Condo Law Question

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Max Lieberman

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Jul 22, 2021, 10:03:02 PM7/22/21
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Perhaps someone in this group can assist  me with this question: May a condominium association require unit owners to maintain the equivalent of homeowners’ insurance on their units? I know Florida has a statute on this, but this condo is in Pennsylvania.

 

The Declaration permits but does not require unit owners to insure their units. Many of the units are not mortgaged, and some owners are not carrying insurance.

 

The Executive Board’s concern is that a fire or water leak, for example, within a unit may cause damage to either the common areas or other units, and there may not be recourse if there is no property damage insurance.

 

Thank you for your guidance.


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Nina Whitehurst

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Jul 22, 2021, 10:12:59 PM7/22/21
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The individual owners only own airspace.  The association owns the building. The individual owners do not have an insurable  interest in the building. 

Nina Whitehurst 
Cumberland Legacy Law
Business Law, Estate Planning and Real Property
"Planning for peace of mind and wealth preservation"
330 Ridgeline Drive
Crossville, TN 38571

On Jul 22, 2021, at 9:03 PM, Max Lieberman <mlieb...@lslaw.com> wrote:


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Kearns, Thomas D.

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Jul 23, 2021, 11:58:14 AM7/23/21
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What Nina says is true but the unit owner could (and should) carry liability insurance to cover those times when they leave home with the tub water running. 

In New York I believe the board could require unit owner insurance but to be safe check the procedure for house rules or condo dec amendments in your state. 

On Jul 23, 2021, at 7:32 AM, Nina Whitehurst <ni...@cumberlandlegacylaw.com> wrote:

 The individual owners only own airspace.  The association owns the building. The individual owners do not have an insurable  interest in the building. 


Thomas D. Kearns

 

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Max Lieberman

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Jul 23, 2021, 11:58:27 AM7/23/21
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I understand what a condominium is. But condo owners can obtain insurance similar to homwowners or tenants insurance that covers them for loss of contents, personal liability, and property damage to others. That is what we are interested in.

 

Max L. Lieberman, Esquire

Max L. Lieberman & Associates, P.C.

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Blue Bell, Pennsylvania 19422-2160

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Clifford Treese

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Jul 23, 2021, 11:58:38 AM7/23/21
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The given condominium is confused concerning the insurance issue presented in the email.  

1.  The condominium association does not own real property.  This feature (and others) distinguishes a condominium from a cooperative.  The unit owners own the entire building as tenants in common with an undivided interest.  The association, however, acting through the board has the obligation and the right to obtain insurance on the building and that portion of the individual owner's real property that is part of the unit (subject to the declaration), usually certain Improvements & Betterments.

2.  The owner's personal insurance (an HO-6 or its equivalent) is a different matter.

3.  The water leak example does not make the point. The master property insurance will insure the water leak (subject to the deductible) unless the language of the master property insurance is very unique.  The most the unit owner might be liable for is the master policy deductible if the association can establish negligence.

4.  I have never seen a condominium association without property (and other) insurance.  No one would be able to buy or refinance a unit without such insurance.  Virtually all condominium unit owner mortgages have the Uniform Condominium Rider attached to their mortgage which requires, among other things,  that the borrower promise, so to speak, that the association maintains such insurance.  Further, when an owner obtains a mortgage (and if the lender intends to sell the mortgage to one of the GSEs), then the lender at closing will have to verify certain coverage aspects of the master property policy and/or require the owner to obtain and show an HO-6 at closing.

5. As to forcing a unit owner to have an HO-6 (or its equivalent) this, again, is another matter.

Cliff Treese

To view this discussion on the web visit https://groups.google.com/d/msgid/nyclarealprop/F7717146-C246-41C4-8125-7B9B7043E03B%40cumberlandlegacylaw.com.


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Paul Hogan

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Jul 23, 2021, 11:58:43 AM7/23/21
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Just off the top of my head. I suspect that the HOA insurance covers the loss with local law determining if the policy allows the insurance company to recover from the unit owner
Paul Hogan

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On Jul 22, 2021, at 7:13 PM, Nina Whitehurst <ni...@cumberlandlegacylaw.com> wrote:

 The individual owners only own airspace.  The association owns the building. The individual owners do not have an insurable  interest in the building. 

