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September 13, 2005
Shifting Responsibility - When Is it Responsible?
Updating Governing Documents - it can be fun, can't it? One reason so many California HOAs are moving to update and improve the governing documents (besides the fact that the laws change everytime we turn around and even 5 year old documents are sorely outdated today) is to shift some responsibility and accountability to Owners. Let's face it - those "in-the-know" know that Owners tend to rely on the Board and management too heavily. They expect to be "taken care of" in all instances. One area where this had lead to major problems for HOAs is water intrusion management and insurance protection. Owners line walls with bookshelves or put a tenant in a unit for years and essentially breed a "cover up" of signs of water intrusion. They may notice a book binding is a little damp, and set the book out to dry, ignoring the fact that something made it wet! All the while the wall behind the massive furniture could be deteriorating. And this is one of my favorites - the owner who has this situation, ignores the signs, and then once the shelves are pulled out threatens to sue the Association because the bookshelves are useless and the mold on the wall is making them sick. The tenant may avoid reporting signs of a leak for fear the rent will be raised or they may have to relocate during repairs. The result - a BIG MESS! And sometimes, a BIG INSURANCE CLAIM. And that dirty word - mold.
In actuality, it is the little insurance claims that add up (like broken refrigerator ice maker lines and washer hoses), and lead to serious problems for HOAs in the arena of purchasing insurance coverage. The "negative" history of an association can lead to uninsurability, or incredibly expensive lines coverage.
So, many associations look for more accountability by changing maintenance provisions to require owners to repair damages to the interior of their units from water intrusion. The Association may beef up the provisions relating to individual insurance coverage. They may add authority to raise the deductibles to whatever amount is prudent, in an effort to stem the smaller claims on the Association's insurance. They may propose amendments that require owners to pay the deductible and get their own "gap" coverage. Some Associations have had to go to "bare walls" or as some say "studs out" insurance coverage to get coverage at all! Many want to require owners to carry individual insurance so that when there is a leak, and it gets to the interior, the owner will share in the burden of fixing up their own unit. Some attorneys say it is just easier to make the association responsible for all leak damage, whether negligent or not. Others say that an Association should not take responsibility for interiors unless it is negligent. Others say that the Association should not take care of the interiors under any circumstances, and that owners should insure for their own protection against water intrusion.
Oh, it becomes so very complicated. Managers say various things, Attorneys say various things, and insurance brokers and agents say various things. In fact, it is not easy to coordinate governing document provisions with insurance policies which are boilerplate for the most part. And it is not easy to shift a mindset that believes the Association is a landlord and should pay for any and all damage to the properties, including the interior fixtures, upgrades and personal property of the owners.
So ... when an Association Board makes an effort to gain more accountability from members, it IS NOT ALWAYS A BAD THING! When a Board seeks expert advice and proposes some amendments to shift some responsibility, it IS NOT ALWAYS A BAD THING! Many professionals in this industry brainstorm solutions to problems that Associations face every day and one big problem in this industry is that owners lack accountability in many instances. Those who do buy coverage to insure property in their own units or to pay a deductible on the Association's policy still have to pay for a share of the damages caused due to a neighbor who does not carry insurance and insists everything should be an association claim. Owners who take care of their units and report leaks early still have to pay for repairs to units where someone negligently (or intentionally) failed to report a leak. Some owners let things go so that when the leak is reported, they can work the repairs into their "remodeling plans". Yeah, it's a scam of sorts, and the innocents are paying for it. Isn't it fair to have a provision that requires owners to report leaks at the first sign, or assume some responsibility for the exacerbated damages that result from non-reporting? Isn't it fair to require owners to carry liability insurance and building coverage to fill any gaps between the protection they want and the Association coverage so that the Association's policy does not get "dinged" each time someone falls asleep in the bathtub or goes on vacation and leaves a load of dirty laundry washing in a machine with corroded and faulty water hoses?
Well, I have said my piece. I've seen many owners come unglued at the very mention of changing the governing documents, but in most Associations I have dealt with, there are at least enough common sense oriented owners to listen and absorb the explanations of what the Board is trying to accomplish. And when that happens, the responsible owners usually prevail over the "whiners".
Posted by Beth Grimm at September 13, 2005 12:18 PM