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i have searched our condo documents and nothing addresses our situation. five units of the 6 of us have paid all the flood, etc. insurance costs for the last 3 years through our dues. this last owner who was in the mortgage business and has about 5 mortgages on the property, rents out the property in the summer and collects a substantial amount. in the meantime they have benefitted from our putting on a new roof and new building facade (over $50,000).

for the last 2 years or more, we have been hearing about a short sale but it hasn't happened. in the meantime, we filed a lien for our back dues.

however now hurricane sandy has caused substantial damage to our condo and it will have to be rebuilt. the insurance could possibly cover rebuilding, but more than likely we will have to put in additional personal money to which that 6th unit will not contribute. then, i think we would be unlikely to ever recoup their share of what they should have paid.

but in the unlikely situation that the insurance amount was over and above what we needed, it seems very unfair that they should receive a portion of it. if none of us had paid up the insurance, we would get nothing back, so why should they get anything.

i am going to start another thread with a question about eminent domain and what the town and state are trying to do to our property.

thank you for any ideas, suggestions, etc.

Member Summary

Is it an end unit?
If so break out a chainsaw and make it a fiveplex.

Why would somebody not pay dues just because they rent out their unit? That doesn't make sense.

tjguitar85 said:   Why would somebody not pay dues just because they rent out their unit? That doesn't make sense.

The owner collects large sums of money from the rental, yet still stiffs the other five owners in the condo association. That's what he's saying.

As I understand it, the sixth owner has not paid his HOA dues. Why has the HOA not chased him for them?

You need to spend the money...everything that comes out of your monthly assessments, or any special assessments that have been passed by the board.

If this other person isn't paying you may need to issue an additional special assessment to cover the fees.

Assessments are for all owners - so although he may not be paying now, he is still obligated to pay them.

You already have a lien against the property - so if he tries to sell he will be out of luck.

I think your biggest danger is if he declares bankruptcy or simply disappears.

Chances are though, you will get your money back either through him or through the bank.

I assume the "totaling" of the building is mostly the outside? You should only be fixing the common elements - everything from the drywall and in should be your personal home-owner's insurance.

We had a similar situation here in Chicago - no damage, but an owner delinquent on fees. She had moved out and after a few months didn't pay fees anymore. There are some laws here which allowed us to take control of the unit and rent it out and use the proceeds to fund any monies owed and work put into the unit. We ended up getting the owner to sign something to make this easier for us, but I think technically we could have seized it somehow if necessary.

I'm surprised you have let it go on this long. At this point it is probably in your best interest to engage a local attorney who specializes in these matters if you have exhausted all communication paths with the owner.

If the other unit holders feel the same way, can't the HOA (which you control) vote on how the funds are spent and allocate none for the 6th unit holder? Perhaps say that each unit holder gets insurance money based on the dues paid.

Again - you should have umbrella insurance for the building and individual insurance for your units. The only think you need to be concerned about is the Umbrella insurance.

This will be paid out to the association to fix the common elements. If any money is left over, it is unlikely that it would be paid out to unit owners - it would likely stay in reserves.

If there was a vote to somehow distribute this to owners - you simply wouldn't give the delinquent owner his share, since he already owes money - you would just take it off his balance.

It looks like the association can initiate foreclosure:

http://www.judiciary.state.nj.us/rules/r4-64.htm

However, it sounds like the owner owes more to banks than the place is worth now. But it still might be worth foreclosing though.

Don't live in flood prone areas (they can flood).

Don't be a part of an HOA (you are tied to the hip financially with your neighbors).

I'd foreclose on him first then do the rebuild

When units known to be rentals in the community I live in get behind on HOA dues, we take action to place the unit in receivership. All rental income then passes to the HOA until debt is paid.

This only really works for us when a unit is a total rental, tho. If it's owner-occupied things get far more difficult to collect.

The condo I rent has a rental addendum to their bylaws requires an addendum to all rental agreements -- that is countersigned by the owner and renter -- allowing the association to collect rent directly from renters when association dues are past due, and then send the net to the landlord.

I realize that for beach rentals it is harder to enforce, but having something like that in your bylaws -- assuming that it's legal in your state -- might be useful going forward.

For my building they allocate the HOA fees based on Square footage of the individual units. How are your HOA dues divided amongst the units? Is it divided by just the 5 units evenly? If it were my building it seems they should split the reimbursement money between the units based on square footage of units then deduct the amount of HOAs in arrears from the delinquent owner's settlement. Any difference would go to the deadbeat owner.

BenH said:   Again - you should have umbrella insurance for the building and individual insurance for your units. The only think you need to be concerned about is the Umbrella insurance.

This will be paid out to the association to fix the common elements.


This is incorrect. Umbrella policies deal with casualty, not property. The only thing that would respond to a flood event would be an underlying FEMA NFIP Condo master policy, individual FEMA NFIP policies and any potential excess flood policy bought on the private market. Those are few and far between.

