Tag Archives: Financial

Condo Deck Spalling Project Creates Additional Unit Owner Expense

M.M. from outside of Connecticut writes:

Dear Mister Condo,

If the condo HOA has contracted with a firm, using funds from an assessment, to do spalling on your deck, is the condo owner responsible for paying for tile removal and replacement and also a sliding glass door replacement they say needs to be removed to do the spalling?

Mister Condo replies:

M.M., that is a tricky question. My gut instinct is to say that the unit owner is responsible for those items that the unit owner owns and the association is responsible for any common elements that it owns. In the case of a deck and spalling, my question is who owns the tiles? Are they your tiles (installed by you or a previous owner)? If so, it is likely that you own the tiles and would have to pay for the replacement. Who owns the slider? Again, that is typically unit owner responsibility but your documents may state otherwise. My best advice is for you to review your documents and see who owns what. If the documents are silent on the subject, you might ask neighbors who have faced a similar situation how it was handled previously. My best guess is that you will be responsible for the tiles and the slider. On the upside, you will have beautiful new deck spalling, tiles and a slider to come and go to enjoy your deck. All the best!

Condo Insurance Check Issued to Unit Owner for Building Damage

S.F. from Fairfield County writes:

Dear Mister Condo,

Insurance check for house damage was made payable to a condo owner, who is the brother of the president of the condo association. Why did the insurance company allow this? Check amount was substantial, for several thousand dollars.

Mister Condo replies:

S.F., there are a few reasons that the condo owner was reimbursed directly for an insurance claim. For starters, the policy holder typically designates the payee. Was this entirely association-owned insurance or was it homeowner’s insurance as well? Typically, the homeowner gets paid for claims made against their own policy. If the damage had already been repaired by the homeowner, the check may have been for reimbursement. A typical association claim for exterior building damage would go to the association, who would then hire the contractor to repair the exterior building damage. It the damage were internal (water damage for instance) and the association’s insurance were covering that damage, it would not be uncommon for the payment to go directly to the homeowner.

Keep in mind that insurance claims are also records of the association. As such, you have the right to inspect the claim. If you think foul play is afoot, I would suggest you review the paperwork to determine why the payment went to the owner and not the association. Good luck!

Responsibility for Condo Construction Defect 30 Years After Developer Control

P.Z. from outside of Connecticut writes:

Dear Mister Condo,

During window and door replacement in my condo, built in 1988, it was discovered that there was about 18″ of insulation missing from the walls directly above the windows. It was corrected during the install of the windows. Is the association responsible to compensate me for the expense of properly insulating the space above the doors and windows? The property manager says no, but I think otherwise. What’s your take, please?

Mister Condo replies:

P.Z., in a perfect world, the missing insulation would have been the responsibility of the builder and would have been considered a building defect if uncovered back in 1988. However, that is impractical, if not impossible. In theory, the association takes over after the developer is through (the developer transition period) and assumes full responsibility for all of the common elements. The question now is whether or not the insulation is considered a common element or part of the window. I agree with you and would argue it is a common element where a building defect has been found. However, the association is likely to argue that they are not under any obligation to pay for a hidden item like this because they had no way of knowing there was an underlying defect and they have no recourse with the developer at this late date. That brings us to the practical element of this repair. I can’t imagine it was very expensive. Do you really want to complicate matters by suing the association for the repair? If the dollars justify a lawsuit and/or you feel strongly on this matter, you should speak to a locally qualified attorney to see if you have a case, or you may bring the matter to Small Claims court depending on the dollar amount. If it was $500 or less to insulate the area around the window, I think I would just pay it and move on. The culprit was the developer back in 1988. He made a mistake and was never held accountable for it during the time when he could have been. All the best!

Purchase of Lien and Foreclosure Rights on Delinquent Condo Owner

S.A. from South Florida writes:

Dear Mister Condo,

Can an individual purchase the lien and foreclosure rights on a delinquent condo unit? Second, is there a situation where a condo association can foreclose and take possession without going through the auction process? The unit in question has no mortgage and the owners have abandoned the unit. Sorry, one more question, is it the responsibility of the Association to keep the electric on if the unit is abandoned, to protect the neighbors from mold. This is a South Florida condo association.

