Responsibility for Special Assessments

QUESTION:  I represent a buyer in a transaction that is under contract using the Offer to Purchase and Contract (Form 2-T). In the Residential Property and Owners’ Association Disclosure Statement, the seller disclosed the existence of what the seller characterized as a “proposed” special assessment relating to a county water and sewer project in the neighborhood. A question has arisen as to whether the seller or the buyer is responsible for paying for the assessment. What do you think?

ANSWER: The answer depends on whether the assessment you describe is formally approved by the county prior to Settlement.  Sellers are required to pay all special assessments approved prior to Settlement pursuant to paragraph 8(k) of the Contract, and buyers take title subject to all special assessments approved following Settlement pursuant to paragraph 6(a).

Special assessments can be imposed by governmental authorities or by owners’ associations.  Since your situation involves an assessment by a county, we will focus on the assessment-approval process used by governmental authorities.  Although the process can vary to some extent, in general, when a county or city decides to finance a project by special assessment, a public hearing is held. If the governing body formally approves the special assessment, a preliminary assessment resolution is adopted and a preliminary assessment roll is prepared.  The roll includes the expected amount of the ass

essment and a list of the parcels to be affected. At this point, even though the assessment amounts are subject to amendment, the special assessment is considered approved. This formal approval by the governmental body is what triggers a property owner’s obligation to pay the amount that is eventually assessed.

Once the county or city completes its improvement work, and all the costs of the project are known, another public hearing is held.  Following that hearing, the final assessment roll is given to the tax collector for collection. In our view, this hearing does NOT need to take place, and the assessment does not need to be “fully payable”, in order for the special assessment to be considered “approved” under the terms of Standard Form 2-T.

It is important for a buyer to become knowledgeable about the existence and the status of any special assessments affecting a property the buyer is interesting in purchasing, either before making an offer or, if the buyer is under contract, no later than the expiration of the Due Diligence Period.  Such knowledge will likely affect the amount the buyer is willing to offer or the buyer’s decision whether to proceed with a transaction that is already under contract.

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