Condo Q&A: Hot Water Heater Caused Damages: Who Pays?

By Steve Adamczyk

A condo unit’s water heater burst and the flooding damaged other neighbor’s units. It’s an insurable situation, but which insurance policy applies? It’s complicated.

STUART, Fla. – Question: A hot water heater burst on an upper floor and many units sustained water damage, and owners are demanding the association pay for everything. Is the owner of the hot water heater responsible? – H.R., Stuart

Answer: We could write about this situation every week. Whenever there is water loss, the first question is whether the damage was caused by an insurable event. Most hot water heater bursts are insurable events, although this is a factual question.

If insurable, responsibility to repair and restore is governed by the statutes, and specifically section 718.111(11) of the Florida Statutes. A basic reading is that the association is responsible to repair and replace property insured by the association, and owners are responsible to repair and replace property insured by the unit owner.

The association does insure a lot, but not everything, and there are also some exceptions to the general rule.

Ultimately, the board wants to take proactive measures to ensure that mold is not spreading between units and common elements. Then the association should investigate whether the damage justifies the association filing a claim with its own insurance, and further whether the hot water heater burst could have been avoided. If you have a rule, for example, that owners are required to turn off water to the unit during a prolonged absence and this burst could have been avoided if the water was off, it is possible that this breach of the rule could shift financial responsibility to the offending owners.

I should note that if the loss was not the result of an insurable event, the obligations to repair and replace would be controlled by your specific condominium documents. As a result, it is very fact specific and you should contact your attorney to help navigate the repair process because there can be significant differences between the allocation of responsibility in the statutes versus the allocation of responsibility in your governing documents.

Question: Our association levied a special assessment a few months ago for waterproofing repairs. The assessment requires monthly payments for another 18 months and owners are asking what to do if they sell their unit now. Who is responsible for the remaining payments? – P.T., Fort Pierce

Answer: The first part of this answer is that owners are responsible for assessments that come due during their ownership. If the special assessment installments come due after the closing of the home, then the new purchaser would be responsible for those future installments.

The second part of the answer involves the contract between the buyer and seller. This is a private contract between the parties so the association is not involved in these negotiations, but buyers and sellers will frequently negotiate who will be responsible for any outstanding special assessments that are either pending or imminent when the contract is signed.

Obviously, the seller would like to avoid paying for something that he or she will never use again (the waterproofing), but the buyer has leverage to buy another home that does not have any pending special assessments.

From the association’s perspective, a critical part is disclosure through the estoppel process. When there is a real estate closing, there is almost always a request from the closing agent for an estoppel, which requests a lot of information such as whether there are any covenant violations, outstanding delinquent assessments, and whether there are any pending special assessments. If the estoppel is correctly completely and delivered, the buyer will know exactly what he or she is purchasing and there should be no surprises.

Another critical aspect from the association’s perspective is whether the outstanding balance must be due and payable at closing or whether the buyer can step into the seller’s shoes for future payments. When the board levies the assessment itself, we recommend this aspect be included as part of the resolution to avoid any ambiguities.

Steven J. Adamczyk Esq., is a shareholder of the law firm Goede, Adamczyk, DeBoest & Cross, PLLC. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross, or any of our attorneys.

Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

© 2021 Journal Media Group

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