Flood Insurance Required By HOA?

You own the home they do not. So may not be a HOA responsibility,

So I do have a policy as well as my neighbor (vertical split town homes) but the underwriters all say that a HOA policy needs to be in place and I cannot have a personal policy for outside the building.

Have you looked through your governing documents to see if the HOA is required to maintain this type of insurance policy?

But I feel the biggest frustration is that without the HOA coverage my unit would be almost impossible to sell and no lender would approve a refinance whether I have a plan or not covering the common area.

Ben

I lived in a townhouse (3-4) per building in MA. The outside of the building (siding, roofing, landscape, etc.) was covered by the association. Yours may not insure it (as in they could afford to repair it) but it is their responsibility.

Who is telling you that you cannot sell/get a mortgage without this?

With regards to the mortgage it is Freddie/Fannie policy to have the insurance from the HOA when in a designated AE zone

I would also be concerned about this, and I agree with Benjamin's assessment of things. I agree that the insurance section of the CC&Rs is vague enough to make flood insurance optional. Personal opinion: that flirts with breach of fiduciary duty if part of the community is already in a flood plain, and we're seeing more extreme weather events that may result in the flood zone expanding depending on the lay of the land. Boards can use the business judgement defense, but in this case I don't see any options that can make up for the loss of flood coverage.

* Start by asking the board about why this coverage was dropped. It may be because of the expense, although insurers have been known to drop coverage if the insured has made too many claims. It would help to know (the latter would be a bigger issue).

* I agree it may be worth buying an hour or two of a lawyer's time to get a read on the legalities. Having the lawyer write a demand letter may be enough to get the board moving, assuming this was their decision and not something that was forced on them.

* You may need to rally your neighbors and let them know what's going on. Usually anything that will result in increased assessments is a hard sell, but they're going to be hit in their wallets anyway if this isn't addressed. They need to know that they have skin in the game.

* Since Fannie Mae/Freddie Mac require this, people whose mortgages have been sold to Fannie/Freddie may have an issue.

* The inability to obtain mortgages/refinance is a real problem, since the community will be limited to cash buyers. Not only can this drive home prices down, it makes the community vulnerable to takeover by investors. If your governing docs don't have a strong rental restriction, you could be in more trouble.

* In general I don't like lawsuits against HOAs for a host of reasons, one of which is that it's much cheaper and faster to simply move. But that option is off the table unless you're willing to sell your home to a cash buyer for whatever you can get, and most people aren't in a position to do that. And as noted, owners can't fix this since they can't insure the common elements themselves. So it looks like stand-and-fight unless walking away is possible.

Remind the board that in the event of a flood, the association/trust will have to pay to repair all of the common elements that are damaged by the flood.

I suspect the board stopped the insurance because they thought that it only benefited some of the owners, which is not actually true. The common elements belong to everyone. Maintaining and repairing the common elements is a common expense that will be paid by everyone, not just the 22 in the flood plain. So the insurance benefits everyone. Without flood insurance everyone is at risk.

If the board cannot be convinced or replaced, then get together with the other 22 owners to pay for flood insurance. You will have to work with the board to purchase the insurance in the name of the owners association/trust.

The board will have to purchase the insurance and bill the affected owners. Otherwise, the HOA's insurance agent may suspect shenanigans and refuse to go along with it. As he should, it's legally questionable.

Personal opinion: if I were one of the 22 owners, I would go along with this *only* if I viewed it as a temporary maneuver that would allow me to get the heck out of that community with my finances more or less intact. I suspect that if one of the 22 were to hire a lawyer and fight this, he'd probably win - because the HOA would be passing on the cost of an HOA expense to a small subset of owners. So this is not a long term solution.

Here where I am from you are NOT required to have flood insurance unless your property has been determined to be in a flood plain by the EMA/FEMA. (Whatever the government is responsible). Out of our 107 homes only 2 - 3 had a known flooding issue. So we had to fight to get those homes put on the flood plain qualification list so that they could qualify for the flood insurance policy. Otherwise it wasn't on their policy nor required.

It was a bit complicated as our HOA as a whole wasn't in a flood plain nor required to have flood insurance. We owned t"he property around the houses (common property) but the owners owed the house and the lot it sat on. It wasn't our common area causing the flooding nor being damaged by flooding. The flooding ONLY occurred when it rained heavily. Otherwise the water ran off in about 30 minutes after a good rain. It was more of an "act of God" conditions.

What was happening was a pipe ran from the above neighborhood was draining into our HOA property as a berm had failed. It sent the water no longer into the stream beside the HOA but directed toward a ditch running behind their homes. We found the Corps of Engineers was involved in any work that had to be done to this stream. Which they were not doing anything about. (Long story...)

We did do something about the issue by building up a new berm and adding a French drain system. (Some members complained as they felt our actions were "selective"). This is basically what our HOA could do. The homes did stop flooding. We are talking 4 foot of water in the homes... Plus able to get them to qualify for flood insurance. Only homes that need it.

So I would look further into the issue of why the flood insurance is required. You may be able to fight that battle to remove it. We had a nearby neighborhood who was able to get off the flood plain because they had not flooded in 25 years and no longer subject to flooding. They had to prove it to the city and it helped them drop flood insurance requirement. Something that held them back from home sales and refinancing.

All good points. I am just not quite clear on what this flood insurance is covering (or would cover). E.g. might it also cover the damage from the ingress of water from the common areas into one of the flood plain units (meaning it would pay for damage to the interior walls of the unit, say)?

Else from a distance, and assuming the facts as presented are correct, the situation the OP describes sounds pretty sad to me. The stuff of risk. The stuff of litigation. And yes, the stuff that argues for selling and moving, if this is even possible at some point soon.

I think that's a smart approach.

Boards often are unaware of how much risk they're taking on, not just for the HOA but for themselves personally as board members. As I'd mentioned earlier, I think this is flirting with a breach of fiduciary duty, and maybe even crossing the line.

On the other hand, you may find out it the board's hands were tied to some extent. For example, in a few communities homeowners must approve HOA budgets, and if homeowners keep voting down assessment increases and insurance premiums keep rising, the board would have no choice but to cut expenses somehow. In a case like that, it's the homeowners who need an education because they're committing financial suicide.

And I am looking at the long game. A little expense now to solve a chronic problem. I have a lot of equity in condo as I purchased at right time before MA property values skyrocketed.