Wood-shingle roofs hike HOA insurance rates

Q: I am on the board of a 102-unit homeowners association, a blend of single-family units and town houses. Roughly 10 percent of units have wood-shingle roofs.

When our master insurance policy came up for renewal in March, the only quote we were able to find was approximately $276,000 — triple what we paid for insurance last year.

Unable to find any other company who would insure us (the wooden roofs are the primary reason cited for declining to cover us), we mailed out revised budgets to owners for a vote. The budget would have increased dues by roughly 60 percent ($200) a month. Unsurprisingly, owners overwhelmingly rejected this budget, 46-4.

We thought we had an option to buy insurance for common elements only, but this insurer withdrew at the underwriting stage, again citing the wooden roofs.

We have purchased other forms of insurance such as liability, fraud, etc that have nothing to do with property insurance.

This feels like an impossible situation. We want to comply with Nevada state law, but owners, understandably, will not vote to pass a budget increase that would allow the association to do so. We are not a wealthy community.

Owners have been advised to self-insure, at least until we can resolve this situation. We are feeling pretty desperate. Do you have any suggestions on how we can move forward?

A: Unfortunately, your association is not the only one that has a serious insurance issue. Any suggestions would be extreme and would require your legal counsel to view your governing documents. Such extreme measures would be to require homeowners with the wooden roofs to change them to tile roofing within, for example, two years so that your association could qualify for lower insurance costs. You may be able to pass a regulation that upon sale of the homes with the wooden roofs, the new owner would need to convert his or her roof to that of tile.

The other extreme measure is to see if you could charge a special roofing fee for those owners with the wooden roofs based upon the insurance premium. Under Nevada Revised Statutes 116.3115 (4b), any common expense benefiting fewer than all of the units may be assessed exclusively against the units.

Q: I would appreciate it if you would please clarify to me NRS 116,31034-11(b): “Unless the person owning 75 percent or more of the units in the association and the other person would constitute a majority of the total number of seats on the executive board.”

Does this only refer to individuals or does it include members of the same investment group that are board members. If it includes only individuals is it possible to change the statue to include members of the same investment group.

My condos were built in 1972, and out-of-state and out-of-the country investors were not a major purchaser of units as they are today. Any advice you could share with me is appreciated.

A: NRS 116.31034 pertains to the eligibility to be a candidate for a board of directors’ position. Subsection 11 pertains to a person, other than a person appointed by the declarant, who owns 75 percent or more of the units in any association may be a candidate and reside in a unit with, be married, be domestic partners, with or be related by blood, adoption or marriage within the third degree of consanguinity or affinity to another person, who is also member of the board or is an officer unless the person owning 75 percent or more of the association and the other person would constitute a majority of the total number of seats on the board.

Under subsection 14, a person associated with the corporate owner, trust, partnership, limited-liability company or estate and identifies the unit or units owned by the entity can serve on the board. The person must file proof in the records that they have been appointed to represent the entity.

It would appear that the individual who owns 75 percent or more of the units and the one member representing the investment group could serve at the same time as the state law does not explicitly include the investment representative in subsection 12.

Barbara Holland, CPM, is an author, educator and expert witness on real estate issues pertaining to management and brokerage. Questions may be sent to holland744o@gmail.com.