Wendy Yu

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Jul 23, 2021, 11:58:50 AM7/23/21
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In NY, especially NYC, it is unusual not to have homeowners insurance. Most condo unit owners will have their own homeowners insurance for their unit in addition to the condo’s master insurance due to the concerns you mentioned, fire, water leaks, etc.

For new condo, it is usually required. It is an absolute bank requirement if the unit is mortgaged.

Wing Y. (Wendy) Yu, Esq.
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On Jul 22, 2021, at 10:12 PM, Nina Whitehurst <ni...@cumberlandlegacylaw.com> wrote:

 The individual owners only own airspace.  The association owns the building. The individual owners do not have an insurable  interest in the building. 

Max Lieberman

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Jul 23, 2021, 12:30:26 PM7/23/21
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Thank you, Cliff.  It is your point 5 that I am asking about.

 

Max L. Lieberman, Esquire

Max L. Lieberman & Associates, P.C.

591 Skippack Pike, Suite 400

Blue Bell, Pennsylvania 19422-2160

Tel: (610) 397-1820 Fax: (610) 397-1821

mlieb...@lslaw.com | www.lslaw.com

 

From: nyclar...@googlegroups.com <nyclar...@googlegroups.com> On Behalf Of Clifford Treese
Sent: Thursday, July 22, 2021 11:15 PM
To: nyclar...@googlegroups.com
Cc: Clifford J. Treese <cliffor...@gmail.com>
Subject: Re: [nyclarealprop] Condo Law Question

 

The given condominium is confused concerning the insurance issue presented in the email.  

Max Lieberman

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Jul 23, 2021, 12:30:29 PM7/23/21
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Thank you. Yes, lenders require it, and it would be wise for a unit owner to carry it even when there is no loan, but can the Condo Board require it when there is no loan?

 

Max L. Lieberman, Esquire

Max L. Lieberman & Associates, P.C.

591 Skippack Pike, Suite 400

Blue Bell, Pennsylvania 19422-2160

Tel: (610) 397-1820 Fax: (610) 397-1821

mlieb...@lslaw.com | www.lslaw.com

 

From: nyclar...@googlegroups.com <nyclar...@googlegroups.com> On Behalf Of Wendy Yu
Sent: Thursday, July 22, 2021 10:38 PM
To: nyclar...@googlegroups.com
Subject: Re: [nyclarealprop] Condo Law Question

 

In NY, especially NYC, it is unusual not to have homeowners insurance. Most condo unit owners will have their own homeowners insurance for their unit in addition to the condo’s master insurance due to the concerns you mentioned, fire, water leaks, etc.

Clifford Treese

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Jul 23, 2021, 7:44:04 PM7/23/21
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Max

Thanks for the follow up.  The data on enforcing an HO-6 requirement in a condominium by the association itself is sparse.  This is because it is a lot of admin work and the association would have to pay to have the coverage tracked.  Another problem is actual enforcement --- if you find someone without an HO-6, unlike a mortgage lender that can lender-place (force-place) coverage, there is no such market for the everyday condominium to force-place HO-6 coverage.  Someone tried to create such a market a few years ago, but I don't know what happened.  And, a smaller, but still important problem is what if a person cannot get an HO-6 becauses of prior losses.  The uninsurable person would have to go to the state's FAIR which would be expensive for limited property coverage and maybe no liability insurance.  

Let me know if this helps.

Cliff

To view this discussion on the web visit https://groups.google.com/d/msgid/nyclarealprop/MN2PR13MB3501F2725BE3C3CB61FC23EDCAE59%40MN2PR13MB3501.namprd13.prod.outlook.com.

Chris Minor

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Jul 23, 2021, 7:44:13 PM7/23/21
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Having discussed the nature of condominium ownership and the type of insurance, we get down to the actual question:  can such insurance be required by fiat of the executive board?

