Preventing Mold and Water Damage in Your Condominium Association: Proactive Steps for Managers and Boards

From frozen pipes, broken appliance supply lines, to roof leaks and leaking drain pans, in townhome and attached condominiums, these and other sources of water intrusion can quickly wreak havoc for owners and the association if not handled properly and quickly. Whenever you have organic material (such as drywall or wood, for example) and moisture, you will eventually get mold. And once you have mold, you get mold spores. It is therefore crucial to act fast to halt the water intrusion and immediately begin the process to dry out the structure and perform repairs and cleanup, even if that means figuring out who pays for what later.

We will outline a hypothetical example of a water incident to explain the do’s and don’ts of responding to these situations. We also included some additional items boards can put in place to reduce association liability and exposure.

Avoid the Finger-Pointing Temptation – An Example

Sometimes boards focus on whether the loss was caused by an occupant of the residence. This often makes a board hesitant to spend association funds in a belief that if the association is not responsible for the cause, the association should have no role in the cleanup, leaving the owners to deal with the situation. This can be a big mistake as common elements have likely been affected! Consider the following example.

Imagine a condominium composed of duplexes, with two units sharing a middle wall. The board receives a report from an owner that they noticed water on the kitchen floor and their sink. The owner reports the leak is not coming from their unit, and says that they knocked on their neighbor’s door and together they discovered their neighbor’s refrigerator line was leaking, who knows how long. The water was shut off, and the owner looks to the Association to make repairs.

The Association board, however, refuses to get involved, and tells the owner to contact their insurer and go after their neighbor for compensation. The board refuses to consider filing an insurance claim, and does not perform an inspection. Eventually, the owner makes a number of repairs not only to their kitchen, but also opens up the drywall between the units to address a mold issue in the wall cavity. The owner later seeks a significant amount of compensation from the association, in part for work that the owner claims the Association should have performed.

Association Repair Obligations Exist Regardless of Cause of Damage

The board’s mistake in the above example was failing to appreciate that in a typical condominium, whenever there is damage to a common element, there are two questions to consider in deciding how to go about repairing the damage:

  1. Who is contractually obligated to perform the repairs?
  2. Who is contractually obligated to pay for the repairs?

The answer can vary depending on what needs repairing, and the answer to questions 1 and 2 is not always the same.

In a typical attached condominium, the association is often responsible for repair of common element structural and support components – ceilings, floor construction, drywall, and electrical and gas distribution systems within the walls, amongst other things. All of these items could be damaged by water. Typically, the association is assigned both the duty to perform the repairs promptly, and the duty to pay for them unless a limited exception applies. But the duty to perform the repairs always remains the same.

As for owners, in a typical attached condominium, they are generally responsible for repair of the interior of their units, including all interior surfaces (meaning paint, wallpaper, and floor coverings like carpet or wood floors), all personal property such as furniture, and often times fixtures such as cabinets. These duties remain in place even if someone else “caused” the damage.

Our hypothetical Association made Numerous Mistakes

In this example, the condominium’s governing documents explain that when there is a casualty that affects any common element the association is responsible to maintain, repair, or replace, then the association has the obligation to carry out the repairs to those common elements. Typical and modern condominium documents in some sense operate in a “no fault” manner as to the duty to perform repairs, meaning that regardless of why the damage happened, the association performs the repairs to common elements for which it is responsible, and the owner makes the repairs for which they are responsible.

Mistake #1: “Not our Fault, Not our Problem”

The board’s mistake #1 was in leaving all repairs to the owner. Without association involvement, the association has no way to confirm the repairs were properly done and may face future legal exposure if they were not. And indeed, the owner who made the Association’s repairs may turn around and demand compensation, and they might well be entitled to some.

Instead of worrying about who is responsible for what, the board would have been better served to act immediately and begin the process of making repairs. And in the event the damage is extreme, or if there are any disagreements about who needs to repair what, boards should strongly consider utilizing their broad abatement authority to cleanup everything, and once the bills are in, figure out how much to charge any particular owner.

