By Deborah Goonan, Independent American Communities firstname.lastname@example.org
A summary of notable legislative updates for owners of property in HOA-governed communities. This is Part 2 of HOA, condo, and co-op legislative updates for 2020. Read part 1 here.
Georgia – Condominium association not required to insure property against water damage claims
If you own or reside in a condo in the state of Georgia, and your property is damaged by water due to an accidental flood, don’t expect your condo association’s insurance policy to cover your losses.
Until last year, state law was unclear as to whether or not a condo association must carry insurance to cover damages caused by water perils.
But, as of July 2020, Governor Kemp signed House Bill 1070, which amended Code Section 44-3-107 of the Georgia Condominium Act to clarify that condo associations do not have to insure against water damages due to sudden, unexpected flooding.
A key provision of the Act now states:
Nothing contained in this subsection shall require an association to obtain insurance related to water damage or water perils.Georgia Condominium Act, effective January 1, 2021
For many years, insurance policies have excluded coverage for water perils, which are defined as sudden events that result in unexpected flooding and damage to property. (A slow plumbing leak would not be covered as a water peril event, because it’s excluded as damages due to a failure to maintain one’s property.)
As is the case with flood insurance or earthquake insurance, homeowners and condo associations must purchase special coverage for water perils, at additional cost. Many condo associations choose to minimize insurance premiums rather than add coverage for water damages.
As you might imagine, a large number of condo disputes arise when a unit owner’s property is damaged by a burst pipe in a common wall or failed water heater in the upstairs unit. Regardless of the source of the water leak, a unit owner owner is almost always on the hook for the cost of repairs. This underscores the need for condo owners to carry insurance for water perils.
Following one legal dispute last year, a Georgia court ruled that condo associations are not required to carry additional insurance to cover water damages.
While the new law does not require a condo association to carry insurance that covers water damages or water perils to either common areas or individual units, it does impose new disclosure requirements.
If a unit owner makes a written request to the condo association for information regarding insurance coverage for water damage or peril claims, the HOA has five days to respond in writing. Vice versa, when the condo association makes a written request to a unit owner with regard to insurance coverage on the unit and its contents, the owner has five days to respond.
Summary: the condo association’s only real obligation to unit owners is to disclose whether or not their insurance policies cover water hazards. Unless a condo owner is willing to self-insure for damages due to water perils, it is wise to consult with an insurance agent, to make sure your condo owner’s policy includes coverage for damaged caused by unexpected floods or leaks.
New Disclosure Requirements for Water Damage Insurance Claims in Condominiums Effective January 1, 2021, Insights from Condominium Lawyers Nowack Howard Community Associations Attorneys
Georgia Legislature, House Bill 1070 as passed and signed by Governor.
Maryland — Condo owners must now pay up to $10,000 insurance deductible for certain damages
Due to rising insurance premiums, many condo associations across the U.S. are obtaining insurance policies with higher deductibles. In the state of Maryland, most standard Association policies have a minimum deductible of $10,000.
Accidents and breakdowns occur often multifamily housing. As the owner of a condo, it’s usually your responsibility to pay for damages to your own unit. But you may also be liable to pay for damages to a neighboring unit or common elements, if your unit was the source of a system failure.
Most condo associations carry an insurance policy to cover damages in some situations, but the Association’s policy won’t kick in any money until after they meet their annual deductible.
So, for example, if a unit owner’s water or sewer pipes break, or if an appliance failure results in damages to your own unit, a neighbor’s unit, or common elements, you coulc be responsible for covering the Association’s insurance deductible up to $10,000.
Prior to the passage of this amendment to state law in August 2020, a unit owner’s deductible liability was limited to $5,000.
This is another wake-up call for condo owners. Contact your insurance agent an be sure your HOA-6 condo unit policy includes coverage for the condo association’s deductible.
Read SB175 from Maryland state Legislature website
Maryland Condo Owners May Be Responsible for $10,000 Property Insurance Deductible Thomas Schild Law Group, Aug. 11, 2020
New Jersey – Lake Associations that never had the authority to collect mandatory homeowner fees cannot force non-members of Lake Clubs to pay HOA fees
In 2017, New Jersey enacted the Radburn Bill, which expanded the definition of homeowners associations to include some voluntary membership HOAs. Soon afterward, several cash-strapped Lake Associations began sending annual invoices to homeowners in the vicinity of their Lake Clubs.