Mister Condo replies:

S.A., those are all great questions. As you know I am not an attorney and offer no legal advice in this column. You should likely check with one of the many fine community association law forms in your state before taking any actions listed in your question. Let me offer the following friendly advice. Delinquent condo owners, even those who abandon their units have rights, both from the association’s governing documents and state law. If the unit owner is amenable to any of the methods of disposal for their unit as you have outlined, I can’t imagine there being a problem. However, it doesn’t sound like the unit owners are even around to agree with any proposed disposal of their unit. This is where the lawsuits typically begin and the process of foreclosure gets under way. Typically, a unit owner would offer a defense to the action of foreclosure. However, if the legal papers are served and they choose to simply ignore them, the process continues. If the association follows the law, there should be no problem. As far as an individual purchasing the lien and foreclosure rights in order to take possession of the unit, I would personally have a problem with that. The association is the aggrieved party. They should be the recipients of the proceeds from proper resolution of this matter. However, I am not aware of any law that forbids this. Once again, I would suggest speaking with the association attorney about the legality and proper filings. If the attorney says “yes” and you have a willing and able buyer, I would think it would expedite the process and save the association a good bit of time and money. They key to either of these transactions is making sure the association doesn’t violate any of the unit owner’s rights. Otherwise, multiple lawsuits could ensue. Please check with the association attorney before taking any action.

As for the electric that the association needs to decide whether or not to keep on, my guess is that they should be able to charge back the cost of any electric to the unit and make it part of the lien. Again, the expense of the electric service likely outweighs the potential damage that could be caused by mild so the best business judgment rule should allow the association to make that decision. Even if they can’t collect on the electric cost, that amount should be paltry in the overall scheme of things. All the best!

Condo Roof Leak Causes $75K in Damage; No Insurance Claim Made

J.T. from Middlesex County writes:

Dear Mister Condo,

Condo roof leak caused mold and extensive repairs paid by unit owner. The association refuses to pay the bill. $75,000.00 and never contacted master insurance but stated in emails that they did during initial assessments by environmental specialists provided by association who stated the need for immediate repairs. What is my next step?

Mister Condo replies:

J.T., you have a few different issues here. If it were me, my next step would be to contact an attorney to find out who I should sue for the $75,000 repair. That is a lot of money to be out of pocket for a roof leak and mold remediation. Of course, there is a procedure and protocol to follow here so don’t expect this to be a necessarily easy battle. Let’s start with the roof leak. Did the association fix the roof leak? That is their duty, regardless of whether insurance covers it or not. The association should have had insurance to fix the roof and made a claim to cover the cost or repair and any damage to any common elements. The association should have hired the contractor to make the repair. Is that what happened? You didn’t pay for the roof repair, did you?

Damage to your unit’s interior should have been covered by your own policy. If you didn’t have a homeowner’s policy in place, you should have and you should definitely have one in place moving forward. If the repairs were made in timely fashion, the mold issue may have been averted as most clean-up efforts would have included a dry-out of the damages area. However, as is often the case with mold, it doesn’t appear until months later. Regardless of how it got there, mold remediation is necessary because it can be toxic and, at the very least, a health hazard. If the mold can be determined to have been caused by the roof leak, the association may be on the hook for that as well. You should talk to an attorney about the mold issue to see who is responsible.

Again, I am not sure as to how you amassed a $75,000 bill for this problem, J.T.. If it was a lack of insurance on your part, this is going to be an expensive lesson on why you should always carry homeowner’s insurance. If it was simple mishandling of the claim by the association, an attorney can best advise you of your next steps. I hope you get the mold remediation taken care of immediately. All the best!

Condo Association-Hired Contractor Damages Unit Owner Ceilings

D.R. from Hartford County writes:

Dear Mister Condo,

A unit owner notified the condo association of a roof leak. A contractor, called by the association to inspect and give an estimate, caused several cracks in the ceiling while up in the attic inspecting, even though he was told the attic had no floor. Who is responsible for the repair, the contractor and his insurance or the Condo association insurance. The condo insurance company said they are not involved.

Mister Condo replies:

D.R., what an unfortunate situation. I am actually surprised that this contractor didn’t fall through the ceiling, which would have caused an even bigger problem for the association and perhaps even caused injury. The association hired the contractor to handle the inspection. Regardless of what the contractor was told, his actions caused the damage as reported by you. Typically, the association should go after the contractor for the damage he caused. Typically, that would have the contractor calling his insurance company to file a claim. It sounds to me like that didn’t happen. Instead, someone initiated a claim with the condo insurance who has subsequently denied the claim as it wouldn’t typically be covered by the type of insurance most associations have for their buildings. In fact, you have stated that the damage was caused by the contractor.

