Yes, you can sell a condo while the association is considering a special assessment. However, you should investigate the proposed project and the association’s finances before listing. Even if an assessment has not been formally approved, the issue may affect the asking price, negotiations with the buyer and your expected proceeds at closing.
A Special Assessment Does Not Have to Be Final to Affect the Sale
Condo owners sometimes assume that a potential assessment does not matter until the board takes a formal vote and establishes the amount.
In practice, the problem can affect a sale much earlier.
The association may already be:
- Collecting bids for a new roof
- Reviewing an engineering report
- Planning façade, balcony or masonry repairs
- Considering replacement of an elevator or boiler
- Discussing an association loan
- Operating with inadequate reserves
- Preparing to increase regular monthly assessments
The final amount may still be unknown, but buyers do not like open-ended financial obligations. Uncertainty can become nearly as important as the eventual assessment itself.
Expect the Buyer to Investigate
If unit owners are discussing a possible assessment around the building, do not assume the issue will remain a rumor.
The underlying project or financial problem may appear in:
- The association’s Section 22.1 disclosure
- Financial statements and annual budgets
- Reserve information
- Board meeting minutes
- Engineering or inspection reports
- Notices distributed to unit owners
- The buyer’s lender review
Illinois condominium resale disclosures include information about capital expenditures anticipated during the current or next two fiscal years, as well as the status of the association’s replacement reserves.
That means a project can be relevant even before the board formally approves a special assessment.
Once the buyer learns about it, the buyer may ask the seller to pay the assessment, provide a closing credit or reduce the purchase price. A buyer may also decide that the uncertainty is more than they are willing to accept.
Investigate Before You List
A possible special assessment does not mean that you cannot sell your condo. Many condo owners sell while their association is planning a major project.
It does mean that you should understand the situation before choosing a listing price or accepting an offer.
Try to answer the following questions:
What work is being considered?
Find out exactly what the association is planning. Replacing a roof is different from remodeling a lobby. The urgency, expected cost and effect on the building will matter to a buyer.
Has the board obtained bids or professional reports?
Contractor bids, engineering reports and inspection findings can show whether a project is merely being discussed or has moved closer to approval.
How much money does the association have in reserves?
A major project does not always require a special assessment. The association may be able to pay some or all of the cost from reserves.
However, a low reserve balance makes an assessment or association loan more likely.
Is there a reserve study?
If the association has a reserve study, compare its recommendations with the amount actually held in reserves. A significant shortfall may help explain why the association is considering an assessment.
What do the meeting minutes say?
Recent board minutes may provide information about bids, repair priorities, financing alternatives and the board’s expected timeline. Review more than the most recent meeting if the issue has been developing for several months.
Is the board considering other ways to pay?
Instead of—or in addition to—a special assessment, the board may consider borrowing money or increasing monthly assessments. These options can still affect a buyer’s anticipated ownership costs.
Build the Issue Into Your Selling Strategy
Once you understand the likely cost and timing, you can decide how to address it.
Depending on the circumstances, a seller might:
- Adjust the asking price
- Pay an approved assessment at or before closing
- Offer the buyer a defined closing credit
- Negotiate for the buyer to assume the obligation
- Establish an agreed escrow when the amount remains uncertain
- Wait until the board’s plans become clearer
The right approach depends on the contract, the status of the assessment, the strength of the local market and the size of the potential obligation.
Do not assume that an assessment automatically belongs to the seller or the buyer. The language of the sales contract—and any modifications negotiated during attorney review—will determine how the parties allocate the expense.
Understand Your Bottom Line Before Accepting an Offer
The worst time to investigate a potential special assessment is after you have accepted an offer.
By then, the buyer may be demanding a large credit, the attorneys may be disputing who should pay, and the proposed assessment may materially change what you expect to receive at closing.
Before listing, determine what is known, what remains uncertain and how much of the potential expense you are prepared to absorb. That allows you to set a more realistic price and negotiate from a position of knowledge.
If your Chicagoland condominium association is considering a special assessment and you are preparing to sell, a real estate attorney can review the available association information and help you address the issue in the sales contract.
Not legal advice. Just hard-earned experience.
