HOA Assessment

I own a condo in Valdosta, GA, and until recently, I served as the Vice President of the HOA. I decided to step back from my role temporarily while we contemplated some crucial decisions that needed to be made by the board. Recently, our community faced the aftermath of a hurricane, which damaged two buildings. These incidents involved falling trees that caused extensive damage. In one of the buildings, a tree completely obliterated the staircase leading to the top unit, a two-story unit. Thankfully, no one suffered any harm during these events. In the other building, a tree fell onto the roof, with branches penetrating through, exposing the unit to the elements, including rain. Fortunately, the tenant who resided in this unit was indoors at the time and remained unharmed. Additionally, one of our units experienced damage from flooding, and there was some harm to the vinyl siding on several buildings.

I've provided this context to help you understand the situation. After assessing the extent of the damage and consulting with the insurance company to file a claim, we were informed that the deductible for these repairs would be $17,000 for two-bedroom units and $21,000 for three-bedroom units. In response, the board and our property manager convened a meeting to discuss the extent of the damage and expected expenses. We decided to cover the costs for the unit that suffered flooding since it amounted to significantly less than the deductible we would have to pay. However, our operating budget needed to be more adequate to cover the expenses for the other two buildings.
Consequently, the board determined that an assessment of the owners would be necessary. Only after we decided the assessment amount could we inform our owners, some of whom own multiple units, about the damage and the expenses they would need to bear for the two buildings struck by trees. The total cost of the assessment for the deductibles was calculated to be $34,000. We recognized the importance of justifying these expenses to our owners but were faced with the challenge of insufficient funds to cover all the necessary repairs. It's worth noting that if a hurricane had not caused the damage, the deductible would have been considerably lower, possibly allowing us to cover the repair expenses without needing a significant assessment.
Once the decision to proceed with the assessment was made, we calculated the amount each unit owner would be responsible for. The total assessment cost of $34,000, divided among our 56 units, equated to $600 per unit. The board promptly notified all owners via mail, outlining the details of the incurred expenses and the reasons behind the assessment. A due date was established, allowing a 30-day window for owners to submit their payments. Additionally, it was communicated that a penalty of $25 would be imposed on any owner who failed to meet the payment deadline. It's important to note that we explored various options, including breaking down the payment into three installments. However, there were concerns about expediting repairs, covering the deductibles promptly to allow the insurance companies to assess and pay for repairs, and fulfilling our financial obligations to contractors ready to initiate the repair work.

Regrettably, some owners questioned their responsibility for the $600 assessment we had determined. They believed only the owners whose units were directly affected should bear this cost. This disagreement highlighted a significant disconnect between what the HOA and the owners perceived as their responsibilities. The HOA had already consulted with our retained attorney to explore our rights and options before deciding to assess the cost of repairs to the owners. We were informed that we had the legal authority to evaluate the cost of damages to the owners.

I apologize for the lengthy response. My question is straightforward. In this situation, what rights do both the HOA and the owners have, and could we have explored alternative options to mitigate the financial burden on owners? I'm interested in your perspective on how you would approach this scenario and whether there are more effective alternatives to alleviate the financial strain we're placing on owners.

Much appreciated! We are fully aware of our responsibilities and are actively implementing the decisions we've made. Regarding owners fulfilling their assessment fee obligations, they are well-informed about the expectations and the steps the HOA is prepared to take to ensure their compliance.

Ramon, I suggest you quote verbatim here all the sections of your CC&Rs that speak to who is responsible for paying for repairs to buildings. If the CC&Rs do not allow the HOA to assess only those owners in the damaged buildings, I would be surprised.

Condo owner and former board member here.

As ElleN suggested, you should look in your CC&Rs. There should be sections that define Unit, Common Elements, and Limited (Exclusive Use) Common Elements. There should also be a section that describes Unit Owner responsibilities. Usually, a condo owner is responsible for repairs to their Unit, and the association is responsible for repairs to the Common Elements. Limited Common Elements can vary - in some communities they're Unit Owner responsibility, and in others the association takes care of them.

Then there is insurance. Insurance comes in two varieties. One is all-included, where the association's master policy will cover repairs to portions of the Units if there is an insurable event. The other is "bare-walls" insurance in which the master policy only covers Common Elements (and Limited Common Elements if those are the association's responsibility). Your CC&Rs will have a section that discusses insurance, and it will say which kind of insurance your community must carry.

So... a hurricane is an insurable event. Where this gets tricky is in cases where the association chooses not to put in a claim because repair costs are less than the deductible. If you have all-included insurance, does this mean that the association will also pick up repair costs to the Units that would have been covered by the master policy? That's a question for your insurance agent. I can't remember a similar incident in my community, so I really don't know what would happen in this case. So sort that out first.

I'm sorry to tell the other homeowners who don't want to pay for the costs of repairs that the Common Elements and Limited Common Elements belong to all of them, not just to the persons whose homes were damaged. That's what condo ownership is about, unfortunately. Their personal condo owner insurance (HO6) policies *may possibly* cover some of this, and they can talk to their insurance agents about it.

It should be stated that not paying a special assessment does fall under items the HOA can lien for. That is because they count as dues assessments. The HOA is funded ONLY by it's members FOR it's members. One can't pick and choose whom pays and whom doesn't. All the HOA can do is take the whole amount and divide evenly amongst ALL the members. Those whom don't like it, can complain and get a lien if not paid.

We had a tree fall on a house in our neighborhood. The HOA deductible was 20K. We have 107 homes. The HOA ended up only paying $1500 dollars for the tree cleanup. Why? Because the homeowner's insurance kicks in for the internal damages. The HOA kicks in for the EXTERNAL.

Make sure your HOA isn't over reaching it's responsibilities by wanting to play the "nice guy". The truth is there is a dividing line with insurances. In our case the tree was on our common property. It was on the next door neighbor's side. It crashed through a fence and the back side of a kitchen/dining room. The tree was infested with Pine Beetles which caused it to fall. The person whom owned the house the tree was in was uninsured. The home that had tree fall on it was insured. Their insurance paid the claim and then went after the uninsured party. The HOA's ONLY responsibility was to get the tree debris removed as it was on our common property. A condo/house isn't common property necessarily. The areas around it most likely are.

No issue with the insurance company. They will cover expenses for repairs. We just need to pay a 34K deductible for both buildings.

Thank you. Very insightful. We took on the expenses for one of the flooded units. It wasn't that bad. Unfortunately, we currently have a loan we are paying so taking out another loan would not be ideal. We actually have some of the reserves for the flooded unit. As for the two buildings struck by trees, we had no choice but to submit claims to the insurance companies. Reason for the assessment. Thank you for your response.

I took Ramon's comment about "taking on the expenses" to mean that the association paid them out of pocket instead of submitting a claim to their insurer. This 100% makes sense when the total cost is close to the deductible, because the association avoids the additional claim. Our insurance agent even recommends this approach to help keep premiums down.

Also, we're talking about condos here. If they have all-included insurance, that the master policy will cover parts of the unit that are normally the owner's responsibility. It's not a "precedent" - it's the difference between maintenance vs. insurable event when all-included insurance is in play.

If the association *did* cover things that should have been paid for by the owner, just because the owner complained, then yes that's asking for trouble. It would surprise me if that's the case, because it sounds like the board knows what they're doing and *they got legal advice on this*.