Condo Association Management Blog

There is nothing you can do to force the board, but I don't understand why they refuse if you agreed to pay for it. Have you tried talking to them? What's their reason?

If you are financing your unit through any of the government agencies (FNMA, FHLMC or FHA), fidelity bond coverage is a requirement and has been for years. There have been many stories over the past years of people embezzling funds held on account for the association. Only condominiums less than 20 units in size are exempt from this requirement. Ask your lender if there is a restriction for you paying the premium for the fidelity bond coverage.

If you are financing your unit through any of the government agencies (FNMA, FHLMC or FHA), fidelity bond coverage is a requirement and has been for years. There have been many stories over the past years of people embezzling funds held on account for the association. Only condominiums less than 20 units in size are exempt from this requirement. Ask your lender if there is a restriction for you paying the premium for the fidelity bond coverage.

Try to encourage the board to obtain the fidelity bond coverage which insures them against theft of funds. They are being very negligent in thinking they do not need this coverage!

Mary, I think you are going a bit too far by accusing them of negligence. Very few associations have this bond, and even fewer ever needed it. This is an expense that a small association shouldn't take on unless they have extra money.

If the seller is willing to pay for it, you'd think the board would jump at the opportunity. Makes ME wonder why they're not! ...just saying.

Our association policy has coverage for "Employee Dishonesty". I gave this information recently to a mortgage underwriter and they accepted it instead of the fidelity bond, which is only insurance anyway, not really a bond. Employee Dishonesty (or equivalent) may be what your board says is "sufficient". 
 
I would find out exactly what your board's sufficient insurance is (and how much coverage) and then go back to the bank. You can look up fidelity bond on wikipedia and it will say that it is insurance, and our insurance broker told me the same thing. 
 
Also, check your condo documents (bylaws, CC&Rs) to see what is required for a fidelity bond (it is probably required or something like it), and then show that to your board as well.

Jeff, 
 
 
 
As far as I know a fidelity bond is not very expensive. 
 
 
 
IMO, if the board has no such insurance they "are" being negligent. What would happen if someone did embezzle money from the assn? How would the loss be recovered? BTW, you don't purchase insurance hoping you will need it -- actually it's the direct opposite, you have insurance hoping you will never need it!!!

Mary, I don't have first hand knowledge how much such a bond would cost. The original poster mentions $650 for a 26 unit condo. I actually think that it's a very expensive policy considering the risk involved. 
 
Also you can always add a rider to your regular insurance policy to cover such a loss. 
 
There is no way we individually, or business, or HOAs can insure everything from every occasion. It just can't happen. We need to make a determination and evaluate risks and costs involved. 
 
Maybe for a large HOA that has lots of employees and people 'touching' money it might make more sense than for a small condo building managed by a mom and pop management company.

FHA - Our assocation, 100 units, does not have FHA approval. We are undecided if we want to apply - units are not selling and some owners want the approval. The concerns focus on wheather owners approved for it can afford to maintain their units and can afford fee increases. We are lucky that we have deliquencies usually under $1,000 and we have no foreclosures.

Jeff, 
 
 
 
When I served as treasurer of a small (49 single family homes) self-managed assn I insisted on getting a fidelity bond. It also serves as a protection in case the treasurer, or anyone else handling assn funds, were accused of embezzlement or mismanagement of HOA funds. If this type coverage can be acquired through other means, so be it, but I do think it's necessary. It's just another item that the HOA should budget for.  
 
You could use the same argument for D&O insurance, or any other insurance for that matter!

Condo law in most states requires fidelity bond coverage. Most financial institutions are now doing due diligence and requiring proof of fidelity bond. Most condo documents require the persons handling funds to carry a bond at the expense of the association.  
 
Having been through assistance to many who have had loss of $$$ - most through mgmt, but some through board members stealing from owners accounts - one Treasurer committed suicide after books didn't balance perfectly (not really was theft, bad accounting) and other directors attacked her integrity.  
 
Never never never would I encourage a condo or HOA to forego this insurance. Mgmt co insurance covers a percentage of each client's funds, but not all. That is why the association should have its own coverage.