It's stated that the Declaration does not require such insurance, but permits it.  This provision alone suggests that the declaration contemplates that such insurance is optional.  Boards of directors of such associations typically adopt rules and regulations not found in the declaration.  There is room for much argument as to the scope of such authority, but ultimately I think it comes down to analysis of two things: (1)  the language in the declaration delegating discretionary authority to the Board and (2) applicable provisions of state condominium laws. 

I have no idea what the Declaration may say about Director authority (and I can't even speculate about state laws).  However, I do believe that the mention of this type of insurance, with language that suggests it is optional, and nothing to suggest that the Board has authority to make it mandatory, makes it unlikely that a court would find that the Board does have such authority.

CM

Miriam Jacobson

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Jul 23, 2021, 7:44:17 PM7/23/21
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In a condo, and even in a co-op, the unit owner is responsible for the interior of the unit and damages to it. Therefore, the HO-6 covers the unit owner's interest in the interior improvements, which are not covered by the Association's interests in the building itself and the common elements. If the unit owner is not insured separately for her/his/its/their interest, they would have to go out of pocket to repair those damages. And the condo or co-op documents may require that unit owners carry such coverage.

State law may vary.

Miriam
From: Miriam N. Jacobson
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Philadelphia PA 19103-1431
Tel.: 267-330-0699


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Max Lieberman

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Jul 23, 2021, 9:59:32 PM7/23/21
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Thanks, Miriam,  It has been a long time since we conversed.

 

The board member who raised the question was concerned about damage caused by an owner to either property of another owner or the common area. Basically, just worried about deductibles.

Max Lieberman

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Jul 23, 2021, 9:59:36 PM7/23/21
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Thanks, Cliff. I am coming to the conclusion that it is not a good idea, because it would protect against only two losses: the deductibles of an injured owner, including the association, or the losses of an uninsured owner. Why would we want to force someone to insure against these two risks? Doesn’t make sense to me.

Nina Whitehurst

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Jul 24, 2021, 4:05:02 PM7/24/21
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Yes that is quite true, Max, and it is what I always recommend. I thought that they were being asked to insure the building rather than their contents and for liability. 


Nina Whitehurst 
Cumberland Legacy Law
Business Law, Estate Planning and Real Property
"Planning for peace of mind and wealth preservation"
330 Ridgeline Drive
Crossville, TN 38571

On Jul 24, 2021, at 8:33 AM, Max Lieberman <mlieb...@lslaw.com> wrote:



Miriam Jacobson

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Jul 24, 2021, 4:05:05 PM7/24/21
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My personal experience is that there’s no way to cover deductibles, they are the responsibility of the unit owner. I’ve had to eat the deductible a couple times when the loss was not my fault but the fault of other owners who caused the damage. Did I try to argue that the association or the other owner should pay the deductible? Yes. Was I successful? No. That’s just the way it works. 

Still, each unit owner should carry H06 insurance to cover their own losses. The enforcement mechanism should be through rules and regulations that impose fines or other penalties for failure to carry the coverage. 

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Gail Marcus

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Jul 24, 2021, 4:32:02 PM7/24/21
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There’s insurance called vacancy insurance. It’s pretty easy to get. 

Gail Marcus, Esq. 
2 Penn Center
Suite 1020
Philadelphia, PA 19102

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On Jul 24, 2021, at 4:05 PM, Nina Whitehurst <ni...@cumberlandlegacylaw.com> wrote:

 Yes that is quite true, Max, and it is what I always recommend. I thought that they were being asked to insure the building rather than their contents and for liability. 

pwalt...@aol.com

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Jul 25, 2021, 4:16:23 PM7/25/21
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If the discharge hose on a unit owners washing machine disconnects from the appliance, damaging common elements, I believe the unit owner is liable for the repairs. 


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Subject: Re: [nyclarealprop] Condo Law Question

V LEE

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Jul 25, 2021, 7:18:46 PM7/25/21
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Absolutely which is why a homeowner wants to carry homeowners insurance.

On Jul 25, 2021, at 4:16 PM, pwalt35907 via nyclarealprop <nyclar...@googlegroups.com> wrote:


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