Damage from Other Units
Q. I live in a condominium that is approaching the 10 year mark. Although it is not an old condominium, it is aging and the appliances and fixtures inside of units are aging. Many of our buildings are stacked one on top of the other so that a major failure above, such as a hot water heater, would likely affect unit(s) below. We do have a clause in our Bylaws which states that the Master Policy deductible could be passed to the Homeowner of the Unit where the damage initiated if the majority of the Board rules that the damage was caused by negligence, misuse or neglect of the owner. While the insurance deductible is a factor, another prime concern is the quality of life for those suffering damage from causes which might well have been avoided had preventative maintenance/replacement been done.
What approach could you recommend that would address maintenance of fixtures/appliances inside of units, e.g. recommended inspections on a timed basis or replacements on a timed basis? Would the absence of such inspections or replacements constitute neglect? Should the Board adopt a resolution to further expound on some of these issues?
A. There are many condominiums like yours which were built 10 to 20 years ago and are now "showing their age" - both on the exterior and the interior. There always seems to be more focus on the exterior and most associations now have built up some reserves (albeit many do not have enough) to replace or renovate their common elements. However many boards do not focus on the effects of age on the water heaters, hoses and other devices that carry water inside of units and the building's common elements which, upon breaking, can have a devastating effect on units lying below the unit or area in which the break occurs. The person who drafted your documents had more foresight than most when writing the provision which allows the board to require payment of the association's deductible by a neglectful owner.
There is another school of thought that the board should not have to make such a judgment about negligence or no negligence and this is avoided by having a "strict liability" clause; that is, the owner of the unit where the break occurs pays the deductible under any circumstance - no questions asked, no judgment required. Other documents go so far as to make the unit owner from which the water emanates pay damages to the association and other unit owners who suffer the effects.
Another school of thought is that all unit owners should be required to carry insurance to protect themselves and the upstairs owner should only have to pay the deductible of the adversely affected owner below. These concepts could be added to your documents by amendment, which does require some serious effort and signatures of the required unit owners. The next issue you raise is the compensation to the unit owner who suffers the damage as a result of a burst hot water heater or similar occurrence. The damage can also occur to the common elements as well. One would ask why the Association should have to repair the damage at its expense if the owner had not replaced the hot water heater in 15 years, a time frame well past its useful life. You might think that it is not a problem because the association has insurance to cover it. Well, first, the association has to pay the deductible amount. Secondly, if there are enough of these claims it begins to affect the premium paid for the master insurance policy and, in the event of excessive claims, can lead to cancellation.
Many associations have adopted a rule which allows for periodic inspection by its contractor of the hot water heaters, air conditioner condensation lines, washing machine hoses and other similar devices which carry water in order to prevent the damage from occurring. This is a reasonable and enforceable rule, and should be an expense that all owners should consider inconsequential in light of the amount of property loss, damage and inconvenience that can be avoided by some preventative measures. The inspection will allow you to bring to the attention of some unit owners the inadequate condition of their appliances and the liability to which they may be exposing themselves by failing to act responsibly. Some associations have coupled with that rule an amendment to the Declaration that states that a failure to properly maintain and/or replace such devices in a timely manner resulting in damage to property is considered negligence which will require that unit owner to pay damages to the Association and any damaged unit owner.
This is clearly a significant issue for many multi-story condominiums. It is a topic you should discuss with your insurance agent. We encourage you to invite your insurance advisor and attorney to a meeting of the board in order to thoroughly address these topics and obtain their recommendations based on your particular circumstances.