2-Unit Condo Doing It All Wrong!

A.L. from Massachusetts writes:

Dear Mister Condo,

I recently purchased 1 out of a 2-unit condo that was bank-owned. There is no association/condo fee. We found out after we purchased (when we tried to make a payment of our portion of the insurance) that the master policy is under my neighbor’s name and my husband and I cannot make any decisions, initiate claims or even contact the insurance as they will not speak to us. So we basically have to give the neighbor a check every month for half of the amount as it is deducted automatically out of his checking account. This, of course, didn’t make any sense to us. Why do we have to give a check to him? He is not our landlord! If something happens to our roof, why do we have to wait for him to initiate a claim, what if he is out of town, what if he is lazy and takes his time initiating a claim on our behalf-as joint condo owners, shouldn’t we have joint decision-making? We confronted him with all of these questions and he, not only refused to make any changes to the policy, he also refused to give us a copy of the current policy claiming that because the previous owners of our unit defaulted on their mortgage, to avoid his homeowner’s insurance from being cancelled, he had to assume full responsibility of the payments. I am aware that you are not able to provide any legal advice here but if you could provide some information regarding what general rules or guidelines apply in these situations would be appreciated. Thank you!

Mister Condo replies:

A.L., for reasons like these, I often find myself shaking my head when I learn of the potential horror stories that come from purchasing one unit of a two- or three-unit condo association. Many times, these are simply old multi-story homes where a previous landlord decided there was a tax benefit in converting the property from a multi-family to a condo. However, the governance problems that can and often ensue replace the sweetness of condo living with the bitterness of the reality that what you have purchased is a real estate investment trust that is only as good as the folks that are your fellow owners. Your only option is likely going to be legal because the guy controlling all of the important items isn’t looking to play by the rules of the condominium. This can be expensive for you and your neighbor so it is really in everyone’s best interest that the condo is run like a condo but, to date, the other unit owner isn’t doing that.

Ultimately, the master policy needs to be in the name of the association, not an individual. There needs to be an operating account set up for checking where common fee payments are made. The common fees need to include the insurance premium. The fact that the previous owners defaulted on their mortgage is of no consequence to you although I am sure he did have to assume full responsibility of the payments at that time because the insurance wasn’t properly in place to begin with.

As you have mentioned early on, I am not an attorney so my advice is to be taken as friendly. I hope you can reach a friendly solution but my instinct tells me that the two of you are each going to need attorneys to get this ironed out. On the upside, once this insurance situation is settled, you shouldn’t have any further problems. Talk to an attorney and get a legal opinion. Good luck!