Before Trouble Knocks …

Everybody has experienced some kind of damage – something like water infiltration, which is very common. So let’s take the first kind of case. Where there’s water infiltration into an apartment because the exterior of the building has a leak, or a pipe in the wall breaks, water can cause damage to an apartment.

The building is responsible, but the extent to which the building is responsible is an important question. Most co-op and condo documents provide that the building is responsible to restore, but only to what’s called the “building standard.”

That generally means they’ll repair cracks, deal with the dampness, put up a coat of primer on a wall or ceiling, and that’s it. All of the shareholder’s or unit-owner’s personal property and personal decoration is their responsibility. So the resident has to pay to restore the wallpaper and clean or replace the rug. That can be expensive, and obviously it’s the reason why many co-op and condo residents have the good sense to purchase homeowners insurance.

There is another set of cases where damage is caused from another unit. The person upstairs leaves the bath running, it overflows, and now, the water damage isn’t caused by the building per se. It’s caused by the person upstairs. Again, there can be damage in the apartment downstairs, but this time, the question is who to look to for repairs. The resident upstairs is responsible, but if that person doesn’t have any insurance, then you’re just looking at a knockdown, drag-out fight to get any money from him.

The hope is that the responsible shareholder or unit-owner has the resources to cover any kind of loss. But this is the second main reason for shareholders or unit-owners to have insurance to cover their liability: if there’s damage, the responsible party is able to pay for repairs.

My modest proposal is that boards consider requiring residents to carry homeowners’ insurance. That way, a shareholder or unit-owner is protected if there’s damage in his apartment, and his neighbors are protected if his negligence causes damage to other apartments.

Some buildings have concerns about requiring insurance. There are concerns that management will have to track all of the residents to make sure that they’ve seen proof of insurance. That might be something of a burden, but you’d have to discuss with management whether it’s so much of a burden that it actually would supersede the interest in having this kind of insurance.

The best way to implement the requirement for insurance is probably in the constituent documents of the building. In a co-op, that would require amending a proprietary lease. In a condo, it would require amending the bylaws.

Understandably, it’s not always the easiest thing to amend those documents because they require that a super majority of shareholders vote to approve those amendments, usually something like two-thirds or three-quarters. But as another approach, a board might try to impose the requirement by implementing a house rule. The extent to which that’s enforceable is something you should discuss with your attorney, and it will depend on your governing documents.