J.P. from Fairfield County, Connecticut writes:
Dear Mister Condo,
If condo makes decision not to rebuild, after major disaster, how is the money collected from insurance distributed?
Mister Condo replies:
J.P., it is highly unusual that an association would not rebuild although not unheard of. If your association has experienced this type of disaster, I have to assume that the association has hired an attorney to assist with the legal proceedings that would accompany such a disaster. Keeping in mind that the association, not the individual homeowners, holds the policy that would cover such a disaster. Key players, such as mortgage holders and owners, would expect to be made whole for the loss of their investments. After deductibles, the proceeds would go to the Master Association. The Master Association would then have to decide how best to reimburse the individual units that make up the association. Both association documents and state law would come into play and the courts would surely be involved. Individual unit owners would be wise to hire their own attorneys to make sure they are not overlooked in the process. And let’s not forget about the potential for insolvency on the part of the association. It is conceivable that the association might have to file for bankruptcy during the dissolution of the association, leaving both unit owners and mortgage holders on the short-end of the dissolution. Ideally, the association will rebuild and restore the units to the condition before the disaster. If that is not possible, the dissolution process would begin with the intervention of the courts and attorneys to guide the association through the process.