condo associations

The Legal Obligations of Condo Associations

According to the Foundation for Community Association Research, 26% of the U.S. population resides in community associations. These associations offer a range of benefits to their members, including amenities, security, and increased property values. Members might wonder, though, who holds condo associations accountable — and what are the responsibilities of condo associations? The exact obligations of a condo association depend on its bylaws, but there are a few general responsibilities that ever community association must abide by. Read on to learn more about the four main duties of a condo association — and what happens when these duties are not fulfilled.

Duty of Care

The first responsibility of any community association is to provide care to its members. What does this look like for a condo association, and why is it important? Simply put, an association’s duty of care means that they are obliged to carry out their community responsibilities in a manner that is prudent and reasonable. To this end, members of the condo association board should be familiar with all of its rules and requirements. Similarly, they must be aware of all of the facts in a situation before doling out any disciplinary action.

Duty of Loyalty

Another duty of a condo association is its obligation to remain loyal to all members of the community. In a position as a board member, an association leader may have the opportunity to make decisions that benefit their own interests. To do so would be an ethical violation, though — members of the board must act only in the interest of community members as a group. If any conflict of interest is present, a board member should immediately notify all other members of the board and excuse themselves from decisions involving the matter.

Duty of Authority

It’s important that board members exercise their authority in the interest of all community members, but it’s equally important that board members not exceed the scope of their authority. The association’s bylaws should include specific descriptions of the authority granted to each board member, and it is each board member’s duty to abide by their obligations. Exceeding these obligations can become a source of liability for a condo association — especially associations that do not have condo association insurance. Condo association insurance is a great way to protect an association against many of the liabilities that arise from community management.

Duty of Fiduciary

One of the most important yet often overlooked duties of a condo association is its responsibility as a fiduciary entity. Because condo association board members hold positions of trust, they are responsible for handling any financial transactions with integrity and transparency. The association’s financial records should be available to community members who pay association fees.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

community associations

Community Association Risk Management

Community associations are an integral part of the home ownership experience for many Americans. These associations are tasked with maintaining properties to established standards, resolving property owner disputes, and minimizing losses. Risk management, then, is a critical aspect of the community association role. In this guide, we will explore community associations insurance and how it forms the foundation of a more comprehensive risk management program for community-oriented associations across the country.

Community Associations 101

With over 370,000 associations in the United States, representing over 50% of all owner-occupied houses in the country, Community associations are groups formed by members of a specific geographical area. They are often comprised of homeowners elected in a formal leadership structure. Community associations may go by names like:

  • Homeowners’ associations (HOAs)
  • Neighborhood associations
  • Condominium associations
  • Master associations

No matter what they are called or how they are structured, these associations serve one common purpose: to protect the rights, property, and financial interests of property owners. Membership in an association may be mandatory for homeowners of a particular development, and dues may be collected to pay for common services like legal services, maintenance, and landscaping. These associations are characterized by a set of rules, both for homeowners and for the operation and responsibilities of the association itself.

Community associations insurance is a critical aspect of the role these associations play in property owners’ lives. This insurance protects against a broad range of liability risks. Developing a risk management plan around community associations insurance ultimately works to minimize or eliminate unexpected losses.

The Risk Management Plan for Community Associations

To develop a risk management plan for property owner groups, community associations have several factors to consider. These include:

  • Identifying applicable risk exposures, such as properties, liabilities, personnel, and income.
  • Evaluating risk control and/or risk financing to mitigate potential losses. Risk financing includes the purchase of community associations insurance and other insurance protections.
  • Understanding the relationship between risk control and risk financing.
  • Implementing risk control practices.
  • Monitoring risk management practices and making improvements as needed.

Developing a risk management plan for a community association may require the assistance of professionals such as attorneys, property managers, insurance agents, and accountants or tax professionals. Community associations are particularly susceptible to liability risks, often brought in the form of legal claims by homeowners in the property being managed. A single legal challenge may result in steep expenses, including attorney defenses and judgements against the association. A community associations insurance policy helps to cover the costs of legal claims and many other liability exposures.

The Role of Community Associations Insurance

In addition to protecting associations from the risks of legal claims, community associations insurance also provides comprehensive coverage for such factors as:

  • Property damage
  • Catastrophic losses
  • Personal injury claims
  • Theft, fire, and vandalism
  • Professional mismanagement or conduct claims

Optional coverages may be available, including hired and non-owned auto insurance for associations that utilize vehicles owned by the individual members, equipment breakdown coverage, and employee benefits liability. Each community association is different, and each must determine what risk exposures they face. With the help of an experienced insurance professional, community associations insurance can be tailored to the unique needs and risks of an association. With this insurance, and with a risk management plan to support insurance protections, community associations may continue to perform their role of protecting homeowner investments from losses.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.