From frozen pipes, broken appliance supply lines, to roof leaks and leaking drain pans, in townhome and attached condominiums, water intrusion can quickly wreak havoc for owners and the community association if not handled properly and quickly. Whenever you have organic material (such as drywall or wood) and moisture, you will eventually get mold. And once you have mold, you get mold spores, which can spread and contaminate everything inside a home. It is therefore crucial to act fast to halt the water intrusion and immediately begin the process to dry out the structure and perform repairs and cleanup, even if that means figuring out who pays for what later.
We will outline a hypothetical example of a water incident to explain the do's and don'ts of responding to these situations. We also included some additional items boards can put in place to reduce association liability and exposure.
Avoid the Finger-Pointing Temptation – An Example
Sometimes boards are hesitant to spend association funds believing that if the association is not responsible for the cause, the association should have no role in the cleanup, leaving the owners to deal with the situation. This is a big mistake as common elements may have been affected! Consider the following example.
Imagine a condominium composed of duplexes, with two units sharing a middle wall. The board receives a report from an owner that they noticed water saturating the kitchen floor and drywall. The owner reports the leak is not coming from their unit, and says that they knocked on their neighbor's door and together they discovered their neighbor's refrigerator line was leaking, for who knows how long. The water is shut off, and the owner looks to the association to make repairs.
The association board, however, refuses to get involved and tells the owner to contact their insurer and go after their neighbor for compensation. The board refuses to file an insurance claim for the association, and does not perform an inspection. Eventually, the owner makes a number of repairs not only to their kitchen, but also opens up the drywall between the units to address a mold issue in the wall cavity. The owner later seeks a significant amount of compensation from the association, in part for work that the owner claims the association should have performed.
Association Repair Obligations Exist Regardless of Cause of Damage
The board's mistake here was failing to appreciate that in a typical attached condominium, whenever there is damage to a common element, there are two questions to consider in deciding how to go about repairing the damage.
The answer can vary depending on what needs repairing, and the answer to questions 1 and 2 is not always the same.
In a typical attached condominium, the association is often responsible for repair of common element structural and support components – ceilings and perimeter wall construction including drywall, floor construction, and water, electrical and gas distribution systems within the walls, among other things. All of these items could be damaged by water. And typically, the association is assigned both the duty to perform the repairs promptly, and the duty to pay for them unless a limited exception applies. But the duty to perform the repairs always remains the same.
As for owners, in a typical attached condominium, they are generally responsible for repair of the interior of their units, including all interior surfaces (meaning paint, wall paper, and floor coverings like carpet or wood floors), all personal property such as furniture, and often times fixtures such as cabinets. These duties to repair remain in place even if someone else "caused" the damage, although whether someone else, including the association, might be responsible to pay may depend on the language of the applicable documents or whether fault or negligence can be placed on someone else.
Our Hypothetical Association made Numerous Mistakes
In this example, the condominium's governing documents explain that when there is a casualty that affects any common element the association is responsible to maintain, repair, or replace, then the association has the obligation to carry out the repairs to those common elements (and, sometimes, specified items that are not common elements but are covered by association insurance, like cabinets or other fixtures). But our hypothetical board did not appreciate this and made several costly mistakes.
Mistake #1: "Not our Fault, Not our Problem"
The board's mistake #1 was in leaving all repairs to the owner. Without association involvement, the association has no way to confirm the repairs were properly done and may face future legal exposure if they were not. And indeed, the owner who made the association's repairs may turn around and demand compensation, and might well be entitled to some.
Instead of worrying about who is responsible for what, the board would have been better served to act immediately and begin the process of drying out the unit and making repairs. And in the event the damage is extreme, or if there are any disagreements about who needs to repair what, boards should strongly consider utilizing their broad abatement authority to cleanup everything, and once the bills are in, figure out how much to charge any particular owner.
The association's primary goal should be to get the property cleaned up, dried out, and habitable as fast as possible. In this way, you can "stop the bleeding," and where these cases get expensive is when you have competing contractors (the owner's vs. the association's) with different opinions on what should be done, or when the owner disagrees with what the association plans to do. If the board finds itself encountering resistance or second guessing from the owner that is holding up work, trust your own experts and contractors and if the owner gets in the way, perform their clean up obligations for them and bill them.
