The rules changed on June 1 for condominium unit owners and associations in the Greater Crofton area and throughout Maryland.
Until then, condo associations were responsible for upkeep and structural repairs to both the common elements and units, while unit owners were responsible only for personal property within their units.
A copy of the master insurance policy was provided to unit owners at the time of purchase, along with other condo documents, so unit owners would know the extent of the association's insurance coverage and they could purchase supplemental insurance accordingly. That's no longer the case.
The new law (HB 287) has two requirements you should know about:
1. Condo associations must maintain property insurance on the common elements and units, but NOT any upgrades or replacements made by unit owners.
2. Unit owners are now responsible for any damage that originates in their own unit, up to the $5,000 deductible of the association's master policy.
How does this affect you, a Maryland condo owner? Let me give you some examples:
Maryland condo buyers will be notified of this obligation at the time of initial or resale purchase AND condo associations will provide written reminders to unit owners annually. (Agents, take note of this and be sure to use the new condo forms provided by MAR or your local association whenever you sell a condo.) A Maryland condo buyer who does not receive this notice may terminate his/her purchase contract.
How will Maryland condo owners cope with this new responsibility?
I'm not an insurance expert, so let me defer to local real estate attorney Benny L. Kass. He indicates that the answer lies in a condo owner's own insurance policy. He suggests you obtain an HO-6 policy from your favorite insurance company because it will cover any personal losses and supplement the condo association's master policy.
If you're new to Maryland and don't have a local insurance agent, check with one of these agents in the Greater Crofton area for more information:
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Margaret Woda is a licensed Associate Broker in Crofton Maryland. She specializes in serving the real estate needs of home owners and home buyers in Anne Arundel, Howard and Prince George's Counties, Maryland, including Fort Meade, Andrews AFB, and the U.S. Naval Academy. If you enjoyed reading this post, check out Focus On Crofton and Your Online Relocation Package for Anne Arundel County.
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Real estate adviser and advocate for home buyers and sellers in Annapolis, Bowie, Crofton, Davidsonville, Gambrills, Odenton, Fort Meade, and other nearby communities in the D.C.-Baltimore area
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Margaret, when I visited my Mom earlier this week, she was on the phone with her State Farm agent to make sure she got herself covered.
This whole thing is going to get tricky, because in most buildings the pipes within the walls are part of the common elements. If a pipe bursts, you're not liable for damage to other units. But if you let your bathtub caulking funk out and your neighbor's place is damaged, you're liable - and in most buildings were liable for all of the damage - not just the first $5000. If your toilet or dishwasher overflows, ditto.
Your advice to call your insurance agent is great. I always urge my condo buyers to buy a condo owner's policy.
Margaret.
This is important information and especially now that so many homes are going to foreclosure, although I suspect fewer in Crofton than other areas.
The banks are not going to provide the condo docs and many listing agents don't want to take the trouble to get them. Once a buyer closes, it's too late.
Thanks Lenn - you sure are on top of things!!! If Maryland went this route - there may be other states that follow. Again, thanks for keeping us informed.
Margaret... this is excellent information.. and I will be writing more about this in general, that FHA has changed and it could be worse for many buyers and sellers. Overall, some great information and insight on this...
Jeff, I can't help wondering how lenders will view this added financial responsibility of borrowers. Require an HO-6 insurance policy? Require $5000 in reserve? Surely it will have some impact on a condo buyer qualifying for their mortgage.
Lee and Pamela - I'll let Lenn reply to your comment, since you addressed it to her.
Lenn - I don't know about you, but I haven't seen this publicised or promoted at all, until yesterday's Wash. Post article in the real estate section.
Patricia - 'Glad your mom is on top of this. The first thing that crossed my mind was "How about current condo owners?" From what I can tell, they're obligated by this, too,
Hmmm, this is interesting. I've not heard anything of this in seacoast NH area.
Patricia Aulson/portsmouth nh real estate
Margaret--good points to know as I am sure that the other states like PA will follow shortly.
Margaret! What a great post, and so right up my alley, considering about 90% of my listings and sales have been condos. I can't speak for all parts of the country, but can tell you how it works here.
Most of our condo buildings now require the owner to submit proof on an annual basis of their homeowners insurance. Failure to do so by a certain date, results in fines that are added to your mnthly HOA dues you already pay. Some buildings, if this requirement is not met, can "turn off" your access to common elements (parking, pool, gym, clubhouse) until you bring your HOA account up-to-date, including paying the fines.