The association’s primary goal should be to get the property cleaned up, dried out, and habitable as fast as possible. In this way, you can “stop the bleeding,” and where these cases get expensive is when you have competing contractors (the owner’s vs. the association’s) with different opinions on what should be done, or when the owner disagrees with what the association plans to do. If the board finds itself encountering resistance or second guessing from the owner that is holding up work, trust your own experts and if the owner gets in the way, perform their clean up obligations for them and bill them.

Mistake #2: Go After Your Neighbor, it is Their Fault

Mistake #2 above was in assuming that because the water originated from the neighbor, then of course the neighbor is legally responsible for all damages. But accidents happen and sometimes no one is at fault, and that is in part why insurance exists. Many documents will hold an owner responsible only for negligent damage to common elements. Absent negligence (which is hard to prove) then the Association not only has the obligation to repair the common elements, but also pay for the repairs even though the association had no involvement with the cause of the damage.

Mistake #3: Not our Fault, Not our Insurance

Mistake #3 was in not submitting an insurance claim. Any time there is a substantial water incident that touches common elements – as here when you have water migrating through walls and saturating floors and drywall – a community association should strongly consider submitting an insurance claim, for several reasons. First, it can be difficult to know whether the damage is minor or severe, as much of it might be hidden. Second, failure to timely submit a claim may result in a denial of an otherwise covered loss. Third, assuming the claim is covered, insurance may pay for the damage assessment and repairs (less the deductible).

While many boards fret over submitting insurance claims due to the risk of an increased deductible, the risk of failing to submit a timely claim – and thus losing out on coverage for what might end up being a significant loss – can be financially devastating. Insurance exists for situations like this, and all owners pay for it and thus can expect to benefit from it when appropriate.

The Board Could Have Avoided these Mistakes and Minimized its Exposure if it had Focused on Cleaning Up as Fast as Possible

What the board should have done in our example, and what you should do if faced with a similar situation.

    1. As soon as the loss is reported, a board member, the property manager or association contractor (or all) should immediately inspect the damage and ensure the source of the water is turned off, if possible. If water is gushing from property where no one is home, utilize the Association’s abatement authority and get into the unit immediately. Do not let fear of damaging a door allow water to continue to flow and spread. The board’s job is preserving common elements.
    2. If the loss is significant, an insurance claim should be filed immediately. If you are unsure what counts as significant, consult with your insurance advisor or the association’s legal counsel.
    3. Once the source of the water is halted, or if the source of the intrusion cannot be identified, either way, the next step is to hire an appropriate contractor to assess the damage (and identify the source of water if unknown) and prepare estimates to repair all damage.
    4. The association should then carry out all work that is its responsibility under the governing documents. The board can figure out later whether someone else should pay and then pursue them in collections if necessary. Better to “stop the bleeding” and limit the damage first rather than wait and allow the damage to grow.
    5. If a complete repair to avoid mold growth requires the owner to perform some work, then the board should strongly consider undertaking the owner’s share of the work and billing them for it unless the board is certain the owner will act without delay and utilize appropriate contractors. You will first want to confer with legal counsel when going this route to ensure it is done properly and will stand up in court. Return the property to habitable condition as soon as possible and do not let owners stand in the way.

Associations Can Pass Rules and Amendments to Minimize Exposure

There are also additional proactive steps boards can take to better position the association to address water losses before they happen.

  1. Consider amendments to your governing documents. Many documents will only hold an owner responsible for “negligent” damage to common elements, which makes holding owners responsible more difficult.
  2. Consider passing a rule requiring periodic inspections of items that commonly fail, including all water-carrying appliance service lines.
  3. Consider amending your documents to expressly require owners to report leaks or any other damage to common elements. If they fail to do so, they can become liable for damage that results.

The key when facing any water loss is for the association to take prompt and decisive action. Your job as a board member or property manager is, in part, to preserve the common elements. Take charge of the situation, dry it out, and perform the needed repairs. If the owner is an obstacle, use the Association’s abatement authority to get the job done over the owner’s objections, including heading to court if necessary. Better to sort out who pays for what after the damage has been addressed and minimized. If your Michigan condominium or subdivision association board has any questions regarding a water loss in your community, one of the experienced attorneys at Makower Abbate Guerra Wegner Vollmer will be more than happy to assist.