Running a condo association involves taking care of basic maintenance in the common areas, ensuring that all tenants or owners adhere to the rules, and making sure that the association carries adequate insurance policies, just in case. Not having the required insurance policies or enough coverage can lead to a number of problems, particularly those in the financial and legal realm.
All of this can surely affect your tenants as well. So, what are the issues associated with underinsuring your condo association? Keep reading to learn more.
Potential Financial Issues
People choose to live in condos with associations in order to avoid all of the maintenance and other issues that come with owning a home. They know that the association is in charge of keeping the building and its communal areas updated, in good condition, and in working order. However, if something happens to the structure, like a fire, flood, or damage from high winds, and the condo association doesn’t have enough insurance coverage to pay for all of the repairs, corners may be cut.
These shortcuts can lead to a poorly maintained facility that ends up being worth less money than it was before, which is problematic for the homeowners who have mortgages on their individual condos. Plus, if the monetary gap is made up by special assessments on the owners, they may not want to stay in the building and might sell their units. This can lead to a loss of the monthly association fees that are needed to keep things running. It leads to a vicious cycle that often leaves the building vulnerable and in poor condition.
Legal Requirements
In addition, there are legal requirements that the condo association must meet, put in place by the local or state government. This includes keeping the building properly maintained and habitable, as well as having all of the required insurance coverage. Not meeting these requirements can lead to fines and levies that must be paid by the condo association, putting it further into a monetary hole that can be tough to climb out of.
Problems That Can Affect Homeowners
Finally, there are numerous issues that can trickle down to the homeowners who live in the building. They may have problems renting out their units if they choose to do so, being forced to take a lower monthly fee due to the lack of maintenance. Over time, these owners may find that selling their units is the best option, only to find that their condos aren’t worth as much as previously thought.
When you add on the special assessment costs, you, the members of the condo association, end up creating a building where the owners are angry at having to pay additional funds for a condo that’s not worth as much as they purchased it for, all because you failed to have the right amount of insurance coverage.
Have Questions? Contact Charlotte Insurance
Want to learn more about insurance needs for your condo association? Contact Charlotte Insurance. Our agents can explore and explain all available options and put together the insurance coverage plan your condo association needs.