Dec 14, 2017

Condo law confusion

PIACT would like to see more consistency and uniformity in condominium bylaws governed by Connecticut law. It has become difficult for agents to advise unit owners on the amount of limits they need for Coverage A property. Is the unit owner responsible for building property and, if so, how much of that building property are they responsible for?

Connecticut has enacted three laws since 1963 that have governed the creation and maintenance of condominium associations. However, only the Condominium Act of 1976 (Title 47, Chapter 825) and the Common Interest Ownership Act of 1984 (Title 47, Chapter 828) remain in force today [see Section 47-214]. With few exceptions, associations that have been created on or after Jan. 1, 1984, are governed solely by the CIOA. Further, these laws have been amended effective in 2007, 2009, 2010 and 2011, which has added some confusion to their interpretation and implementation.

As condominium associations purchased property insurance with higher deductibles in recent years, they began to stray from their communal roots. Some associations are assessing these policy deductibles solely to the unit owners who actually sustained damage to their units. The unit owner might not be expecting this expense given that the association was assuming responsibility for insuring the building property.

The statutory default for deductibles is established in Section 47-255(h), stating: "The cost of repair or replacement in excess of insurance proceeds and reserves, regardless of whether such excess is the result of the application of a deductible under insurance coverage, is a common expense."

Both the CIOA [Section 47-257(c) shown below] and the Condominium Act [Section 47-76(c)] permit an association to override the statutory default in its declaration and exclusively assess the common expense [deductible] to those units directly affected by the maintenance, repair or replacement of the property. Neither of these sections of the law were amended by Public Act No. 07-68.

(c) To the extent required by the declaration: 1. Any common expense associated with the maintenance, repair or replacement of a limited common element shall be assessed against the units to which that limited common element is assigned, equally, or in any other proportion the declaration provides; 2. any common expense or portion thereof benefiting fewer than all of the units shall be assessed exclusively against the units benefited; and 3. the costs of insurance shall be assessed in proportion to risk and the costs of utilities shall be assessed in proportion to usage.

Condo associations still have the option to waive coverage on the units per Section 47-221. However, if they do cover the units, then they must follow the "improvements and betterments rule." The association is charged with insuring the improvements and betterments installed by the unit owners, in addition to the units of the building. An exception is made when the declaration limits coverage for improvements and betterments, or the executive board decides to limit coverage after giving unit owners notice and an opportunity to comment. When the common interest community has more than 12 units and does not insure all improvements and betterments, the association must provide to the unit owner each year a schedule of property it insures.

Another potential problem observed by PIACT is when the owner of a newly purchased unit must assume liability for an assessment resulting from claims incurred by the association before the unit was purchased. Fortunately, if the unit owner has a policy equivalent to the ISO HO-6 form, there would be coverage for this assessment regardless of when the actual claim occurred. This is because the trigger for assessment coverage is the date that the assessment is made. However, it seems reasonable that the new unit owner should be immune from this type of assessment, or at least given adequate disclosure that there is the potential to be assessed for claims occurring prior to the unit’s purchase.