By Deborah Goonan
Ever wonder what happens if there’s a fire in your condo complex? Fortunately, injuries and fatalities are relatively rare. But I read dozens of reports of condo fires every month, and in many cases, condo residents are displaced. This often presents a hardship for owners whose units have been destroyed by fire or water damage. Typically, the owner-occupant must continue paying the mortgage and condo assessments (maintenance fees), as well as temporary living expenses.
A condo owner that does not live on premises, but rents to a tenant will have to bear all of the carrying costs and a share of the Associations repair costs, and may be unable to rent one or more units in need of repair or rebuilding.
Unfortunately, the rebuilding process can take a lot longer than you think.
Here’s a typical example:
Questions linger 8 months after fire devastates Fern Creek condos
Melissa Swan, @WHAS11 7:45 p.m. EDT August 14, 2015
Although I am not an insurance professional, this report raises some important questions:
Does your Association carry adequate insurance? In the case of Fern Creek, the insurance policy requires a huge deductible that condo owners cannot afford. Sometimes an Association opts for a larger deductible in order to reduce annual premiums and month assessment fees. But this money-saving strategy can backfire.
What if your own unit isn’t one that has been damaged by fire, smoke, or water? If you own one or more condos, you are a member of the Association. All members share the repair costs equally. If insurance does not cover the damage, the HOA Board will issue a special assessment for each unit you own. If you cannot afford to pay the special assessment, there will be a lien placed upon your unit. If the lien remains unpaid for more than 90 days, the Condo Association Board could even foreclose to collect on that lien.
Do you carry adequate insurance, and what about your neighbors? While the Association is responsible for replacing or repairing the structure or “bones” of damaged buildings and units, each individual owner is responsible for most of the contents, structures, and finishes from the interior walls inward. Some policies also help cover living expenses while you are displaced, or help pay part of unexpected special assessments. It’s best if all owners carry insurance to help cover these “extra” costs, but many do not. That makes it difficult for some owners to come up with a sizable special assessment on short notice.
How long will it take to have the units repaired? Depending on the situation, it could take months or more than a year. Insurance claims must be filed by owners in each unit involved in the rebuilding process. And coverage needs to be coordinated by the Association, who must work with contractors to manage the rebuilding process. If even one affected member lacks adequate insurance coverage, or fails to file a timely claim, the entire project can be delayed.
If you own a condo, you need to protect your interests in the event of fire or another disaster by contacting a qualified insurance professional. Here’s some basic information to start the conversation: