Although they’re relatively new, homeowners associations have become firmly embedded in the landscape of the housing market. According to the Foundation for Community Association Research, as of 2012, there were roughly 323,6000 community associations in the U.S. Florida leads the pack with 46,000, while California is right behind with 42,500. Overall, 24 percent of homes in the country are located in a community association. This number is only expected to increase as more developers build homes in community associations and the number of people buying these houses grows. There are several reasons for the growth of these associations. Often these associations will be responsible for privatizing public infrastructure and services, such as road maintenance, trash pickup or storm-water management. In addition, since HOAs often have strict rules for what can and cannot be done to the property, many are able to maintain high home values. For some, becoming part of a community association makes them feel a part of something larger, since many of these places have social gatherings and public functions.

“A person slipping on unshoveled snow can create a real nightmare for an uninsured HOA.”

As the number of these associations expand across the country, it can be in the best interest of the boards of directors to obtain an insurance product that offers professional liability insurance. No matter how well-staffed and careful a board of directors is, there are unfortunately still ways they can be held liable for problems that happen on the association’s property. A person slipping on unshoveled snow or a twisting an ankle on a crack in the cement can create a real nightmare for an uninsured HOA. Disgruntled unit owners A common scenario for unit owners and the board involves owners who feel as if the board is not doing their job, in which case the owner will file a lawsuit against the board. For instance, a unit might have a faulty sink, and the unit’s owner will approach the board requesting they hire a plumber to remedy the problem. However, if the association’s bylaws explicitly state the owner is responsible for the issue, the board doesn’t have to fix the sink. Unfortunately, many owners have a sort of landlord-tenant mentality, and they will decide to stop paying dues as a form of protest. In a situation where the unit owners decides to cease due payments because of a problem in their unit not covered by the bylaws, the HOA might need to take matters to court. Although nobody likes having to go to court, sometimes it’s the only option for settling a conflict like this. Boost communication Since so many of the lawsuits brought against community associations stem from discrepancies between neighbors and residents, it’s important for these associations to foster an open and receptive environment for communication among and between owners and board members. This alleviates animosities and provides everyone a chance to explain their position and rationale before anyone escalates the problem to involve litigation. According to The New Jersey Cooperator, distributing an association newsletter lets board members elaborate on or defend a controversial decision, or it can provide an opportunity to get feedback from the community about what needs to be done to handle a certain tricky situation. Hosting a regular social gathering – whether a picnic, a movie night or even a town hall-style meeting – allows everyone to mingle and get to know each other and ideally solve any conflicts that might be weighing on the HOA. Boosting communication also means putting more emphasis on the community aspect of the community associations. When residents and unit owners are not engaged and active within the building and association, it can lead to a feeling of detachment that creates a more litigious mentality among the members. But by increasing communication and fostering a better sense of community, it can lead to more civil interactions among residents and ideally reduce conflicts that are becoming all too common in HOAs. No matter how hard boards work to make a community association a safe, secure and reasonable place to live, there will always be some unforeseen catastrophe waiting around the corner, which is why it always pays to expect the unexpected. McGowan Program Administrators is a leading provider of community association insurance across the country, including Directors & Officer’s Insurance, Fidelity/Crime Insurance, Umbrella Insurance, Property & General Liability Insurance and Community Manager Errors & Omissions Insurance.


 

Volunteering for your HOA board should not be a path to financial ruin. To learn how to protect yourself, download our free guide: 4 Questions You Must Ask About Your Community Association Insurance.

McGowan Community Association document