New England Condominium February 2020

February 2020 NEWENGLANDCONDO.COM Removing a Condo Owner Points of law on this subject are consistent from state to state, with only slight variations. The important distinctions relate to who is being removed; the actual owner of a unit, or that owner’s tenant. In both cases laws are consistent on the most basic mat- ters, with slightly differing approaches and nuances in some states’ statutes. 175+ EXHIBITORS, SEMINARS, FREE ADVICE & NETWORKING NEW ENGLAND’S BIGGEST & BEST CONDO, HOA & APT EXPO! SEAPORT WORLD TRADE CENTER — TUESDAY, MARCH 31, 10–3:30 FREE REGISTRATION: NE-EXPO.COM 205 Lexington Avenue, NY, NY 10016 • CHANGE SERVICE REQUESTED continued on page 14 THE CONDO, HOA & CO-OP RESOURCE CONDOMINIUM NEW ENGLAND One of the unique aspects of life in a co- op or condo is that a building or HOA is in many ways a microcosm of the larger world outside. It can suffer from the same faction- alism and partisan bickering as any political entity, only on a much smaller, more inti- mate—and therefore potentially more dam- aging—scale. Conflict and divisions in co-op and condo communities can and often do bleed into the community’s administration: the manager and board of directors. Even a seemingly minor conflict can upend a resi- dential community if it’s not dealt with dip- lomatically—so boards and managers must be prepared to step up, step in, and do their part to defuse such issues before they turn into something worse. Board Obligations Michael Davidson is the president of BoardCoach.com, a Manhattan-based com- pany that specializes in nonprofit board development and management support, including coaching. Davidson explains that board members of nonprofit entities (includ- ing co-ops and HOAs) have three main du- ties to which they must adhere: “The duty of care, the duty of loyalty, and the duty of obedience.” With regard to the first, the duty of care, “Board members must basically understand what’s going on in terms of the building,” Davidson says, adding that their primary re- sponsibility is to make sure the property is well and effectively managed. The second duty, the duty of loyalty, “Re- If a rental tenant defaults, persists in violating rules, or breaks the law, they can be evicted from their unit. It can certainly be a drawn-out, acrimonious process, but it’s more or less routine. While much more rare – and more complicated – it’s also possible to termi- nate a co-op shareholder’s proprietary lease and compel him or her to vacate the building for compelling financial or administrative reasons. By contrast, removing a condo owner from a building or association and effectively wiping out his or her equity position as a member of the community is extremely difficult, and subject to very narrow legal interpretation. For example, while theoretically a co-op shareholder could be evicted from residency for non-monetary defaults, the same is virtu- ally impossible in a condominium. Condos are pure real estate, not shares in a cooperative corporate entity. As a matter of fact, from a legal standpoint, the word ‘eviction’ cannot be used in reference to removing a condo owner (though it can be applied to removing a rental subtenant in a condominium unit—a point we will return to later.) The closest we can come to a legally recognizable term for this type of action in a condo association is removal. Insurance is cyclical; there are hard mar- kets and soft markets, and insurance com- panies typically make money in two ways: underwriting profit, and investment income. When the market is soft, insurance companies are looking for market share, so they lower their premiums and relax their underwriting guidelines, which allows them to write more business. New carriers or programs enter the marketplace and charge lower premiums to gain market share, which reduces premiums further. Insurance companies can afford to charge lower premiums, as they typically are making a nice bang for their buck via invest- ments. In a hard market, it is the opposite. When the market is hard, insurance companies are not making money by investments, and losses start adding up. This makes them unprofit- able at the premiums they are charging, so to become profitable, they raise premiums. They also tighten their guidelines to try and write only preferred risks, which limits the number of companies the “average” association can get a quote from. Sometimes they add exclusions to restrict coverage. To make matters worse, some carriers or programs simply stop writ- ing insurance during this time, so there are fewer options for community associations. Hard Times We are currently in a full-blown hard market, one of the worst I have seen in my 25 years of being in the insurance industry. What is contributing to this? In the property arena, natural disasters such as hailstorms in the South and Midwest, wildfires in California, various hurricanes, flood and water issues in a number of states have resulted in billions of dollars in losses for insurance companies. Because of this, they are purchasing more reinsurance – which is insurance that insurance companies buy. So if Condominium Owner Evictions Handling a Tough Legal Situation BY A J SIDRANSKY Managing Conflict When Boards and Residents Take Sides BY A J SIDRANSKY Parsing the Insurance Market Understanding What the Current Cycle Means to You BY ED MACKOUL continued on page 15 continued on page 17