The master flood policy for the condo will likely cover all six units. The master policy does not care if one unit owner did not pay his dues, rather the association has ended up picking up his portion of the premium. It sounds like the association has a judgement against him for the past due dues. Included in this judgement is the premium that should have been paid. So effectively, you (the collective) have fronted him the premium for his share of the master policy while holding a lien on unpaid dues. Once you recover the dues, you have been made whole, as if he had paid the dues.

The condo association master flood policy will pay a lump sum for all six units. The distribution will be made to the association. The association will hold those funds in escrow and pay contractors as work is done. In my opinion, his portion of the proceeds should be set in escrow until the lien is settled. Rebuilt the entire six unit, however if I were in control of the funds and building process, I would only frame his portion and finish the exterior. Rough in plumbing, no fixtures, no floor finishing, no drywall, nothing interior except as required by code, and hold the proceeds for interior repairs until he settles up his bill.

I won't claim to be an expert...but I did serve on the Board of my HOA (8 unit building in Chicago). From my understanding the Condo Master policy (which I referred to as "Umbrella"...my terminology may be wrong) is held by the association and paid for by owner assessments.

This master/umbrella policy covers the entire building if a disaster were to strike. I do not know if flood is covered...or if that is a special policy we would have needed to buy. Since we are in Chicago, it is unlikely we would be destroyed by flood. But, let's say...fire. If our entire building burned down this master/umbrella policy would rebuild the building itself, including all common elements (plumbing, electrical, stairway, windows, etc.). They would stop at the drywall to the units. It is up to the individual owner's polices to cover from the drywall out.

So, again, perhaps the term "umbrella" has another connotation, but what I mean was that there is usually a master policy owned by the association to cover the main building - but it does not cover the innards of individual units.

For the most part though I agree with what you are saying up until the last part....the master policy will *only* cover up to the framing of his unit in any case - anything else would be covered by his individual policy. At least, that's how I understand our master policy to work.

Again, unless there is some special policy that deals only with floods that works differently....

evmocas said:   BenH said:   Again - you should have umbrella insurance for the building and individual insurance for your units. The only think you need to be concerned about is the Umbrella insurance.

This will be paid out to the association to fix the common elements.


This is incorrect. Umbrella policies deal with casualty, not property. The only thing that would respond to a flood event would be an underlying FEMA NFIP Condo master policy, individual FEMA NFIP policies and any potential excess flood policy bought on the private market. Those are few and far between.

The master flood policy for the condo will likely cover all six units. The master policy does not care if one unit owner did not pay his dues, rather the association has ended up picking up his portion of the premium. It sounds like the association has a judgement against him for the past due dues. Included in this judgement is the premium that should have been paid. So effectively, you (the collective) have fronted him the premium for his share of the master policy while holding a lien on unpaid dues. Once you recover the dues, you have been made whole, as if he had paid the dues.

The condo association master flood policy will pay a lump sum for all six units. The distribution will be made to the association. The association will hold those funds in escrow and pay contractors as work is done. In my opinion, his portion of the proceeds should be set in escrow until the lien is settled. Rebuilt the entire six unit, however if I were in control of the funds and building process, I would only frame his portion and finish the exterior. Rough in plumbing, no fixtures, no floor finishing, no drywall, nothing interior except as required by code, and hold the proceeds for interior repairs until he settles up his bill.

While, I am an expert (often utilized as an expert in court) in both general claims adjusting and policy interpretation , I concede that there are minor coverage variances by state and policy form. Having said that, 95% of condo association master policies are written under the standard ISO form. You are correct that the association holds the master policy and pays the premiums which is typically pulled from the unit owners dues (not assessment).

All master policies cover the exterior of the building and framing. Depending upon the state and their adoption of the Uniform Condo Act, coverage may or may not be extended to the cover drywall, flooring, fixtures, etc. Most states adopted similar acts which clarified master policy versus unit owner policy coverages. This has made adjusting these claim MUCH easier. Most states adopted these acts in the 1980s, thus those built subsequent to the act will include coverage for drywall, builder grade paint, flooring, etc. Basically what was there when the unit was originally sold. Upgrades such as wallpaper, improved flooring, upgraded cabinets, etc would be the unit owners responsibility, thus the unit owners individual coverage (additionally and typically also insuring personal liability and personal contents).

As to the specific peril of flood (defined as surface water entry regardless of wind driven or not), in handling and/or reviewing tens of thousands of claims, flood is not covered under the master policy nor the individual policy. That is where FEMA and the NFIP (National Flood Insurance Program) come into play. The association can buy this coverage on a master policy level (Residential Condominium Building Association Policy Form aka RCBAP)and the individual unit owners can buy it on a unit owners level. Most likely you did not have flood coverage in Chicago unless you were adjacent to a river system in a higher risk flood zone. The flood program responds similarly to the above states general perils policies.

