HOAleader.com - Tip of the Week - April 15, 2011
Published: Fri, 04/15/11
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Save Money on HOA Insurance: Know What You're Paying For
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If your HOA board of directors is just a passive observer when it
comes to buying HOA insurance, the result can be an unnecessarily
hefty homeowners association insurance bill. In this week's tip,
we cover the basics of HOA insurance so you can be an active
participant in discussions with your insurance agent--and keep
costs down.
First, check your state law to see if it provides insurance
minimums for condos or HOAs. Florida, for instance, has a
statute that establishes insurance requirements. "When I meet
with associations, first I determine under what statute they
were established," explains Alan S. Chesler, a partner at Alan
James Insurance in Sunrise, FL, which specializes in commercial
and residential property insurance, including condos, HOAs, and
co-ops. "It could be under section 718 of the Florida statutes,
which covers condos, or Section 720, which covers HOAs.
"Section 718 overrides most of the authority given condo
associations by their documents, and they must adequately insure
property for its value, which needs to be determined by an
appraisal every 36 months," Chesler adds. "That's a
replacement-cost appraisal, not a market-value appraisal. HOAs
are covered under Section 720, which doesn't deal with insurance
requirements, so we have to look at the governing documents, and
whatever they say is what the board is required to do. A board
can do more than the documents require unless the documents say
it can't."
In addition to your state's statute, you must consult your HOA
governing documents. "We talk about insurance a lot with our
clients and give them guidelines, but our main concern is that
boards need to go to their governing documents and make sure
they have what their documents require," says Kristen L.
Rosenbeck, a partner at the Mulcahy Law Firm PC in Phoenix,
which represents associations. "You have to have that as a
minimum standard."
Next, consider what property your association owns and whether
you need additional coverages. Get the scoop in our new article:
http://www.hoaleader.com/members/562.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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HOA Insurance: What You Need to Know -- Part 1
The cost of insurance can hamstring an HOA. That's why it's
important to understand HOA insurance basics so you and your
board of directors can intelligently evaluate insurance bids.
Here, in part one of a two-part series, we explain how to
determine what coverages your HOA must have, how to determine the
value of the property you must insure, and extra coverages to
consider.
Click here to read full article:
< http://www.hoaleader.com/members/562.cfm >
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HOA Taxes: What's Exempt Under the 90-Percent Rule?
You have two options when you file your HOA's tax return. One is
to file as a corporation, and the other is to file under Section 5
28 of the Internal Revenue Code. Most associations opt for the
Section 528 treatment because if almost all your HOA's income is
from assessments and almost all of your expenses are for
maintaining association property, you don't have to pay taxes. To
qualify under IRC 528, your association must meet several
requirements, one of which is that at least 90 percent of your
association's expenses must be exempt, which means they're
operating and capital expenses that directly affect association
property. But which expenses are exempt, and which aren't? Here's
a rundown.
Click here to read full article:
< http://www.hoaleader.com/members/560.cfm >
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Creating New HOA Rules? Should You Grandfather or Not?
Let's just say the dog situation has taken a turn for the worse,
and many of your HOA's owners want to change your rules to ban
dogs. Naturally, dog owners are aghast and want to be "
grandfathered" into the rule, meaning that they'd be exempt.
Should you grant their request?
In this week's
Click here to read full article:
< http://www.hoaleader.com/public/559.cfm >
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Four Examples of Smart HOA "Grandfathered" Rules
Here, we discuss the pros and cons of creating exceptions for
rules, give four examples of when it's smart and not smart to
grandfather residents in, and provide tips to ensure the
grandfathered rules don't last forever and are enforceable.
Click here to read full article:
< http://www.hoaleader.com/members/558.cfm >
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HOA Foreclosing to Rent Units? First, Know the Risks
In this week's tip, we suss out the pros and cons of whether to
foreclose on a delinquent owner with the intent to rent out the
unit to recoup your HOA's fees.
Click here to read full article:
< http://www.hoaleader.com/public/554.cfm >
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