Why HOA Boards Should Stop Saying 'We'll Just Do a Special Assessment'

The HOA special assessment vs loan conversation usually ends before it starts. A board member says, "we'll just do a special assessment," everyone nods, and the meeting moves on. We have heard that line in board rooms since 2016. It is almost always a tell. It signals that the board has not done the math, has not surveyed owners, and has not modeled what the assessment will mean five years from now.

This is not a post arguing every project should be financed. Special assessments have a real place in association finance. They are appropriate for emergencies, for small projects, and for boards with high-income owners who genuinely prefer cash. But the reflex to default to one without comparison is the symptom of a board that has not taken the decision seriously. That is what we want to push back on.

What the Phrase Actually Means in Practice

"We'll just do a special assessment" usually means three things, and none of them are what the speaker thinks they are saying.

It means the board has not modeled the cash impact on owners. A $25,000 special assessment lands as a single bill in a single quarter. For a retired owner on a fixed income, that is not an inconvenience. That is a forced sale. We have watched it happen. Boards that wave away the conversation often discover six months later that two units are on the market and a third is in arrears.

It means the board has not surveyed ownership. Boards routinely assume their owners would rather pay cash than borrow. We have polled communities. The split is closer to 50-50, and the older the building's owner base, the more it tilts toward financing. The assumption that owners hate debt more than they hate large bills is rarely tested. When it is tested, the answer surprises the board.

It means the board has chosen deferral disguised as discipline. The phrase sounds responsible. Pay as you go. No debt. Tight ship. In practice, it often translates to scaling the project down, sequencing it across three years, and inviting cost overruns as construction prices keep moving. Calling that discipline is generous. It is usually procrastination wearing a tie.

The Math Nobody Ran

Run the numbers on an 80-unit association doing a $1.5M building envelope project. We will keep this clean.

Special assessment route: $1,500,000 divided by 80 units is $18,750 per unit, due roughly within the year. For an owner with a $400,000 unit, that is 4.7% of the property value landing as a single bill. For an owner who refinanced into a fixed-rate mortgage in 2021 and has minimal liquid savings, the assessment is a real problem. Boards consistently underestimate how many of their owners fall into that bucket.

Loan route: at terms typical of our network in the current 10-Year Treasury environment, a $1.5M loan over 15 years carries an annual debt service of roughly $158,000. Spread across 80 units, that is about $1,975 per unit per year, or $165 per month added to dues. Stop and read that number again. One hundred sixty-five dollars per month versus an $18,750 bill.

The board's job is not to pick the option that sounds most responsible at the dinner table. The board's job is to pick the option that minimizes financial harm to the ownership base. On most projects above $500,000, the loan math is not close. The fact that the math is not close, and that boards still default to assessments, is exactly the problem this post is trying to name.

The Equity Question

Here is the question every board should be forced to answer out loud. Why should current owners pay for 30 years of deferred decisions made by every board before them?

The building's reserve fund is underfunded because past boards kept dues artificially low. The envelope project is overdue because past boards delayed it. The reserve study has been sitting on the shelf for five years. The owners who benefited from low dues are gone. The owners who benefited from deferred maintenance sold and moved. The bill is now landing on people who bought into the building three years ago, who paid current market price for a unit that already reflected its maintenance condition, and who are now being asked to write a check for damage they did not cause.

A loan spreads the cost across the next 15 years. Owners who sell in year three pay three years of their share and then the next owner picks up where they left off. That is closer to fair. We are not arguing it is perfect. We are arguing it is more equitable than dumping the full bill on whoever happens to own a unit the year the project finally happens.

What to Put in the Minutes

If your board still wants to assess after running the math and surveying owners, fine. That is a defensible choice. But put this exact sentence in the minutes, and write it down in the words your fiduciary attorney would approve of:

"The board considered financing the project through an HOA loan and rejected that option for the following specific reasons."

Then list the reasons. Not "we don't like debt." Specific reasons. Interest cost over the term. Owner survey results. Deposit relationship constraints. Whatever drove the decision. The act of having to write the reasons down forces the analysis the board would otherwise skip. If you cannot name three specific reasons, you did not consider the option. You defaulted to it.

That single line in the minutes is the difference between a board that exercised its fiduciary duty and a board that just said the thing boards always say. Owners reading the minutes a year later can tell the difference. So can lawyers, when something goes wrong.

If your board is staring at a project and the phrase has already been said at the table, schedule a free consultation with HOA Loan Services before the next meeting. We will run the math both ways, walk the board through the survey questions, and give you the comparison you need so the minutes can be honest.