Home Insurance in 95050>Question Details

buykaz-etc, Home Owner in Santa Clara, CA

Purchased townhouse IN '84 and have typical HOA policy as well as personal inside policy. Complex is 3 separate units. (4-4-2)

Asked by buykaz-etc, Santa Clara, CA Sat Feb 16, 2013

All this caused by neighbor refinancing and appraisal came PUD not Condo and HOA agent wants us to change to PUD policies (structural and personal).

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Grace Morioka’s answer
First, and pardon me for being so hyper-critical ( but as an HOA expert myself), how is it that your HOA manager did not know from the very first day that he or she took over the manamgement of the complex that the community was not a condo minim but a planned development? It tells you what the HOA actually is--condo, planned development, community apartment or coop-- based on the first and second pages of the CC and Rs, and that is the HOA manager's first job to know and understand, because this tells us exactly what the HOA can and cannot call common area?

Second, there is no such thing as a planned UNIT development. The word "unit" implies that something is a condominium, as a condo is always described as a unit, while a planned development is properly described as owner LOTS.

Third, unless the CC & Rs so provide the Board of Directors ( notice, I did not say the "manager") with the ability to change the insurance coverage after 30 years, such actions are not within the purview of the HOA to change without fairly extensive notice periods and policy changes such as modification to the governing documents, majority voting of the members and mortgage holders and review and approval of a new mid-year budget. All a lot of unnecessary tosh to undo something that has obviously been in place for decades, if you ask me.

So let's talk "the basics" for a bit. This is going to be a lot, so bear with me, but stories like this coming from the HOA industry just annoys me, so I will try to be kind.

1. No one has the right to change any rules without proper notice to the members--least of all the manager. In all likelihood, the developer of your community set it up that the HOA should have blanket insurance as this is the most economical and safest way to purchase insurance. Further, it avoids the problems of one homeowner (especially someone who after 30 plus years of ownership, no longer has a mortgage and no requirement now to carry insurance) being unable to rebuild the home after a loss.

2. Insurance coverage is probably mandated in the governing documents, meaning that it cannot be changed without changing the CC&Rs first. Without a majority approval of all of the members, this is not possible. Again, neither the HOA manager nor Board of Directors has the power to "correct" the insurance if the governing documents say the HOA must purchase structural coverage. Insurance provisions are usually stated at the end of the CC&Rs.

3. To my knowledge in working with major carriers such as Farmers, State Farm, Philadelphia, Allstate and Travellers, there is no difference between a blanket policy for condominiums and one for a planned development of PD. A commercial policy, which is what this is, is the same regardless of definition of the community. There is only the difference of the HOA having to purchase the policy or shifting the burden directly to the homeowners. Again this is not possible simply by a suggestion from anyone.

4. Many attached home planned developments have blanket insurance policies as part of their HOA responsibilities. Requiring a homeowner to buy it separately would be atypical, not ordinary practice, of how most HOAs handle structural insurance. Talk to an attorney or insurance agent to know the escalated risks in not having blanket coverage.

5. Again, to my knowledge, the real estate industry and mortgage companies do not require that attached communities have individual hazard policies purchased by the owner unless the HOAs policy is insufficient to cover the expected loss. If that is the case, then the HOA needs to increase coverage to ensure adequate funds in the event of a catastrophic loss.

Obviously, this discussion really started, not because of the refinance, but because the HOA is looking to off load some hefty expenses onto the individual homeowners. There are a lot of ways to do this without losing insurance coverage, and one of the ways is to attack operating expenses first. Look for a new and cheaper management company and insurance policies (there are many out there), get lower cost maintenance, reduce utilities by switching landscaping companies, attacking water leaks, changing light bulbs. Get homeowners to pitch in on beautification projects. In short, Buy, you need a property manager like my pal, Christine Cubillas, who regularly saves her HOA clients thousands of dollars annually by aggressively slashing costs without sacrificing services. This is the type of HOA manager and company your HOA should get...if not from the current management company, then from somewhere else.

Most importantly, Buy, if you do not like what you are hearing or seeing your Board of Diectors do, then it's time to step up, get on the Board yourself, and make your HOA into the lean, mean financial machine it needs to be to move safely and securely into the next decade.

Good luck,
Grace Morioka
Allisone James Estates and Homes
0 votes Thank Flag Link Sun Feb 17, 2013
Graceee, You seem to know your stuff! I would like to know your opinion on Philadelphia Insurance's quote for our 16 Unit HOA, which has no outside maintenance, Bldgs or facilities to maintain. We amended our Declarations making Owners responsible for their own maintenance and urged them to have HO6 Policy in place as suggested in Dex. Here is the decutibles we are forced to accept: Philadelphia Insurance Quote June 2012.

1. Wind & Hail 2% Deductible per Replacement Value per Unit.
2. Water damage is $10,000.00 deductible per unit/occurrence.
3. All other covered claims $5000.00 deductible per unit/occurrence.
4. Annual Premium Cost is $6,844.00 with Terrorism coverage and $6,315.00 without.
The way I see it is this HOA only benefits if the loss is near colossal and not covered for most common occurrences. I would appreciate your take on this or if you know of better rates elsewhere. Caroline J
Flag Sun Apr 28, 2013
We own the lot with common walls-sold as townhome-CCR says lot not any mention of condo or townhome-except for sold as Harrison St Townhomes
8 lots 4, 2 & 2-can you get individual insurance for outside even though attached with common wall?
Flag Mon Feb 18, 2013
What is your question? You should have rules and HOA fees for shared walls and common areas. If the HOA is asking for insurance change I recommend you discuss this with your insurance carrier and lender. Whats in your bylaws and rules?
0 votes Thank Flag Link Sat Feb 16, 2013
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