HOA and Assement for Common Area

Hi Pat:

Why is insurance not available?

The bulk of the answer to your question will potentially be found in your governing documents. In essence what do they state with regards to assessments or special assessments?

Here is a link for your state statutes:
http://oregon.statelawyers.com/Statutes/Index.cfm/StateID:37/ID:39274

This section has the following information:

94.630 - Powers of association

(k) Modify, close, remove, eliminate or discontinue the use of common property, including any improvement or landscaping, regardless of whether the common property is mentioned in the declaration, provided that:

(A) Nothing in this paragraph is intended to limit the authority of the association to seek approval of the modification, closure, removal, elimination or discontinuance by the owners; and

(B) Modification, closure, removal, elimination or discontinuance other than on a temporary basis of any swimming pool, spa or recreation or community building must be approved by at least a majority of owners voting on the matter at a meeting or by written ballot held in accordance with the declaration, bylaws or ORS 94.647;

Regarding insurance this section would apply:

Oregon Statutes

94.675 - Insurance for common property
(1) The board of directors of an association shall obtain:

(a) Insurance for all insurable improvements in the common property against loss or damage by fire or other hazards, including extended coverage, vandalism and malicious mischief. The insurance shall cover the full replacement costs of any repair or reconstruction in the event of damage or destruction from any such hazard if the insurance is available at reasonable cost; and

(b) A public liability policy covering all common property and all damage or injury caused by the negligence of the association.

(2) Premiums for insurance obtained under this section shall be a common expense of the association. The policy may contain a reasonable deductible and the amount thereof shall be added to the face amount of the policy in determining whether the insurance equals at least the full replacement cost.

This section covers assessments:
94.704 - Assessment and payment of common expenses

(5)(a) Except for assessments under subsections (6), (7) and (8) of this section, the board of directors shall assess all common expenses against all the lots that are subject to assessment according to the allocations stated in the declaration.

As you will note above it only references "allocation stated in the declaration".

These type of situations are exactly why there is a section involving "Special Assessments". It's the abillity for the members to call a special meeting and vote to divie up the necessary money for a large project. This way no one owner has to pay thousands of dollars when it's ALL the owner's responsibility.

I didn't think the HOA would qualify for any federal funds for this repair. If anything at all, they may qualify for a LOW to NO INTEREST LOAN for disaster areas. The government in disaster situations usually makes funds available to LOAN those effected by major disasters. These low interest loans are ONLY available IF the government declares the area a disaster area. If they don't designated it a disaster area, then the commercial loan rates apply. This basically allows those effected to be able to afford to do repair work necessary.

Your HOA could qualify for one of these type loans instead of having a special assessment. However, it would depend on the financial situation of your HOA. A raise in dues may be necessary to cover the loan payments. Which some documentation allows without a special vote while other significant hikes do require majority member approval. READ your documentation!

I agree, why is there no insurance money? I cant imagine a HOA not having insurance on common areas.

Hi Pat:

Due to the amount of money involved I highly agree with Tim’s “Note” above. This is the main reason I also recommended checking with an attorney. Keep in mind having the membership decide if they would like to keep or eliminate the amenity due to costs, as noted in the above statute, will insure community harmony and avoid potential legal litigation.

Keep us informed as it could assist others in a similar situation. I am very sorry for what your HOA has experienced and we wish you the best in your endeavors.