HOA Special Assessments in Maryland: What Buyers Need to Know Before Closing

An HOA special assessment in Maryland is a one-time charge your association can levy on top of regular monthly dues. It covers unexpected costs or capital projects the reserve fund can't fully handle — think roof replacements, elevator overhauls, parking lot repaving, or emergency structural repairs. Special assessments average $2,000–$5,000 per household for routine projects, but major building-wide repairs in Bethesda's older condo stock can push that number to $15,000–$50,000 or more per unit.

Here's why this matters before you close: you inherit whatever financial situation the HOA is in the moment you take ownership. A pending special assessment, an underfunded reserve, or a board sitting on a known-but-deferred capital project becomes your problem, not the seller's.

This is one of the most consequential pieces of due diligence buyers overlook in Bethesda's condo and townhome market. The resale disclosure package tells you what's coming — but only if you know what to look for.

The existing post on HOA disclosures for Bethesda buyers walks through what documents you're entitled to receive. This post is about what to do once you have them — specifically, how to evaluate special assessment risk before you go under contract.

How Maryland HOA Special Assessments Work

Maryland governs HOA special assessments under Real Property §11B (the Homeowners Association Act) for planned communities and §11-109.2 (the Condominium Act) for condo buildings. The rules are similar under both.

The key threshold: if a proposed special assessment would push total annual assessments more than 15% above the approved budget, a membership vote is required before the board can charge it. That sounds protective — but there's a carve-out boards use frequently. Genuine emergencies (immediate safety risks, sudden structural failure, code violations requiring immediate action) allow the board to assess beyond the 15% cap without member approval.

Maryland's 2025 legislation (HB 107) added new reserve study requirements for HOAs and condo associations with more than $10,000 in reserve components. Boards must now conduct a reserve study and update it every five years, and they must adopt a reserve funding plan with a five-year window to reach the recommended funding level. This is meaningful — boards can no longer quietly ignore underfunding without a formal plan on record.

What this means for you as a buyer: the reserve study is now a required document with legal teeth. It tells you how funded the association is and what capital projects are on the horizon. Reviewing it isn't optional — it's the financial equivalent of a home inspection for the building or community as a whole.

Reading the Resale Package: What to Look for on HOA Special Assessment Risk

Maryland law requires the HOA or condo association to provide a resale disclosure package before settlement — and unlike most states, Maryland prohibits the association from charging you a fee for it. If any management company tries to bill you for this package, they're violating Maryland law.

The package includes the declaration, bylaws, rules and regulations, current budget, most recent financial statements, reserve fund information, pending litigation, and any planned or approved special assessments. Here's what to focus on:

• Funded ratio: This is the single most important number. It measures what the reserve fund currently holds versus what it should hold based on the reserve study. 70% or above is healthy. 50%–70% is a yellow flag. Below 50% is high risk — and roughly one-third of HOAs nationally fall into that category.
• Reserve study age: If the study is more than three to five years old, the cost estimates are likely outdated. Post-2021 construction and labor inflation can make older numbers significantly understate what repairs will actually cost. Ask whether an updated study is in progress.
• Approved but unbilled assessments: These may not appear as a budget line item. Ask your agent to request a written statement from the association confirming whether any special assessment has been approved but not yet invoiced.
• Delinquency rate: If more than 15% of unit owners are behind on regular dues, the building may lose Fannie Mae and Freddie Mac eligibility — which affects your financing now and your ability to sell later.
• Capital project timeline: Even without an approved assessment, look at what the reserve study flags as due in the next three to seven years. A 25-year-old roof, aging elevators, and a 35% funded reserve is a liability waiting to bill you.

In Bethesda's older condo buildings — particularly 1970s and 1980s construction near Wisconsin Avenue, downtown, and the Friendship Heights corridor — reserve shortfalls are common. These properties carry real location value, but the financial picture requires scrutiny. Understanding the full cost of buying in Bethesda means accounting for what the HOA may charge you in year two or three, not just at closing.

HOA Special Assessments, Your Mortgage, and What Happens at Closing

A financially distressed HOA doesn't just cost you money — it can cost you your financing.

Fannie Mae and Freddie Mac classify condo projects as non-warrantable when the association is in active litigation (beyond routine slip-and-fall), when more than 15% of units are delinquent on dues, or when the reserve fund is materially underfunded. Non-warrantable means conventional financing is unavailable. You'd need a portfolio lender — typically 0.25%–0.75% above market rate — or in some cases no financing for that specific property at all. For a $900,000 condo in Bethesda, that rate premium adds up fast.

FHA and VA condos have their own approval requirements. FHA condo project approval can lapse if the building's finances deteriorate, which means buyers using FHA need to verify current approval status, not just historical approval. This is particularly relevant for buyers thinking through what happens at closing — a non-warrantable finding can surface late in the transaction and delay or kill the deal.

On the closing side, who pays a pending special assessment is a negotiation point, not a default rule. If the association has approved an assessment that isn't yet billed when you go under contract, you have leverage to ask the seller to pay it at settlement. If installments are already being collected, the standard approach is for the seller to pay through the date of settlement and for you to assume the balance — but this must be spelled out in the contract addendum, not assumed.

I walk every condo and townhome buyer I work with through the resale disclosure package before they go hard on a deposit. The reserve fund health is as important as the condition of the unit itself. When the numbers raise a concern, there's usually a way to structure the deal — price adjustment, seller-paid assessment, or a contingency that gives you a real exit. But you have to know what you're reading first.

If you're looking at a condo or HOA community in Bethesda, Chevy Chase, North Bethesda, or Potomac, I'm happy to walk through the resale financials with you before you commit. Reach out anytime.