Assessments needed to cover rising insurance premiums

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Dear Poliakoff,

Recently, I received a notice from my condo board indicating that there was a shortfall of $500,000 in the budget related to our insurance premiums. Starting next month, all unit owners will have to pay a certain percentage to cover this shortfall. To me that doesn’t seem quite right, since we all paid monthly dues to the association as expected – how can they now come back to us and charge us more than they initially charged us? Am I wrong on that? Seems like a scam to me.

Signed, RB

Dear RB,

Due to a number of market factors, including the Surfside tragedy (the collapse of Champlain Towers South), many insurers exited the Florida market and the cost of insurance increased dramatically. Many of our clients have reported premium increases of hundreds of thousands of dollars. So if your insurance renews in the summer, what you describe is not at all surprising (I’ve heard several reports of similar increases). The association has a legal obligation to buy insurance, and they must pay for this premium increase one way or another – the only solution is to increase your dues. This can be accomplished in two ways. Either the board can change the annual budget and levy increased dues for the rest of the year (which seems to be happening in your case), or the board can adopt a special levy to raise sufficient funds to cover the shortfall .

You can certainly ask to see association records related to the insurance, including previous policy cost and quotes and correspondence from the insurance company. This will allow you to confirm the validity of the increase. That said, there’s nothing about your question that particularly surprises me, and I have no reason to believe that this rating boost is a “scam”.

I will note that some condominium governing documents contain limits on the board’s power to increase the budget or pass special assessments without member approval, so this is worth considering. However, it is unclear what would happen if any of these restrictions conflict with the legal requirement to carry insurance. Would an affected association be required to empty the remainder of its budget to pay for the increased cost of insurance? Would they stop maintaining the landscaping or fire the cleaning crew? The association also has the obligation to maintain the property! Hopefully the members will support the board and respect the fact that the board has no choice but to purchase appropriate insurance, despite skyrocketing costs.

Dear Poliakoff,

My question is about how long a director can sit on the board. Is there a joint ownership law limiting the number of years a member can participate? The Chairman of our Board of Directors has served on the Board of Directors for over 15 years and has been the Chairman for the past ten years. Since he makes sure the other board members are his friends, he runs the association like his own business and the owners have very little say in the matter. He approaches the owners and tells them who to vote for, so we can’t recruit new board members. The management company he chose made many questionable decisions under his watch.

Our condominium syndicate will elect new members to the board of directors in November. What can dissatisfied owners do to improve the situation?

Signed, KC

Dear KC,

In your question, you say “owners have very little say”. In fact, the owners have the final say—the owners choose the board members. You say this chairman made sure the whole board was made up of his friends by telling the owners who to vote for. Of course, he can’t really force owners to vote for anyone; and so to the extent that they vote as he asks, they actively support the way he and the board run the association. Same with the management company – while you describe them as having made “many questionable decisions” these are ultimately board decisions as they were directed or agreed to by the board (or, the board knowingly authorizes the president to make all their decisions for them).

Unfortunately, you seem to be in the minority in your building. Unless the board violates your governing documents or state law, you find yourself in a position where you simply disagree with the business decisions made by the board. Thus, your only recourse is to assert your point of view with your neighbors and hope to convince them enough to replace the board of directors with new members who share your vision of the operation of the association.

Ryan Poliakoff, Partner at Backer Aboud Poliakoff & Foelster, LLP, is a Certified Specialist in Condominium and Planned Development Law. This column is dedicated to the memory of Gary Poliakoff, a pioneer in the community association legal industry, tireless advocate and author of treatises, books and hundreds of articles. Ryan Poliakoff and Gary Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living. Send your questions to condocolumn@gmail.com. Please be sure to include your location.

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