Below is a link to a great 4 page summary of NFIP. Folks in flood prone areas should note what is covered, particularly in regards to elevation limitations. Note the RCBAP coverage limit for buildings is a max of $250,000 x number of units insured. If higher limits are required per unit, then it's off to the excess flood markets which, needless to say, are quite expensive.

http://www.floodsmart.gov/floodsmart/pdfs/NFIP_Summary_of_Covera...

http://www.floodsmart.gov/floodsmart/pages/residential_coverage/...

BenH said:   I won't claim to be an expert...but I did serve on the Board of my HOA (8 unit building in Chicago). From my understanding the Condo Master policy (which I referred to as "Umbrella"...my terminology may be wrong) is held by the association and paid for by owner assessments.

This master/umbrella policy covers the entire building if a disaster were to strike. I do not know if flood is covered...or if that is a special policy we would have needed to buy. Since we are in Chicago, it is unlikely we would be destroyed by flood. But, let's say...fire. If our entire building burned down this master/umbrella policy would rebuild the building itself, including all common elements (plumbing, electrical, stairway, windows, etc.). They would stop at the drywall to the units. It is up to the individual owner's polices to cover from the drywall out.

So, again, perhaps the term "umbrella" has another connotation, but what I mean was that there is usually a master policy owned by the association to cover the main building - but it does not cover the innards of individual units.

For the most part though I agree with what you are saying up until the last part....the master policy will *only* cover up to the framing of his unit in any case - anything else would be covered by his individual policy. At least, that's how I understand our master policy to work.

Again, unless there is some special policy that deals only with floods that works differently....

evmocas said:   BenH said:   Again - you should have umbrella insurance for the building and individual insurance for your units. The only think you need to be concerned about is the Umbrella insurance.

This will be paid out to the association to fix the common elements.


This is incorrect. Umbrella policies deal with casualty, not property. The only thing that would respond to a flood event would be an underlying FEMA NFIP Condo master policy, individual FEMA NFIP policies and any potential excess flood policy bought on the private market. Those are few and far between.

The master flood policy for the condo will likely cover all six units. The master policy does not care if one unit owner did not pay his dues, rather the association has ended up picking up his portion of the premium. It sounds like the association has a judgement against him for the past due dues. Included in this judgement is the premium that should have been paid. So effectively, you (the collective) have fronted him the premium for his share of the master policy while holding a lien on unpaid dues. Once you recover the dues, you have been made whole, as if he had paid the dues.

The condo association master flood policy will pay a lump sum for all six units. The distribution will be made to the association. The association will hold those funds in escrow and pay contractors as work is done. In my opinion, his portion of the proceeds should be set in escrow until the lien is settled. Rebuilt the entire six unit, however if I were in control of the funds and building process, I would only frame his portion and finish the exterior. Rough in plumbing, no fixtures, no floor finishing, no drywall, nothing interior except as required by code, and hold the proceeds for interior repairs until he settles up his bill.

evmocas said:   While, I am an expert (often utilized as an expert in court) in both general claims adjusting and policy interpretation , I concede that there are minor coverage variances by state and policy form. Having said that, 95% of condo association master policies are written under the standard ISO form. You are correct that the association holds the master policy and pays the premiums which is typically pulled from the unit owners dues (not assessment).

Not to be picky - but there is nothing wrong with calling them "assessments." In fact, as far as I can "google" the most popular terms for the monthly amount you pay to an association is "assessments", with "fees" and "dues" trailing behind as alternatives. This however *may* be a regional thing - but they are almost exclusively called "Monthly Assessments" in Chicago.

Granted, some might find it confusing because there are both monthly assessments as well as "special" assessments that might be levied - but nonetheless there is nothing incorrect in terming these assessments.

Thanks for the other info you gave - most of my knowledge came from speaking with my individual policy carrier who explained what they are responsible for. I know they specifically said my policy covers "drywall out." I will re-investigate what our current master policy states when I have some free time.

I'm probably not adding anything new, but in my view, I think there might be a separation in past dues that are uncollected and repairs from the insurance policies, etc.

This means that maybe all the repairs, even those that benefit him, should be made according to the policies that the HOA has in place. You can also begin the legal process to collect on what he owes - it just happens to be at the same time, but doesn't necessarily have to be, and that's because it should be viewed independently. There are 2 issues here rather than 1.

Where I am trustees set the collection rules when there are issues not solved by the condo docs. The rule here is for the association to collect money (collect monthly rent payments) directly from the renter occupied unit if the owner is 60 days late.

Renter occupied units provide for quick recovery of unpaid owner fees. Owner occupied units are more difficult.

My guess is that your association will need lots of lawyer help which comes at a very high price.

My guess is that your building is self-managed, and there is no management company.

Many 6 unit buildings are self-managed just fine. Having a full service management company is expensive. After your building is rebuilt, another idea would be to search for a company that offers part-time condo management that only deals with billing so when a problem pops up they will know how to nip it in the bud.

Just wanted to offer my condolences to the OP regarding the hurricane damage endured.



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