10/26/2018 : Three New Headaches For Homeowner Associations
By Benny L. Kass
October 26, 2018
What do drones, copyrights and mold have in common?
According to USI Insurance Services, a national insurer with more than 50 offices throughout the country, these are some of the emerging trends that homeowner associations are — or will be — facing in the coming years. They all affect the financial well-being and the investments of property owners.
Moreover, they also trigger insurance coverage, which may or not be available, as well as litigation.
Let’s analyze each one:
Drones can be useful in snapping photos of hard-to-reach parts of a building to view potential damage. But drones can cause headaches for condo boards when they snap photos of windows, said Marvin Nodiff, a community association attorney in St. Louis and a member of the College of Community Associations.
Some residents, he said, have sued their boards for that reason.
“Community associations should consider this new drone technology to take advantage of its many beneficial applications, such as providing images depicting conditions of roofs and common grounds,” Nodiff said. “Further, associations should protect against potential impacts as drones become more popular for commercial and other uses.”
Safety and privacy are concerns for all communities. Boards should adopt rules regulating, controlling and monitoring who can use a drone and when. Fines should be spelled out in the rules for any violations. And association boards — and their property managers — should consult their insurance agent to make sure there is adequate coverage should a drone fall and damage property or injure a person.
Copyright doesn’t seem like an obvious HOA issue. But the potential for copyright infringement issues and huge fines are becoming more common, according to USI, as more and more communities, to foster a spirit of friendship and a chance to get to know neighbors, are offering free movies.
The owner of the copyright has the exclusive right to distribute the movie, and if you infringe on the copyright, you may have to pay a fine ranging from $200 to $150,000 for each violation. Additionally, you may have to pay for the copyright owner’s attorney’s fees and court costs. And the copyright is not limited to movies; it also includes music.
The Community Association Institute (CAI), a national organization, has developed a guidance document to assist communities with copyright issues, particularly music and movie licensing.
If your community plans to show a movie — free or otherwise — you must obtain a license from a performance rights organization. And even if a resident rents your clubhouse and hires a DJ or a band that plays or broadcasts copyright music, the association is ultimately responsible to make sure all appropriate licenses are obtained.
The CAI publication is available at advocacy.caionline.org/mmlicensing .
Mold has always been a concern, but flooding from the massive rainfall in recent years has made the problem worse. According to USI, “damage from mold is specifically excluded in most standard property insurance policies. Such policies provide coverage for damages that are sudden and accidental. They are not designed to cover the cost of cleaning and maintaining a home.”
Thus, associations must address their water problems. Cleaning up the mold but not remedying the cause is not acceptable. And even if the mold is in just one unit, that does not mean the rest of the association is immune from a subsequent occurrence.
It is important to know whether mold is caused by an insurance-covered peril, such as a burst pipe. But in every association’s master policy, there is a deductible that the association has to pay. Typically, this ranges from $5,000 to $20,000. This obviously can be expensive, especially for older buildings. However, laws in states and the District offer guidance on who is obligated to pay this deductible.
For example, Washington and Maryland laws require that if a pipe breaks in a unit, depending on what the association’s bylaws state, the owner is responsible for paying the HOA deductible, regardless of fault. In that case, the owner’s personal insurance policy (called HO-6) should cover that cost. And in Maryland and the District, the laws mandate that every condominium owner have such a policy.
Every community association — its board and property manager — must ensure that the master insurance is up to date and complies with the minimum dollar requirements spelled out in the law and your legal documents. I have seen policies that do not comply. When there are legal questions, the association consults with legal counsel. When there are insurance questions, the association must consult with its insurance agent.
Benny L. Kass is a Washington and Maryland lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. Send questions to [email protected] kasslegalgroup.com.