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| Providing Community Association Insurance for over 25 years: D&O Liability, Crime Products, Umbrella Coverage and Property Manager's Errors & Omissions Liability. |
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| Author |
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KathleenS
(Massachusetts)
Posts:1
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| 06/08/2006 11:24 AM |
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Hello-
I am the HOA President of a 4-unit townhouse complex that is just over one year old. We are faced with several exterior problems, due to faulty construction and a dishonest builder. We are faced with over $3000 in repairs to a (seemingly!) new roof and an improperly graded parking lot. Other members of the HOA would like to clean out the already small reserve account (which is at <$2500 currently)to avoid out-of-pocket expense. After the one year warranty expired, the HOA decided not to pursue legal action against the builder, under the assumption that the repairs may require out-of-pocket expense. Now that we are aware of how much the repairs will be, many homeowners are saying they cannot afford the out-of-pocket expense. I am concerned that wiping out such a small reserve account is a poor finiancial decision, and will leave us in a terrible situation. Any thoughts?? Are there state laws that require a minimum contribution to a reserve account? Thank you- KAS |
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GeraldT1
Posts:0
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| 06/09/2006 5:41 AM |
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| Kathleen - It is more responsible to use what you have to fix the deficiency than wait till it causes further deterioration down the line. However, fixing the problem presents a catch 22, be careful to document the problem. Prior to performing any repairs you must document the deficiences in writing to the builder, the municipality, the state and give them a chance to respond. You do not want the builder or anyone to turn around and say you made the problem worse by fixing the deficiency. Trust me, this will be the builder's out. It does not sound like the statute of limitations has expired on going after the builder. Check your closing documents or with the state and see if you have a Builder's Limited Warranty. Roofs should be warrantied for much longer than one year. Roofs should not fail within one-year, their replacement is usually at the 20-25 year mark. As a rule of thumb associations should allocate 25% of their annual gross income to reserves. State laws or not, it's a good practice. Have you hired a transition engineer, or at least a certified building isnpector to perform a study on your property? At the end of the day, a solution is to videotape everything, assess each owner $125.00 to cover the $500.00 difference, take the $3,000.00 and perform the repairs, and immediately increase the maintenance and reserve fund allocation. Inform the owners with your course of action. Gerald |
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