I also believe (but stand to be corrected) that you can get an additional rider on your policy to cover the deductible on the Master Policy of the Association.
It's also VERY, VERY important that you make sure any contractors you hire have insurance as well. Last year a contractor working in our building ruptured a water pipe on the 12th floor that flooded numerous homes all the way down to the 7th floor! The homeowner could of been liable for this damage (or his insurance company) had the contractor not had the proper insurance.
Another point that is very important for condo owners to understand if you live in a building that DOES NOT require insurance. (That's a scary thing in and of itself.) If a building were to burn down, for example, the HOA insurance will pay to rebuild the common areas of the building, up to your front door. From the inside, you (or your insurance company) would be responsible for all your personal belongings, as well as the interior of your condo (i.e. appliances, cabinets, counters, electrical wiring, toilet, shower, tub, doors, carpet, etc.) Pretty costly if you don't have insurance.
The same goes for renters. Any clients I work with on rental property, we require the tenants to have renter's insurance to cover their own personal items in case of some type of accident.
Insurance. An necessary evil!
Margaret, it is great that you are conscientious enough to keep up with important changes. So many times changes like this won't come up until closing, or after closing when it is too late.
Thom, I'm so glad you added this perspectivel regarding condos in Mid-town Atlanta Georgia. I hope this inspires a new post for your local blog!
Joe, The information is published on the public site of the Maryland Association of REALTORS, but things change so often that it's easy to overlook changes like this - especially if one's broker doesn't stay informed and keep agents notified.
Mary and Patricia - HO-6 insurance covers things like vandalism, theft, personal liability, and damage from any source within one's own condo unit. I think it's something ANY condo owner should consider buying, even if this law were not in effect.
Good information Margaret. I am surprised there is nothing else online about this kind of change.
Bill - That's why I finally posted about it. If a consumer is doing a google search to learn more information about new condo disclosure requirements (as you pointed out, not readily available), hopefully they'll find my post helpful.
Margaret: Thank you for bringing this important information to the front. .very usable for me since I'm also in Maryland
I am trying to sale my condo in Arlington VA on Lee Highway/Spout Run Parkway. I am going to check this out first thing Monday to see if Virginia has changed. thanks for the heads up.
Great advice! Condo insurance is relatively inexpensive (at least in my area). I had water damage to my lower unit (a rental) from a unit 2 flights above mine. The woman did not have insurance, although at that time it would have cost her $35/month! So I was left with the tab. I had insurance, and the renter had renter's insurance.
Thanks for posting this because it keeps us all on the ball!
Margaret, this is excellent information. Thank you for sharing! I would hope most condo owners would get their own insurance but need to make sure they are fully covered. A great opportunity to touch base with our condo owner clients! Thank you!
Margaret..Oh boy..more problems..I know on new condo mortgages buyers must have policies..thanks for info
helpfulhannah
Margaret, This is great information and so important. Thankfully, there are great agents like you to bring this info to their attention! As mentioned above, many agents have NO clue and the buyers are stuck after closing. Great job!
Thanks for the great information in this post. I'm with Thom & Ray...Insurance as a necessary evil! Don't forget to get as much liability on your policies, too! We are quite the litigious people!
Margaret--great information that I was NOT aware of! Thank you so much for bringing it to my attention so that I can do a little NC research!
And, Thom, you should have just written your own post!! LOL
How well do these new changes get communicated to the public?
Fernando, I'm curious - Have you heard much about this? I hadn't... 'probably should have been better about attending office meetings...
Rebecca, I have no idea if any other state has gone to this, but I do think HO-6 insurance is a good thing for any condo unit owner to buy.
Carla, It sounds like your Association wasn't paying for this... that you had to. Thank goodness for your insurance!
Marney, You're right - it is a good excuse to touch base with clients.
Hannah - I just read that earlier today in my company newsletter. Some lenders are requiring it.
Elizabeth - This is a Maryland thing, so I wouldn't assume it is in other states... although I'm sure it's coming!
Shannon - Good point!
Debe - I'm sure he will, but this was good info on another state and I don't mind at all.
I will make sure I let all my buyers who are looking at condos know this! Thanks, Margaret. Time got away from us....we'll have to plan our lunch in September.
Hi Margaret: This is a major change - wow - thanks for bringing it to my attention!
:)
Excellent post. This is what being a local expert is all about!