildings with unresolved structural issues or low reserves.
3. Who owes what can be negotiated. In many sales, the buyer asks the seller to pay the remaining assessment balance or to lower the price accordingly. Rules vary by association and state, so check your governing documents.

Selling also has its own costs. Our guide to the real net proceeds of selling a house walks through commissions, closing costs and other items that reduce what you take home.

The bigger context: leverage and opportunity cost

Bordenaro widens the lens to a familiar debate. He says that between 2015 and 2025, home prices rose 87%, while stocks rose 235% on price alone, excluding dividends. He uses those figures to argue that owning a home is not automatically the best financial move. We have not verified them, and the exact numbers depend on the index, the geography and the start and end dates. Readers who want to compare should check the FHFA House Price Index or the S&P/Case-Shiller indices on FRED against a broad stock index.

His leverage example is easier to check. With 20% down on a $1 million home ($200,000), a 10% price gain adds $100,000, or half the down payment. A 10% decline does the opposite, while the mortgage balance stays the same. That is how an owner with little equity can end up owing more than the home is worth. If a special assessment is added on top, the squeeze gets tighter.

He is careful to say he is not telling people to avoid homeownership. He values the stability of not having to move unless he chooses to, and he notes tax benefits such as mortgage-interest deductions. A home is also a place to live, which a stock portfolio is not.

Limits and counterpoints

Three cautions apply to the creator's view.

First, the cases are anecdotes. Two California buildings and one Miami building do not describe the whole condo market, and many associations are well funded. Second, special assessments are not always a sign of mismanagement. Storms, insurance gaps, code changes, litigation or unexpected structural findings can create costs that no reserve plan would have anticipated. Third, a high percent-funded figure is not a guarantee. Reserve studies can be optimistic, and a building with a large reserve may still face costs above the study's estimates.

Also, owners with significant equity can often handle an assessment, as Bordenaro's own experience suggests. The risk is concentrated among buyers who put little down, recently purchased near a price peak, or have fixed incomes. Finally, the mortgage-interest tax benefit he mentions applies only to those who itemize, which many households do not.

What this means for you

If you are buying a condo

• Request the reserve study, current budget, last two years of board minutes, and any pending or planned assessments before your inspection period ends.
• Ask for the percent-funded figure and how the reserve study calculates it.
• Compare the monthly fee with similar buildings. A very low fee can signal underfunding, not a bargain.
• Ask a real estate attorney or experienced agent to review the documents, especially in states with newer reserve laws.
• Budget for the possibility of a future assessment even in a healthy building.

If you are selling

• Learn what you owe on any assessment before listing, and whether the balance transfers or must be paid at closing.
• Expect buyers to ask about reserves and upcoming work. Having documents ready can reduce friction.
• If the building is mid-project, ask your agent how comparable sales in similar situations have performed.

If you are an owner facing a bill

• Ask the board for every payment option and for the interest rate, if any.
• Attend meetings and ask for a reserve study update. Boards respond to informed owners.
• Review your equity position, since a falling market combined with an assessment can leave less room than expected.
• Consider speaking with a licensed financial adviser or attorney about your situation. This article is general information, not personal advice.

What to watch next

Reserve rules, lender standards and insurance costs are all moving toward more scrutiny of condo finances. Watch for local reserve-study requirements, changes in how lenders treat low-reserve buildings, and whether price gaps widen between well-funded and underfunded buildings. For broader signs of strain in household finances, see our report on consumer spending and recession signals for housing.

The practical lesson from Bordenaro's examples is not that condos are a bad purchase. It is that a condo's financial health matters as much as the unit's finishes, and the documents that show it are available to buyers who ask for them.