Without knowing all of the details, I would suggest the association needs to go after the contractor they hired and have the contractor make good on the damage he caused. If his insurance will cover it that should be a fairly simple process. If his insurance will not cover it, he should pay out of pocket for the damage. If he won’t do that, the association should sue him for the damage and make good on the repairs for unit owners. If all else fails, unit owners may have to sue the association for hiring the contractor that caused the damage. Sounds like everyone has to do what’s best for them in this situation although the legal fees could quickly outweigh the actual cost of repair. Good luck!

Hardship Case Causing Condo Rental Cap Chaos

H.S. from outside of Connecticut writes:

Dear Mister Condo,

Our association passed an amendment to the CC&R’s capping the rental of units at 17. We have 66 units. This was done in 2006 to help us keep FHA funding. Our last management company let it slide, so our new management company has gone through the hoops and we are now FHA approved again. We have a clause that allows a temporary hardship case which allows renting of a unit out for 1 year and 2nd extension of 6 months. Someone has married and his wife has 3 kids and lives in a house. He bought the condo just before the big collapse in prices. Now he cannot sell it for what it is worth. His wife was laid off. He wants to claim hardship to rent for a year. He said we had until a certain date to give him an answer for a court filing. Well we finally decided to let him do it after conferring with our lawyer. But we waited past his deadline. We have a rental list that he could get on. He has not signed up. If the current person who is number 17 on rental list and cannot get his unit rented within 60 days, he falls to bottom of the rental list. The next person on the rental list moves up to rental position. This person with the hardship case, if he signed up, would now be able to rent the 1 bedroom unit as a regular rental now, if the other 4 folks on the list allowed him to skip over them to be 1st on the rental list. Then we would be back to 17 units rented and no hardship case. This way we won’t lose FHA funding. Some folks are saying FHA is now allowing up to 50%. We are considered the old school rule of condos. I don’t want to take a chance of going over 17 units if I can help it. Will we be in trouble being over the 17 units with this hardship case?

 

Mister Condo replies:

H.S., your adherence to FHA rules while trying to accommodate a unit owner who has fallen on hard times is admirable. However, since you have already involved the association attorney in these proceedings, my best advice is to continue to seek legal advice to guide you through these murky waters. While hardship cases tug at my heartstrings, condo associations are businesses and do not have the luxury of caring about individual unit owner’s unique situations. It sounds to me like you have some very reasonable rules in place about rental restrictions. They have been in place since 2006 and, I am assuming, are in compliance with your state laws on rental caps within community associations. The unit owner’s lack of ability to sell the unit for what it was purchased for is not the business of the association. The collection of common fees from that unit owner and the enforcement of the rental restrictions and other rules of the association are the concern of the Board. If your true concern is FHA funding eligibility, you would be wise to speak with an expert in that area. I am not an expert but I would agree that the current standard of 50% is accurate as of the time of this writing. As your question so easily points out, the FHA changes the rules so today’s answer may not be true tomorrow. There are other reasons for maintaining rental caps, including quality of life for unit owners. Additionally, if you do wish to change the rental cap restrictions, you will need to hold another vote on the matter.

Confrontational Condo Owner Seeks Chair Lift for Condo Pool at Association Expense

J.S. from New York writes:

Dear Mister Condo,

Hi, I met you and your wife at the Long Island Chapter of CAI meeting last month. We have a homeowner who has lived in our association from the start about 14 years. He can be very confrontational. There have been numerous incidents involving him and the board and he and his neighbor. He has developed several health conditions. He still shops on his own and he drives on his own. He has veiled threats against the community to call the Americans for Disability and force us to put in a chair lift in the swimming pool for him. He does enter and exit the pool on his own now and there will be issues in about a month when he wears his same outdoor dirty sneakers into the pool and occasionally has unhealed sores. My question is: can he force us after all these years to construct a chair lift for him which could run up to one hundred thousand dollars?

