Other Than Life (OTL) Practice Exam

Under what condition might special assessments be levied against condominium unit owners?

1. Underinsurance

2. Breach of a policy condition

3. Upgrading

4. Both a and b

The correct answer is: Both a and b

Special assessments may be levied against condominium unit owners under specific circumstances that require additional funding beyond what is allocated in the regular budget. Underinsurance can be a key factor. If the condominium's insurance coverage is insufficient to cover damages or liabilities, especially following an incident, the association may impose a special assessment to cover the gap. This ensures that all necessary repairs or liabilities are fully funded, protecting both the property and the owners' investments. Additionally, a breach of a policy condition could lead to financial repercussions that necessitate a special assessment. If the condominium association fails to maintain the required insurance levels or does not comply with specific policy terms, it may face increased exposure to risks. This scenario could trigger the need for a special assessment to cover unforeseen losses that insurance would typically manage. While upgrading may involve costs that could lead to assessments, it generally falls under planned expenses rather than immediate financial shortfalls caused by the first two conditions. Thus, the combination of underinsurance and breach of policy conditions makes this the correct answer for when special assessments may be levied against condominium unit owners.