In my 7 years here at Rickert/Full Circle I can’t begin to tell you the number of claims I have handled-from a fire that killed a wheelchair resident to a fire that took out 3 condos to smaller fires, a flood so bad the water came out under the front door, to numerous floods/molds/roof leaks/dog attacks etc. The common denominator: The unit owner claims the condo insurance should pay! The answer will be given here in this report but first you need to understand a few concepts:
Negligence: Failure to use reasonable care. You can’t be negligent if you didn’t know. If you knew about a roof leak and did nothing, then that’s an issue.
Deductible: How much of a claim is not covered by insurance.
Insurance coverage: Insurance is for calamities, not if something gets old and stops working. If you have a 3 year old roof damaged by a windstorm that’s covered but a roof that is 25 years old and starts to leak is not covered.
Up to code: If a condo was built without housewrap in 1975 it is not built to code today. Is that wrong? No, it just wouldn’t pass today but it passed in 1975. Up until recently bathroom exhausts were not required to vent outside so they vented to the crawl space or attic-all legal. So every day those fans exhausted wet moist air unto attics which then grew mold (surprise!) and guess what: your attic, your fan, your responsibility!
So what if you get damage from a condo owned thing-like a roof? Roofs are condo common area, roofs leak, leaks damage ceilings-right? Who fixes the roof? Condo. What about the inside leak caused by the roof leak? Here is what Robin Strohm, esteemed attorney specializing in condo law, says:
Interior damage from exterior leak- How the damages to the interior of the Unit are dealt with depends on the $ amount of damage to the interior and exterior. If the $ amount of damage to the interior and exterior of the Unit is over the association’s insurance deductible, the association should file a claim with the association’s carrier. The association’s insurance will then pay for all damages, whether in the Unit or outside of the Unit, which are over that deductible amount. The owner is then responsible for Unit repairs (or components of the Unit) which are under that deductible amount. The association is responsible for common element repairs below the deductible. If the $ amount of damages is less than the deductible, the owner pays for all repairs to the Unit or component of a Unit and the association pays for the common element repairs. Here are some examples of both instances:
Example of association insurance- The damages to the interior of the Unit and exterior (or common elements) total $15,000.00. The association’s deductible is $10,000.00. The association would file a claim and any damages to the Unit and exterior would be paid by the association’s insurance in the amount of $5,000.00. Because there is no insurance under the association’s deductible amount ($10,000.00), the owner pays (or files his or her own insurance claim) for all damages to the Unit or components of a Unit that are not covered by the association’s insurance. The association covers damages to the common elements below that $10,000.00. Owners should be made aware that the association’s insurance will not cover all damages to the interior per the Declaration and they should have their own H06 policy to take care of Unit repairs even if the repairs are caused by an exterior source or damage. Just because there is a roof leak does not mean the association is negligent and the association would not be responsible for payment of interior repairs below the deductible amount.
Example of below deductible amount- If the damages to the interior of the Unit and exterior (common elements) total $4,500.00. The association’s deductible is $10,000.00. The owner pays for or files claim with his or her own insurance for repair of damages to the Unit or any component of the Unit and the association pays for any damages or repairs to the common elements. Each party covers their own maintenance and repair responsibilities.
So it still seems a bit clunky. To go a bit further in this Robin, at a later date, explained:
Let’s assume the damages to the Unit are 80% and the damages to the Common Elements are 20%. The %’s of damages would be determined by reviewing the
estimate from the contractor for repairs to both the Unit and Common Elements. Using these %’s of 80/20, the owner would pay 80% of the deductible ($4K) and the Association would pay 20% ($1K). The exception to using the %’s attributed to the Unit or Common Elements, is if the Association or Unit Owner are negligent- then the negligent party would pay the entire deductible.
But Robin-the condo owner says its not their roof therefore the condo should pay?
“Just because a roof leaks does not mean the Association is negligent. Sometimes roofs leak and the only way the Association would be negligent is if the Association had known there was a leak or an issue with the roof and failed to take steps to correct it. But, if there is a leak and the Association takes steps within a reasonable amount of time to correct the problem, the Association is not being negligent”
So there you have it. If it’s a condo issue but below the deductible then you fix whats yours! If above the deductible you pay a portion of the deductible based on your percent of the claim. If its your exhaust fan blowing into your attic then its your issue.
Clear as mud?
By Dennis Swartz, MBA, Licensed Real Estate Broker with almost 40 years
experience in real estate investing and teaching and condo management.