June 2012 – An HOAleader.com reader writes, “What policies can a board implement to ensure the association is paying for common element maintenance only? Our association has a lot of exterior leaks, which hopefully, for the most part, has been resolved. Unit owners claim the damage is from an exterior leak. The HOA pays for the repairs, but there seem to be additional repairs performed that are unrelated to the exterior leak. This has been going on for years and has become a great expense to the association.
“Is it unrealistic to think the board should create a policy regarding payment of such invoices I feel the board has no control of such maintenance items, and the association is spending thousands of dollars on unit owner repairs. Our property manager seems more interest in fixing the problem and using association money to pay for it instead of determining whether the repair is an association expense. In fact, each management company we have had does the same thing because it is easier for the association to pay for it. There is typically no verification about the source of the leak or who is responsible for the payment. Are my expectations too high? It bothers me that association money is going to fix owners’ repairs.”
Here we provide guidance on policies and procedures you should implement to determine which repairs your HOA should cover and which home owners must pay.
“We’re dealing with this a lot right now,” says Michael S. Hunter, an attorney and partner at Horack Talley in Charlotte, N.C. “We had some major hail storms about a year ago, and there was major roof damage across the city. In a lot of townhomes, the HOA is responsible for exterior maintenance. But the governing documents are very vague about what exterior maintenance is. A lot just say, ‘The association shall maintain exterior surfaces.'”
That unhelpful wording has led to some push and pull between HOAs and owners. “Granted, the HOA has to exchange all shingles on damaged roofs,” explains Hunter. “But what happens if there’s rotten wood underneath those shingles? What if the roof joists underneath that are damaged? Who’s responsible?
“We’ve got another case where an owner 20 years ago installed French doors and windows that jut out, and they weren’t installed properly,” adds Hunter. “They’re starting to rot, and the trim needs to be replaced and painted. Is that exterior maintenance? I don’t think so. I think the home owner should replace the rotten wood and the HOA should paint it.”
Generally, an Association Expense
“People often get mixed up on HOA and condo regime issues, and this issue normally applies in a condo regime,” says Jeff Vinzani, an attorney in Charleston, S.C., who represents associations. “In a condo, the roof and building itself belong to all the owners as a common element. If the leaks are coming from the outside, that would typically be an exterior repair.”
On the same page is Gordon Goetz, president and CEO of Goetz Manderley, a community association management company based in Santa Maria, Calif., that manages 210 associations totaling 17,000 homes in California’s San Louis Obispo, Santa Barbara, and Kern counties. “Association funds should be spent only on association expenses,” he says. “But typically associations are responsible for their building’s envelope. If the damage they’re repairing stems from exterior leaks, the association may very well be responsible for all the ancillary damage.”
What About Our Reader?
Back to our reader. What should the HOA be doing? “I’d suggest the association nip this in the bud by spending a couple thousand dollars to hire an expert to assess the building,” says Vinzani. “The expert will say either, ‘I don’t think it could be exterior leak,’ or ‘I don’t see anything on the inside that could have caused these damages.’ The only way to get the HOA to address the reader’s question right now is to get a baseline from a contractor or inspector. But that may be expensive.”
Since this is an aspect of HOA governance that’s vulnerable to improper claims of damage by owners, the HOA should also review and possibly amend its governing documents. “I’d suggest the HOA involve its legal counsel to review the CC&Rs and policies to be sure that damage caused to the interior of a unit from the exterior leak is the responsibility of the HOA or the individual owner,” says Goetz. “In this area, several years ago when mold started to be the basis for a lot of lawsuits—and a lot of the mold came from roof and window leaks—many HOAs adopted amendments to their CC&Rs.
“The amendments stated that any interior damage, unless it was caused by gross negligence on the HOA’s part, was the owner’s responsibility,” adds Goetz. “Gross negligence would be defined as, ‘I’ve called the HOA and reported this problem three to five times over the last two years, and it was never taken care of.’ But often people would call and say, ‘I have a roof leak and, by the way, I’ve got some black stuff, too.’ That would be the first time the HOA had ever heard of the problem. That’s what we were trying to avoid with the amended CC&Rs.”
That’s Hunter’s advice, too. “I tell HOAs that if their governing documents are vague about what exterior maintenance is required, I suggest they amend to put very specific language in there about what is HOA and what is owner responsibility,” he says. “I even suggest they consult with a structural engineer or architect to determine what components they’re willing to pay for. They should get as specific as they can because otherwise there’ll still be problems.”
Can ‘t get that type of amendment passed ? Hunter suggests another tactic. “The board can adopt a provision setting forth its interpretation of the provision in the governing documents,” he explains. “It might say, ‘The board interprets Article 2, Section 3…’ and spell out what the board considers exterior maintenance. As long as the board applies that interpretation consistently and it’s not an outlandish interpretation, it should hold up.”
Our experts generally agree that it looks like our reader’s board is doing the right thing. “It sounds like there’s a water or sprinkler system leak that’s affecting people ‘s units,” says Duane McPherson, Carrollton, Texas —based division president at RealManage, an association management firm that oversees properties in Arizona, California, Colorado, Florida, Louisiana, Nevada, and Texas. “Naturally, the association will have to replace ruined sheet rock and carpet. I don’t know how far the association has gone in determining who ‘s liable for fixing these repairs, but it sounds like the board is probably doing the right thing.”
How can it convince our reader of that? “We’ve had people who wouldn’t let this issue go,” explains McPherson. “We’ve offered to sit down with them and go over the individual projects. ‘You have to show them the initial cause, and then you have to show them the consequences of what happened. We’ll say, ‘This is what happened. This is the vendor who came out and repaired the water line.’ Let’s say it’s a water leak from a sprinkler. We’ll show how it damaged the owner’s wall, the carpeting, and all the other things that were damaged. Owners are entitled to see all those things. That goes a long way in resolving these questions.”
Matt Humphrey is president of the Alameda, California-based HOAleader.com, from which this article was adapted.