Month: November 2009

On June 12, 2009, the Federal Housing Administration (FHA) announced a new, stricter approval process for condominiums to be eligible for FHA financing. At the time, the FHA's revised lending guidelines were to be effective Oct. 1, 2009. However, since they were announced, the effective date of the new regulations has been twice postponed. Now, the new regulations governing condominium mortgage insurance will be effective Dec. 7, 2009.

The Community Associations Institute (CAI) formed a working group of industry experts to identify specific areas of the FHA regulations that need to be changed. They have prepared a policy position to advocate the changes that are needed. On Oct. 23, 2009, CAI sent comments to David H. Stevens, commissioner of the Federal Housing Administration, to assist the FHA in addressing the current challenges in the mortgage markets. The following are CAI comments and recommendations relating to the proposed regulations that affect condominium community associations:

In these difficult financial times, more and more members are finding the need to sell their homes through the short-sell process as a result of declining home prices and the present state of the economy. For members who owe a lender more than what their properties are currently worth and can no longer make their mortgage payment due to a job loss, divorce, or resetting of an adjustable-rate mortgage, foreclosure seemed like the only alternative—until relatively recently.

Facts: An association obtained insurance liability coverage under two different policies. First, it obtained a commercial general liability policy that provided coverage for property damage. Second, it obtained a directors and officers (D&O) liability policy covering “loss incurred by the association as the result of any claim made against the association for a wrongful act.” The policy defined “wrongful act” as any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed or attempted by the insured organization.

Facts: A condo community has 20 units and 30 parking spaces. At the start of the association, one parking space was assigned to each condominium and 10 spaces were unassigned. A provision in the condominium's declaration permitted the developer to sell the unassigned spaces to members or to third-party non-condominium owners. Under the declaration, no person other than the developer could sell or lease a parking space to a non-condominium owner.

Be sure to review the terms of your association's insurance policies after purchasing them. Somewhere in the purchasing process, an agent may have entered a wrong number, and your association may be getting less coverage than it expected.

This happened in a recent case in which a member suffered substantial water and mold damage to her condominium as a result of Hurricane Katrina. After the hurricane, the member notified the association and made claims under the applicable policies for damages sustained to her unit. These claims were either denied or only partially paid.

A Philadelphia municipal judge recently ruled in favor of a condo association against a member who refused to pay his cable TV bills. The member claimed that the association violated the FCC ban on exclusive cable deals. He argued that the association gets bulk billing from Comcast, forcing all owners to pay for “basic” cable, whether they want it or not. The judge ruled that there was no FCC violation—that the association's cable contract doesn't prohibit a condo owner from getting another cable provider—although he would have to pay two cable bills.

The cold weather has arrived in many parts of the country, bringing with it the increased threat of fires due to the improper use of electric space heaters. According to the National Fire Protection Association, space heaters account for one-third (32 percent) of home-heating fires and three-fourths (73 percent) of home-heating fire deaths.

Facts: A member repeatedly engaged in outrageous communications and conduct with his association, its managers, and members of its board of directors, which included vulgar and harassing letters, disruption of association meetings, and a physical assault on a board member.