Condominium Complex lost Master Insurance, what's next? (tenants, foreclosure, mortgage companies)

[pgtvatitans]

I live in a condo community in MD and I got a letter today stating that our condo complex has lost our Master Insurance due to two fires that happened in some of the buildings here that caused the insurance to go up and was determined by the insurance company to be too costly to keep. The property management sent out a letter explaining the situation but the language in the letter was vague and was asking for people to be more responsible with how they use utilities (we all pay a flat fee, not metered) and asked that our condo fees be increased. It was stated the reason for this request is because we are having a difficult time getting another insurance company due to having a deficient, $800k lost per year, including have $1.1 million in back condominium fees.

At this point, my family and I were already getting prepared to move out and rent out our unit, but I'm wondering what is actually happening and how this will affect me being a landlord.

If anyone has any experience with something like this, how does not having a master insurance policy affect a complex? Given that this is a older complex (built in 1966), what say do local jurisdictions have on places without master insurance policies?

[hueyeats]

Wow... 2 fires.
Dunno much about master insurances but if insurances are dropped... nothing good comes from it.

[399083453]

Without a master policy, no bank will write a mortgage, which means cash only buyers will sink the resale value of your units if you dont get a new master policy soon. The units with existing mortgages will have huge problems with their mortgage company, they will threaten to call your note. Pay the mortgage in full, immediately.

Basically you have no other option but to get another master policy and pay whatever they want.

PS. As a landlord, your condo dues will skyrocket to make up for the higher insurance and non-paying owners which will cut into your profit.

[hueyeats]

^^^Wanted to say... Great comment.

Another example of apples to drag down the prices of other apples w/o the flexibility to call your home that "orange" to be exempt from that "same" common treatment.

[pgtvatitans]

Originally Posted by 399083453

Without a master policy, no bank will write a mortgage, which means cash only buyers will sink the resale value of your units if you dont get a new master policy soon. The units with existing mortgages will have huge problems with their mortgage company, they will threaten to call your note. Pay the mortgage in full, immediately.

Basically you have no other option but to get another master policy and pay whatever they want.

PS. As a landlord, your condo dues will skyrocket to make up for the higher insurance and non-paying owners which will cut into your profit.

This is what I have been afraid of. The property management believes by raising fees that it will make up the money that is lost, but at this point, it seems as though $1.1 million has made that unrealistic. If he had started this process sooner, I would think that this situation would be much more manageable. Now we're looking at the possibility that depending on how much he raises the fees, there will be even more people who can't pay and possibly cause the fees to go up and more people to walk away.

[399083453]

Many mortgage companies require a copy of the rider of the master condo policy each year. Its only a matter of time until all hell breaks loose. How come your mgmt. company isn't foreclosing on the delinquent units?

[pgtvatitans]

Originally Posted by 399083453

Many mortgage companies require a copy of the rider of the master condo policy each year. Its only a matter of time until all hell breaks loose. How come your mgmt. company isn't foreclosing on the delinquent units?

That's a question that I have asked myself with little understanding. It would make sense for them to rent them out, but the issue he states is that he is having trouble getting some of the previous tenants evicted because according to MD law they are allowed to stay under the same lease even though the owners have changed. Personally, some of the owners think that is something going on that he is not telling us, but there isn't a way to prove it because he keeps the financial books away from residents.

[middle-aged mom]

I am guessing there is more to this story than any of us knows. Just about any exposure can be insured so long as the one who needs insurance can pay the premium. Prior claims on policy impact the cost of insurance going forward.

That this association may no longer have insurance is a huge issue.

Many associations have serious issues with accounts receivables and in many cases it becomes necessary for other owners to make up the difference or it could become inpossible for the association to pay its bills or make contributions towards reserves.

The board, not the management company, determines assessments.

It's actually quite rare for an association to forclose on a unit for failure to pay assessments because when they do, the association becomes responsible for the first mortgage and property taxes. Generally speaking, a substantial percentage of people who do not pay their assessments also are not paying their mortage or property taxes. It makes no sense for an assoication to take on the burden of paying owner's mortgages.

Laws and milage vary state to state.

[Resentful Condo Owner]

I'm in the same position except I live in Washington DC. I was just informed the my condo association has no Master Insurance policy either. It would appear that the policy was cancelled months ago and owners are not aware. Is this anything that can be done about this legally? I number of owners are trying to refinance but no bank will allow it without a Master Policy being in-place. The management company says one thing while the board says another,,,

[accufitgolf]

Originally Posted by middle-aged mom

I am guessing there is more to this story than any of us knows. Just about any exposure can be insured so long as the one who needs insurance can pay the premium. Prior claims on policy impact the cost of insurance going forward.

That this association may no longer have insurance is a huge issue.

Many associations have serious issues with accounts receivables and in many cases it becomes necessary for other owners to make up the difference or it could become inpossible for the association to pay its bills or make contributions towards reserves.

The board, not the management company, determines assessments.

It's actually quite rare for an association to forclose on a unit for failure to pay assessments because when they do, the association becomes responsible for the first mortgage and property taxes. Generally speaking, a substantial percentage of people who do not pay their assessments also are not paying their mortage or property taxes. It makes no sense for an assoication to take on the burden of paying owner's mortgages.

Laws and milage vary state to state.

I agree with this.

Insurance is available on anything. One just has to be willing to pay for such.

Foreclosure on a unit is usually not an advised step.