Emptying the Condo Closet

Column space is limited, and sometimes not everything or particular interest or importance can fit into the word limits of a particular column. So what follows are a few supplements to earlier columns.

A previous column has given guidance on how to look for a management company and what they can do and what they should not be doing. However, when looking for a management company, or reviewed the work of current management company it might help to know that there exist programs to actually train and educate property managers. Shocking, but little known. Here are a few designations to look for. (And asking about them in an interview, can actually let the management company know the Board is invested, involved and educated.)

CMCA - Certified Manager of Community Associations - This is an international certification program that recognizes individuals who have demonstrated the fundamental knowledge required to manage community associations. The holder of such a designation must have completed a prerequisite course, and have either at least five-years of experience in property management or hold an approved license/credential and have passed the CMCA exams.

AMS - Association Management Specialist - AMS designees have to have at least two years of association management experience, pass the CMCA exam and have completed at least sixteen hours of specialized instruction.

PCAM - Professional Community Association Manager - This is the highest professional destination. It requires at least five years of property management experience, passing the CMCA exam, and completing more than 80 hours of instruction covering all aspects of condominium management, including creating a comprehensive case study.

All such designations have to meet, like attorneys, ongoing continuing education requirements. Last I knew there were more than 16,500 CMCAs, 7,650 AMSs and only 2,750 PCAM designations worldwide. (By comparison, New Hampshire alone has has attorneys, so .)

Insurance Subrogation. Subrogation is the right of someone who has paid an insurance claim on behalf of someone to step into the shoes of that person and try to recoup the money paid. The most common example is when someone gets hit by a car. Your insurance company pays you for the damages, and by subrogation steps into your shoes and has the right to sue the other driver and try to get back what they paid you. It could be helpful in condominium associations, but it is illegal and associations should know why.

For instance, if an owner causes a fire that damages the common area, the Master Policy kicks in and covers the loss. The Association can assign the deductible to the Owner, but the premium still rises. So, some associations want to go after the owner for damages, but it cannot.

Fannie Mae and Freddie Mac, the two largest (quasi-governmental) insurers of mortgages require subrogation waivers. The reason? Well, if the Association were to pass along the deductible (which is fine), or choose to sue the Owner itself, the Owner's individual policy, commonly called an HO-6 policy would cover the deductible. In turn, the HO6 insurer could pay an owner's damage claim and then turn around and sue the Association asserting they are responsible for not preventing it. And that's the problem. Why? The owner, if it has to personally pay the deductible might not be able to meet other financial obligations, most specifically the mortgage payments, putting the mortgage holder, Fannie Mae, at risk. So they will not loan without a subrogation waiver. Essentially, the insurer can't chase the owner.

On a related insurance note, however, if you have a clubhouse, and you rent it out for owner functions, such as anniversary parties or birthdays, or hold off site functions, your association should know about the potential liability for serving alcohol and driving away and hurting someone. If it happens, or if you allow alcohol, have a pool, someone drinks and dives and get injured, the Association will likely be sued, the owner sponsoring the event, and likely both.

Interestingly, under this scenario, the general liability coverage in the Association's master policy would likely cover “host liquor liability.” But you should make sure. And if it does cover, that coverage can and likely would be voided if the Association charges for the alcohol, including an entrance fee. So check with your agent or carrier before holding such events. Check.

Finally, if you require, as you should, owners to have an HO-6 policy, it would likely provide host liquor liability coverage for owners. It may not, however, cover “motor vehicle liability.” So you should check your own HO- 6 policy to make sure you, the Owner are actually covered as well.

Now go have a good time.