Tag Archives: Financial

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!

Withholding Repairs to Delinquent Condo Unit Owner

M.B. from outside of Connecticut writes:

Dear Mister Condo,

Can a condo board withhold unit repairs to an owner who is delinquent?

Mister Condo replies:

M.B., that is a loaded question with lots of possible answers! Since I am not an attorney, I must recommend that you speak with a qualified community association attorney from your area to determine if withholding repairs is within the association’s rights. Typically, my answer would be that the association has a duty to upkeep and maintain all common elements as they are property of the association and not the individual unit owners. The association’s governance documents clearly state what is the association’s duty to maintain. This would usually include parking lots, landscaping, amenities like pools, sidewalks, roofs and building exteriors. Now, if a unit owner became delinquent in their common fees and needed a roof replaced over their unit, the association would still have to maintain that roof because they own it, not the individual unit owner. Failure to maintain a common element would be akin to cutting off your nose to spite your face. It will still need to be done whether the unit owner living under that roof is delinquent or not. I think the more important question here is what steps the association CAN take to either bring this unit owner up to date with fees or force a foreclosure where by the association evicts the unit owner, and, hopefully, replaces the unit owner with a dues-paying owner. If you haven’t already done so, consult with your association’s attorney and make sure the proper steps are being taken. Good luck!

Can the Condo Property Manager Sue Me?

M.Z. from outside of Connecticut writes:

Dear Mister Condo,

Has the property manager the right to fine me or sue in court?

Mister Condo replies:

M.Z., I am sorry you find yourself at odds with your Property Manager and now need to inquire if you can be fined or sued. The answer to both questions is yes, but with a few caveats. Property Managers work for the association and are granted their powers to enforce the covenants of the association by virtue of their contract with the Board to do so. They cannot make up offenses that you can be fined for. If you are in violation of your community’s rules and regulations, the Property Manager can issue you fines as outlined in the governance documents and in accordance with local and state law. In many states, unit owners who have been cited for violating rules must first be summoned to appear before the Board and state their case before the fine is issued.

Suing you is a different matter entirely. As an individual, almost anyone can sue anyone in this country. The Property Manager can follow the Board’s instruction to bring suit against a unit owner for a couple of reasons. The most common is that the unit owner is in arrears with the association. Delinquency of common fees or special assessments are the most common reasons an association would sue a unit owner. An ongoing dispute over architectural compliance issues is another. In both of these instances, the Property Manager is acting on behalf of the Board. If you and the Property Manager got into an altercation (I hope not!) and the Property Manager decided to sue you personally, that is certainly their right.

The bottom line is that you should speak with an attorney if you are being sued. Personally, and professionally, the Property Manager can bring suit against you. You will want to defend yourself. I hope it doesn’t come to that. Good luck!

Condo Operating Expense Versus Reserve Charge

J.N. from Fairfield County writes:

Dear Mister Condo,

When is an operating expense really a Reserve Charge?

Mister Condo replies:

J.N., typically speaking, operating expenses are those expenses which are incurred during the regular course of business during a calendar year for the association. There are exceptions, of course, as there are some expenses that recur at intervals outside of the calendar year that are still operational in nature. Reserve Charges, on the other hand, are quite specifically collected and deposited in the Reserve Fund. Additionally, many associations have specific Reserve Fund components, meaning funds are collected in Reserve for the roof or the parking lot or the buildings or the pool and tennis courts, and so on. These funds should not be mingled with Operating Funds, which further help to identify them as Reserve Charges. If your association is doing something else when collecting Reserve Charges (paying insurance bills or management fees, for instance) then they are not handling Reserve Charges correctly and could find their use of these funds questioned by a concerned unit owner like you. Hope that helps. Good luck!

Jersey Co-op Unit Owner Strong-armed into Questionable Repairs

L.S. from New Jersey writes:

Dear Mister Condo,

I have unit in a large co-op (almost 500 units) which is rented out. The Manager of the co-op is pushing me into renovation of 2 bathrooms in this unit. The claim is that high moisture reading in adjacent hallway is caused by my bathroom. The reading of moisture is provided by co-op engineer who does what Manager wants. The Board doesn’t want to help. The Manager has only 2 approved contractors who do all work in co-op and gets paid from them (no proof, all cash). The Manager has same bullying background and law suit from previous work place (co-op) requesting unit owners to do unnecessary repairs and getting kickback.  Both bathrooms have no visible defects and look perfect from inside. What can I do? The Board doesn’t respond to my complaints. I wrote to them showing Manager’s background. All correspondence goes through Manager. Is there any organization that protects unit owners in co-op in NJ?

Mister Condo replies:

L.S., thank you for writing. I am sorry for your situation. I am not an attorney so I cannot offer you legal advice. You are describing a particularly legal situation that may very well require legal action to settle. Further, since the Board isn’t amenable to take your side and question the tactics of the Property Manager, that leaves you alone in your battle. If you can’t afford an attorney to represent your best interests you may have little other practical choice but to sell the unit and buy elsewhere.

In NJ, the Department of Community Affairs is tasked with investigating allegations of HOA abuse, which this may fall under. Their website is http://www.nj.gov/dca/divisions/dhcr/ and I encourage you to look there and see if there isn’t a resource to assist you. Good luck!