Thousands of condominium residents face some very daunting and disturbing facts related to the issue of exterior structural insurance. Many, if not most HOAs, have insurance coverage that does not adequately cover the needs of residents should their homes be subject to damage or even loss.
One example is our own association (PMP – West Hills/West Creek) here in Valencia. PMP provides $5 million of coverage for 687 condominiums. This amounts to $7,278 each. Woefully inadequate at best!
The American Beauty Condo development provides $50 million of coverage for 748 units. This amounts to $66,845 each and was deemed by one lender as “not nearly enough.”
This serious underfunding results in lenders refusing to offer mortgages to those willing to buy a condo as lenders feel their loans are inadequately protected from losses. This means condos cannot be sold so residents cannot sell and buyers cannot buy. All cash transactions would largely circumnavigate this problem but those buyers are rare.
This places residents in potential serious jeopardy. What if illness or a job transfer creates a need to sell? What if house and living costs overcome the ability of residents to sustain their homes? Perhaps they will join a growing number, particularly the elderly, to find a home on the streets?
The rules relating to the responsibility of the HOAs to provide reasonably adequate coverage per unit need to be revised. This will result in additional HOA dues cost per resident, but it may prove a wise choice considering potential losses and the inability to sell one’s home. I am not alone in considering this issue as many are lost in no man’s land. Please help?
John Laing
Valencia