Mistake #2: Go After Your Neighbor, it is Their Fault
Mistake #2 above was in assuming that because the water originated from the neighbor, then of course the neighbor is legally responsible for all damages. But accidents happen and sometimes no one is at fault, and that is in part why insurance exists. Many documents will hold an owner responsible only for negligent damage to common elements. Absent negligence (which is hard to prove) then the association not only has the obligation to repair the common elements, but also pay for the repairs even though the association had no involvement with the cause of the damage.
Mistake #3: Not our Fault, Not our Insurance
Mistake #3 was in not submitting an insurance claim. Any time there is a substantial water incident that touches common elements – as here when you have water migrating through walls and saturating floors and drywall – a community association should strongly consider submitting an insurance claim, for several reasons. First, it can be difficult to know whether the damage is minor or severe, as much of it might be hidden. Second, failure to timely submit a claim may result in a denial of an otherwise covered loss, particularly if mold has arisen. Third, assuming the claim is covered, insurance may pay for the damage assessment and repairs (less the deductible).
While many boards fret over submitting insurance claims due to the risk of an increased deductible, the risk of failing to submit a timely claim – and thus losing out on coverage for what might end up being a significant loss – can be financially devastating. Insurance exists for situations like this, and all owners pay for it and thus can expect to benefit from it when appropriate.
The Board Could have Avoided these Mistakes and Minimized its Exposure if it had Focused on Cleaning Up as Fast as Possible
Here is what the board should have done in our example, and what you should do if faced with a similar situation.
As soon as the loss is reported, a board member or the property manager (or both) should immediately inspect the damage and ensure the source of the water is turned off, if possible. If water is gushing from property where no one is home, utilize the association's abatement authority and get into the unit immediately. Do not let fear of damaging a door allow water to continue to flow and spread. The board's job is preserving common elements.
If the loss is significant, an insurance claim should be filed immediately. If you are unsure what counts as significant, consult with your insurance advisor or the association's legal counsel.
Hire an appropriate contractor to assess the damage (and identify the source of water if unknown) and prepare estimates to repair all damage.
The association should carry out all work that is its responsibility under the governing documents. You can figure out later whether someone else should pay and then pursue them in collections if necessary. Better to "stop the bleeding" and limit the damage first rather than wait and allow the damage to grow.
Return the property to habitable condition as soon as possible and do not let owners stand in the way. Boards should perform as much of the cleanup work as allowed (indeed, required) under the governing documents, and should resist interference from owners who may second guess the plan or insist on using their own contractors. It is a good idea to confer with your legal counsel and insurance advisors to decide how much of the work the association performs can be charged back to the owner in the end.
Associations Can Pass Rules and Amendments to Minimize Exposure
There are also additional proactive steps boards can take to better position the association to address water losses before they happen.
Consider amendments to your governing documents to impose broader responsibility on individual owners and limit association responsibility. Many documents will only hold an owner responsible for "negligent" damage to common elements, which makes holding owners responsible more difficult.
Consider passing a rule requiring periodic inspections of items that commonly fail, including all water-carrying appliance service lines.
Consider amending your documents to expressly require owners to report leaks or any other damage to common elements. If they fail to do so, they can become liable for damage that results.
The key when facing any water loss is for the association to take prompt and decisive action. Your job as a board member or property manager is, in part, to preserve the common elements. Take charge of the situation, dry it out, and perform the needed repairs. If the owner is an obstacle, use the association's abatement authority to get the job done over the owner's objections, including heading to court if necessary. Better to sort out who pays for what after the damage has been addressed and minimized.
* Todd Skowronski is an attorney at Makower Abbate Guerra Wegner Vollmer PLLC. Mr. Skowronski focuses his practice primarily in the areas of community association and real estate law. Mr. Skowronski is a member of the Community Association Institute (CAI) and Real Property Law section of the State Bar of Michigan. He has worked as an Adjunct Professor of Law teaching Community Association Law at the Western Michigan University Thomas M. Cooley Law School.