Removing the HOA board won’t solve the insurance problem

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Q: In a homeowners association meeting late last year we were told that because of a high number of claims, they could no longer afford water damage insurance. Then a notice came out early January that as of Jan. 15 we have no water damage insurance on the property.

In June, we received ballots for our covenants, conditions and restrictions amendment to remove the $1,000 deductible on master insurance claims, and there is no new cap. We understand the $1,000 deductible is not practical today and have no issue with this. But it also has added language that says owners “benefiting from” repairs will be liable for deductibles on all master policies. Seems way too broad and arbitrary.

We’ve tried for months to push the board and have done research to find a solution but have been shut down. If the board continues to refuse to act in what we believe is our best interest, we feel we must remove them. I’ve been trying to get more information on the removal process if it comes to that.

Our HOA board discontinued all water damage insurance as of Jan. 15. We owners are at risk now for major liability in our common areas because our condo policies only cover wall insurance. (Although HOA did not warn us or recommend it, many of us have added max loss assessment to our condo policies to protect ourselves.) We have been unable to get the board to move on a solution and have been completely disregarded so we are ready to remove the entire board in order to get something done. Our board president is the decision-maker and has been on the board for many years. If we remove her only, we are concerned that remaining board members will continue with her plans. How do we go about removing the entire board? Or can we remove only three? Is it the same process as you would use to remove one board member except that we name some or all board members in our petition? Your help would be so appreciated.

A: After reading the two notices that you sent to me, I do understand why your association had to take such drastic action. Your association’s multiple water damage claims (I am sure over the years) had reached the point where two carriers required the installation of water leak-sensing devices at a cost of $ 1,200 per unit or a total of $266,400. In addition, the annual insurance premiums from two different companies ranged from $70,737 with a $50,000 deductible to an annual premium of $103,850 with a $25,000 deductible. One major insurance company would provide insurance but with no coverage available for water losses.

Your association board reached out to its legal counsel. Although Nevada law mandates that associations have proper insurance coverage, under Nevada Revised Statute 116.3113 (2), the law states to “the extent that the coverage is reasonably available.” As you indicated in your letter to me, the association did try to increase the $1,000 deductible but was unable to obtain the required vote of approval.

As to your comment about the additional language, “the benefiting from the repairs,” it is a common phrase. It can be found in NRS 116.3115 (3b) where it allows the association to charge back any common expense that benefits fewer than all of the units. The phrase also can be found in many association’s CC&Rs under homeowners’ maintenance and repairs responsibilities.

Removing any of your board members will change nothing. If you cannot meet the financial requirements to satisfy any of the insurance companies, it does not matter who is on the board. When you state that you all have been unable to get the board to move on a solution, what solution would you have them take? Associations’ actions are restricted based upon their governing documents. Options would include, amending the governing documents, increasing the assessments beyond the maximum allowed, or obtaining a loan from a lending institutions. If you were able to obtain a loan, the assessments would again be increased in order to pay off the loan.

Each one of these options will require a vote by the homeowners and a simple majority won’t cut it.

I thoroughly understand the additional financial burden being placed upon the homeowners. I also know that many condominiums are having difficulty in obtaining property insurance because of the water leaks. It is not unusual to have a $25,000 deductible for water claims. In those associations, the homeowners have had to look toward their personal housing insurance (many have the HO6 policy designed for homeowners) in order to obtain coverage for any water damage claims.

As to the removal of your board of directors, either as to individuals or to the full board, NRS 116.31036 pertains to the removal process. You would need at least 10 percent or any lower percentage specified in your governing documents to submit a written petition to initiate the recall process. The board would be required to initiate a recall meeting. Ballots would be sent out so that the meeting is not less than 15 days and not more than 90 days after the date on which the petition was received. In order to remove a director, at least 35 percent of the total number of voting members must cast their ballot and at least a majority of the votes cast voted to recall the director(s).

Barbara Holland is a certified property manager and holds the supervisory community manager certificate with the state of Nevada. She is an author and educator on real estate management. Questions may be sent to holland744o@gmail.com.