Obligation to Purchase Flood Insurance

Obligation to Purchase Flood Insurance

By Ryan D. Poliakoff / Published June 2018

Photo by iStockphoto.com/AntonioGuillem

Q

uestion:

This past year FEMA has determined that our condominium community is in a flood zone. Our association has not secured flood insurance, as the association claims that it cannot afford the policy. As a result of this, no mortgage company or bank will approve a loan in our community. We have our condominium for sale along with a handful of other owners, and we cannot sell because of this. Even cash buyers are turning away. Is there anything we can do to force the association to purchase flood insurance? I believe it was estimated that it would raise our assessments by approximately $20 a month.

Answer:

       While the Condominium Act requires condominium associations to purchase property insurance, flood insurance is optional. The only way your condominium would be obligated to purchase flood insurance is if your declaration of condominium mandates such coverage. Otherwise, you are going to have a very hard time forcing the issue. Of course, every unit owner is entitled to purchase their own flood insurance, and, in fact, I would assume most units that are mortgaged will be required to buy such insurance in the future.

Question:

       Is it legal for an HOA board president, or any board member, to refuse to answer a resident’s questions sent either by email, phone, or letter because he does not like the questions?

Answer:

       In an HOA, while the association is obligated to allow you to inspect records, there is no obligation whatsoever for a director or officer to answer your questions. They are absolutely entitled to ignore you entirely. In a condominium, in contrast, the association is obligated to answer inquiries sent to the board by certified mail within 30 days (or longer if they are requesting advice from the division or their attorney in order to answer the question).

Question:

       I live in an 88-unit condominium community. We have a property manager and a president in our condominium association. Our association board has agreed to eliminate our president’s monthly fees. Is this legal? Our fees range between $440–$502 per month, depending on the size of the unit. If we were without a property manager (who is paid a substantial salary), this would seem to make sense since the property manager would or should shoulder any issues within the community.

Answer:

       It depends on your governing documents (specifically, your bylaws). The Condominium Act provides that both directors and officers shall service without compensation, unless otherwise provided in the bylaws. It would be unusual for modern bylaws to provide that either officers or directors should be compensated (and the credit to your president’s fees would certainly be considered compensation), but it’s possible, especially in older communities. However, I do wonder how a provision allowing an officer to be compensated would interact with a new provision of the Act that provides that an association cannot employ or contract with any person who has a financial relationship with an officer or director. Certainly, that would also apply to the officer or director him- or herself. If the bylaws provide that officers or directors may be compensated for their service, and if that right is still enforceable, it would seem to be a significant loophole in the new anti-compensation provisions.

Question:

       Our inherited bylaws (from our developer, Lennar), state that amendments to the bylaws are made with 66 2/3rd votes of the directors. That’s it, no member vote at all! I can’t find any other HOA with an amendment article written this way.

       Because of this, we now have a quorum that is only 10 percent of the members; the number of directors is determined by the directors; and for members to request a meeting, we must have 20 percent of the members request the meeting (increased from 10 percent). The board also reduced meeting notice time for residents, eliminated notice to residents of the prepared budget, eliminated the requirement to provide residents with a copy of the budget, and removed the requirement to send ballots at least 14 days prior to election—and more!

       With the reduced quorum, the process of amending our covenants (which require an affirmative vote of 66 2/3 of the directors and 51 percent of the votes of those present in person, or by proxy, at a duly called meeting of the members where a quorum is present) has been altered such that a small number of members could determine the outcome for everyone.

       How can we, the residents, amend our bylaws to restore these changes? Our board of directors certainly won’t do it. Our lawyer didn’t have any problem with their changes. Is there anything we can do?

Answer:

       First, keep in mind that both the declaration of covenants and the articles of incorporation are superior documents to the bylaws, and the provisions of the bylaws cannot conflict with those other two documents. That is at least something to check, although most of the things you listed are likely to be specified in the bylaws and may not be discussed anywhere else.

       Many governing documents provide that a percentage of the membership (20 percent, in your case) may petition the board to place an item on the agenda at a membership meeting. That would typically include proposed amendments to those governing documents that must be amended by the membership. If I were in your situation, and if the governing documents allowed such a vote, I would hire an attorney to draft amendments to your articles of incorporation that would undo and supersede the changes to the bylaws, and I would try to organize a membership vote that could not be undone by the board. Alternatively, where the board can amend the documents in one direction, they can certainly amend them the other way, and so all you would need to do is coordinate a recall of the board—and this can be done by written petition, so it would not involve any corporate procedures over which the board would have control.

Ryan D. Poliakoff

Partner of Backer Aboud Poliakoff & Foelster

       Ryan D. Poliakoff is a partner of Backer Aboud Poliakoff & Foelster and serves as general counsel to condominiums, homeowners associations, and country clubs throughout South Florida. He is the co-author of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op, and HOA Living. In addition to representing associations, he is a frequent contributor at seminars and workshops for attorneys and board members, and he has written hundreds of articles for magazines and newspapers throughout the United States. He can be reached at email hidden; JavaScript is required. For more information about his firm, visit www.bapflaw.com.