In light of rising insurance premiums, mold exclusions and litigation, boards must take a more active role to minimize their association's potential liability.
Water-Damage Policy. Buildings should be routinely inspected for water damage and visible mold. Conditions causing mold (such as water leaks, condensation and flooding) should be corrected immediately upon discovery. Water-damaged areas should be dried within 24-48 hours. This prevents mold growth. Depending on the amount of damage, the association's insurance company should be notified. Typically, small amounts of damage are handled in-house without notifying the insurance carrier. This keeps the number of claims down which keeps premiums down.
Normally, the association is responsible for inspecting and repairing the common areas (i.e., ceilings, perimeter walls, and most elements of the plumbing, electrical and HVAC systems). In addition, most CC&Rs authorize the association to seek reimbursement from the responsible party for any damage caused to the common areas. So long as the property damage inside a unit is not caused by the conduct of the association, the association is not responsible for repairing non-common areas such as furniture, appliances, clothing, light fixtures, cabinetry, wall coverings, and floor coverings (carpet, hardwood floors, etc.).
Maintenance Chart. The Board should create a maintenance chart that is clear and unambiguous about the respective maintenance responsibilities of owners and the association. The chart should include responsibilities for windows, sliding glass doors, sinks, tubs and showers, valves and drains, washers, dishwashers, balcony decks, etc. If owners fail to properly maintain their unit and mold results, those owners, NOT the association, are liable for the damage.
Escrow Notice. All buyers should be required to sign escrow notices prepared by the association which puts them on notice of significant restrictions as well as the association's maintenance and mold policies. The mold policy, which should be part of the Rules and Regulations (and any CC&R amendments), makes owners liable for any mold damage that may result from their failure to maintain their unit as well as their failure to immediately notify the association of any water intrusion into their unit from the walls, ceilings, windows and plumbing. The association cannot repair leaks if it does not know about them. As a result, individual owners should be liable for any damage which results from their failure to notify the association.
Annual Notices. The Board should formally adopt maintenance and mold polices in the minutes of a board meeting and incorporate them into the association's Rules and Regulations. The polices should then become a regular part of the annual package of disclosures that goes to the membership along with the budget.
CC&R Amendments. Unfortunately, older CC&Rs are woefully deficient in clearly defining the maintenance duties of owners. The association's governing documents should be amended to specify those duties. In addition, language should be added requiring owners to carry insurance to cover damage to all improvements inside a unit such as carpets, hardwood floors, cabinets and plumbing fixtures as well as personal property such as furnishings, appliances and clothing. Finally, provisions should be added specifically relieving the association of liability for damage not caused by the association's negligence.
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