Mister Condo replies:

J.S., I hope you enjoyed the presentation in Long Island. It was a pleasure to meet so many Chapter members and share time and stories with you. You certainly have an interesting situation on your hands. As you know, I am not an attorney nor am I an expert is New York Community Association law. However, I will offer you some friendly advice. The Americans with Disabilities Act (ADA) is designed to protect people with disabilities and allow access on public properties. Most condominium associations are private properties and are not subject to the same requirements that public businesses are. Although, there are exceptions. If your pool or club house are rented out and used “for profit”, the association may be subject to all the provisions of the ADA. So, you have a bit of a sticky wicket here. It is most certainly time to speak with your association attorney who can give you a legal opinion. Of course, a unit owner who threatens to sue is quite different than a unit owner who actually does sue. If the unit owner makes a formal request for the pool chair, contact the association attorney to determine your legal options. If you are not bound by the ADA rules, you can likely do one of two things. You could simply deny the request, citing the expense as being an unreasonable request or you could allow the installation at the unit owner’s expense, keeping in mind that the unit owner would also be responsible for the maintenance of the chair as well. You can also have pool use rules added that prohibit bathers from wearing shoes (or any footwear) in the pool and prohibit use of the pool by anyone with open soars. Check with your local Health Department for suggested rules on pool use restrictions as well. I hope that helps and I look forward to seeing you again in the future.

Required Audit for Condo Association

J.B. from outside of Connecticut writes:

Dear Mister Condo,

Are condo associations required to get an audit?

Mister Condo replies:

J.B, that is a great question! Very few states have legislated audits for condo associations as state law. That leaves the association’s governance documents. Many call for an audit in some type of timely interval; many do not. Unless the governance documents expressly call for an audit, the association is likely to audit as it sees fit, if at all. For smaller associations, an audit can be too costly or the Board may feel no need as the dollars involved are so small there really isn’t much chance of the money going missing. For larger associations, an audit is almost a requirement as there can be millions of dollars in play. Generally speaking, larger associations are more likely to have audit requirements as part of their governance documents. It is certainly recommended and a best practice to help keep theft and embezzlement at bay. Check your documents and see what they say. If they are silent on audit requirements and you feel they are needed, ask your Board to consider adding an amendment that requires an audit every so many years. You may just be helping your association develop its own best practice. By the way, auditors that specialize in condo and HOA accounting are often members of your local chapter of CAI. Be sure to check there when looking for a qualified and experienced auditor. Good luck!

Unapproved Remodel to Upstairs Condo Damages Downstairs Unit

L.S. from outside of Connecticut writes:

Dear Mister Condo,

The question I have is this, I live in a condo that has 4 units per bldg. I own mine. These condos were built in the late 50’s maybe early 60’s. Unfortunately, there is an HOA fee of 150 dollars a month and the outside of the buildings look horrible. They really need to be painted and new front and rear doors placed. The front porch is falling apart. The condos were not built like the newer ones are. Someone purchased the upstairs condo and decided that they would remodel the whole condo. There was a wall removed and other major repairs without a permit that has caused damage to my condo. I spoke to a contractor who looked at the damage and informed me that if we were to try to fix it, it would cause more damage. The upstairs condo would receive damage also. I am just wondering who should pay for the damage. The owner knows that there were issues and he wanted his handy man who caused the damage and himself to look at it. I am not sure what good that would do. Should I file a claim with my insurance company and let them fight it out or is there another way to deal with this? Am I going to be stuck with a huge bill?

Mister Condo replies:

L.S., you certainly have a lot going on inside your 4-unit building. Let me address each item separately. First up, the HOA isn’t maintaining the property as they should. There is no reason for painting to go undone other than there is no money in the Reserve Fund for the project. You mention a fee of $150. If that fee isn’t enough to cover operating expenses and set aside money for routine maintenance like painting and door replacement, there will need to be a Special Assessment and/or an increase to common fees. Neither option is popular but that is the only way to get the association back on track so it can fulfill its duty to maintain the building exteriors.

The remodeling project is another issue entirely. It sounds like the upstairs unit owner did some unauthorized and unpermitted work on their unit causing damage to your unit. It’s time to speak with an attorney about suing the unit owner for the damage. You should file a claim with your insurance if you have suffered financial damage worth filing a claim over. However, the fault is clearly with the unit owner who did the unauthorized remodel. You governance documents likely spell out what types of repairs and improvements can be made to unit interiors. If they knocked down a supporting wall, you could be looking at a very expensive repair, not to mention the potential danger you are in. I would want to get this taken care of immediately. If they are amenable to correcting the problem at their expense, you may not need to sue but, in my experience, once the dollars start adding up, a lawsuit is almost inevitable. You should be able to recover your damages though and I am hopeful that your upstairs neighbor will do the right thing. Good luck!