How Maintenance Standards Protect the Association
Recent revisions to the Common Interest Ownership Act (also known as the CIOA) offer an opportunity to defer some insurance expense liability to unit owners who do not adhere to maintenance standards for certain wear items that may fail in the interior of a condominium unit. Specifically, properly adopted maintenance standards may allow the Association to assess short falls in insurance, such as deductibles, to violating unit owners. Maintenance standards are not assumed; they must be adopted by the Board of Directors in order for the association to prevent it from having to pay short falls in insurance such as deductibles.
While helpful to associations who wish to minimize their potential losses, maintenance standards are not an automatic provision for the association. They must be adopted by the Board in the form of a resolution and the best practice is to add them to the association’s rules in order for the association to benefit. Once adopted, all unit owners must be made aware of the maintenance standards. After that point in time, the association is in a position to pass along short falls in insurance, such as deductibles that arise from an insured loss that was caused by a unit owner’s lack of adherence to a published maintenance standard.
As an example, let’s consider an older water heater that fails and causes water damage to multiple units. Traditionally, a claim would be sent to the association’s insurer and payment would be issued from the insurer, less a set deductible amount. For this example, let’s assume the deductible is $5000.00. Without having adopted maintenance standards for replacing water heaters every 7 years, the association would be left to pay the $5000.00 deductible. If the association had adopted maintenance standards for water heaters, mandating their replacement every 7 years, the $5000.00 deductible would be assessed to the unit owner with the failed water heater because they had not replaced the water heater within the time specified by the maintenance standard. Had the water heater failed in year 2 the unit owner would not be in violation of the maintenance standards.
Maintenance standards are not limited to water heaters. They can extend to almost any item that is likely to fail over time. Since water damage is the most likely culprit of insurance claims, many of the maintenance standard items are related to potential water damage. Laundry supply hoses, sink supply lines, toilet supply lines and gaskets are just some of the more commonly listed items.
Attorneys Franklin G. Pilicy and Chas A. Ryan specialize in working with community associations. If you haven’t yet passed maintenance standards for your community association, we’ll be happy to make time to discuss your options with you and help you draft a resolution to discuss and adopt at your next Board of Directors meeting. Get in touch with us today to discuss how maintenance standards can help limit association risk at your condominium or HOA.