IAC has previously posted several articles about Ramapo Mountain Lakes Association, which had, for decades operated as a voluntary membership Lake Association. The Association maintains Crystal and Mirror Lakes in Bergen County.
In its heyday, Ramapo Mountain Lakes was a popular summer destination for families. But, over the years, the lake association’s membership dwindled. Several years ago, the state of New Jersey began to mandate expensive repairs and upgrades to dams that impound privately-owned manmade lakes.
Because the 2017 Radburn Bill broadly redefined a “homeowners association” as any planned community, Ramapo Mountain Lakes (RML) and other NJ Lake Associations seized the opportunity to compel homeowners who were not current members of the Lake Club to pay their “fair share” toward maintenance of their recreational lakes.
Not surprisingly, hundreds of homeowners refused to pay these new “surprise” annual HOA fees. They objected that they never used the lake. Most could not see or walk to the lake from their homes.
Determined to raise the money they needed, RML responded by placing liens on the homes of property owners who refused to pay HOA fees. Homeowners were forced to obtain attorneys to fight against paying new mandatory HOA dues.
Finally, it appears that homeowners have obtained legal relief from surprise HOA fees.
New state law (bills S908/A2480) clarifies that a voluntary membership association such as RML — one that does not legally require HOA maintenance fees in its deeds and Declarations —cannot force non-members to pay association fees to maintain a lake or any other property owned by the Association.
New law in NJ (S908/A2480)
Nevada — Private entities such as HOAs gain limited immunity for COVID-related injury or death
State Legislatures across the U.S. have considered laws that limit the liability of private businesses and non-profit entities when a resident, employee, or guest catches COVID-19, resulting in illness, long-term health effects, or death.
Nevada’s Governor approved SB4 in August 2020.
Section 29 of SB4 is applicable to HOA-governed communities, including condominium associations. It states that private non-profit organizations (which includes most HOAs and community associations) cannot be held liable for a COVID illness or death, so long as the HOA complies with state and local health department regulations and guidelines to prevent the spread of SARS-COV-2, the virus that causes COVID-19.
However, state law does not offer blanket immunity to HOAs, its board members, or management agents. A resident, property owner, or guest can still sue an Association that fails to follow all COVID prevention regulations prudently and consistently.
And, since many HOAs find it difficult and costly to keep up with COVID prevention measures, some community leaders will opt to keep their common amenities closed for the foreseeable future.
Read Nevada SB4 on the state’s Legislative website
Wisconsin — New real estate form puts the onus on sellers to disclose detailed information about condo association
Here’s a typical example of the state government passing the buck to homeowners rather than their condominium association.
Realtors in Wisconsin are warning their condo sellers to beware of new disclosure requirements on form WB-14. A condo owner is expected to provide a prospective buyer with copies of financial reports and meeting minutes, any knowledge of upcoming special assessments, the balance in reserve accounts, certificate of insurance for the association, common element inspection reports, and information regarding pending litigation.
Although these are certainly important pieces of information for buyer due diligence, most condo sellers probably won’t have access to this detailed information, without requesting it from their condo association.
Example: a seller is unaware that her condo association is discussing a possible special assessment, and she’s unable to get copies of recent meeting minutes. Two months after closing, the buyer is hit with a $20,000 special assessment. The buyer sues the seller for misrepresentation.
As a practical matter, state law should require the condominium or homeowner’s association to provide this information directly, upon written request from a buyer or the buyer’s agent. It’s unfair to expect the seller to know all the facts, when the association isn’t transparent with its members. And lack of transparency is very common in condo and homeowners associations.
Some Wisconsin realtors suggest that their sellers cross out the disclosure items listed in lines 152-160, to avoid exposure to liability after the sale closes.
Obviously, this practice fails to serve the needs of the buyer. So, if you’re planning to purchase a condo in Wisconsin (despite all the inherent risks highlighted on this website), be sure to send your own written request for disclosure items to the condo associations vs. the owner of the unit you’re planning to buy.
Wisconsin’s WB-14 Residential Condominium Offer to Purchase (CONDO SELLERS BEWARE) Daniel Miske, Husch-Blackwell, Sept. 1, 2020
Link to the revised WB-14 form