In common wall housing, unit flooding and damage can happen for a variety of reasons including roof leaks, water supply pipes leak, toilet/bathtub overflows and washer hose ruptures. Who is responsible for water damage, the HOA or unit owner?
First, determine the actual cause of the loss and whether any of the involved parties were negligent in their maintenance responsibilities (like, left the water running). Then, review the governing documents to determine what guidance there may be for maintenance and repairs. Pay special attention to the definitions of: unit, common element, limited common element, maintenance responsibilities of owners and the homeowner association, insurance responsibilities of owners and the homeowner association and enforcement procedures. These provisions often differ from HOA to HOA.
Generally, owners are responsible for maintaining anything they own or that lies within the unit boundaries, and the HOA is responsible for maintaining the common elements and limited common elements. However, limited common elements are usually allocated to the exclusive use of a unit owner and the unit owner may have the maintenance responsibility for repairs. An important principle to keep in mind is that the obligation to maintain a particular component does not necessarily mean that there is an obligation to repair damage to another unit if that component fails.
Say that the water heater in Unit A fails and damages Unit B. According to most governing documents, Unit A bears the expense for repairing the water heater and any damage to Unit A. There is no obligation for Unit A to pay for damage to Unit B unless the owner of Unit A was negligent in some way. For example, if Unit A owner knew the water heater was leaking slowly and steadily and let it continue to leak for long enough to damage Unit B, Unit A owner would be negligent. On the other hand, if the water heater tank ruptured spontaneously and flooded Unit B, it would not be negligence.
Barring negligence, each unit owner repairs his own unit. The same principle applies if there is a leaking roof which is maintained by the HOA. Roofs leak from time to time. If a unit owner does not inform the HOA when a leak occurs, how does the HOA know to fix it? It's like the old saying, "If a dog barks in the woods and there is no one there to hear him, is he still a bad dog?"
Now, if the HOA is informed of the leak, does nothing to stop it and the unit is damaged, that is negligence and the HOA should pay for the unit repairs. Some would argue that since the HOA's insurance is paid for by the members, unit damage should be paid for by the HOA in every case. Unfortunately, any HOA that does not carefully control the type and frequency of claims made will find itself without insurance or paying enormous premiums.
This is why it is critically important for the board to establish a clear policy on maintenance and insurance responsibility which will safeguard the HOA's insurability. This policy should identify all major building components and assign responsibility either to Owner or HOA that is consistent with the governing documents. Unit insurance agents should be provided this information so they know what their insured is responsible for. This is all about spreading risk around and saving the HOA insurance policy for the Big Claims as much as possible.
There is a sample Areas of Maintenance & Insurance Responsibilities policy available to Gold Subscribers of Regenesis.net. For more innovative homeowner association management strategies, see Regenesis.net .