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HOA Should Buy Flood Insurance

Question: I have recently been elected to the board at our condo association, The previous board was informed that because of a revision by FEMA in May of 2007, we now have 5-6 Buildings located in an AE flood zone. Some of our residents found out about this when we were notified by lenders (banks) that, because we had a mortgage, we were required to have flood insurance. Our board refuses to help by saying that we should pay off our mortgage, and it was not a concern for them and they didn't have to provide insurance. I informed the board that I wanted it on record that they were liable if in fact any buildings in this zone were damaged. Because I needed insurance for the bank, I was required to pay for a Flood Elevation Certificate for my building, which is 12 units, and then purchase an insurance policy. My question is, should the association pay for flood elevation certificates? What is the liability of the board and the association on providing insurance for the buildings in the flood zone? Please note an AE flood zone is based on the fact there could be a flood one time in 100 years. I believe that the association is at risk.

Answer: The Condominium Act requires a unit owner-controlled association to use its best efforts to obtain and maintain adequate insurance to protect the association, the association property, the common elements and the condominium property required to be insured by the act. An argument could have been made that this includes the obligation to obtain flood insurance for condominiums in a flood zone. Under the FEMA guidelines, the association is the correct party for acquiring flood insurance, not the individual unit owners. I have personal knowledge of a condominium in the Florida Panhandle which was washed away by an hurricane; there was no flood insurance. The board didn't want to spend the money. While there is case law holding that the board is not liable for the exercise of its business judgment, so long as the individual board members are not guilty of self-dealing, the absence of flood insurance will impact the ability of individual unit owners to obtain financing on their units. Personally, I feel the board is not acting in the best interests of the unit owners.

Q: We enjoy your weekly column and hope you can give us an opinion on the duties of our board of directors. First, some background: We are a small (37 lots) association with a three-member board. The president has been in place for the last four years. She has determined that she is the treasurer as well as the president. Several of the homeowners feel that this is not the best business decision and does not provide the necessary checks and balances for sound business practices. We would like to bring this up at our annual meeting, but before we can bring it up, we would like to present some reasoning for a change. What is your opinion of this practice?

A: While not favored, without a provision in the articles of incorporation or the bylaws prohibiting same, the president can serve as a dual office holder (e.g., president and secretary, president and treasurer). This is expressly provided for in the Not-for-profit Corporate Act (Chapter 617, Florida Statutes).

Q: Where would it say what the exemptions are, since our declaration that refers to mortgagees being involved in any declaration changes only says "No amendment shall be passed which shall materially affect the rights or interests of any mortgagee without the written prior consent of such mortgagee."

A: The Condominium Act provides that, as to any mortgage recorded AFTER Oct. 1, 2007, the requirement of mortgagee consent only applies to amendments which change the proportionate share of ownership and sharing of the common expenses, and amendments which permit time sharing in a condominium which previously did not, and amendments which adversely affect the rights and interests of unit mortgagees.


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