In Rhodes Management

A recent article in THE WALL STREET JOURNAL, SUNDAY noted that "Even a single water damage claim" may raise a flag to an insurance company. Why? Mold damage. The article states that "Insurers are very cautious about a history of water damage claims. Experience has shown that one water damage claim foreshadows another water damage claim."

The article also noted that for every $1.00 collected in premiums insurance companies paid $1.25 in claims and related expenses.

How can community associations reduce the premium? The most obvious method by boosting the deductible.

Board of Directors may also want to consider evaluating claims submitted. Insurance companies should not be viewed as a back up maintenance program.

Has your association been consistent in filing a particular claim? If so it is important to demonstrate that the community association has taken steps and documented the steps to correct a specific situation that has led to claims.

What should a Board of Directors recommend to their membership if they are confronted with the situation where their association has had their policy cancelled due to claims made and paid and they are forced to find coverage in the secondary market? What should be done if the new carrier excludes water damage form the new policy?

One insurance agent has recommended the following as a way to cover that gap in the coverage:

Homeowners should be encouraged to amend their HO-6 policy (a condominium policy) by
Website Development
David A. Cowan, CPM, PCAM

We recently started the process of developing what we hope will evolve into an interactive website. We will provide our communities with updates on the website as we get closer to completing the work on it.

Michigan Chapter of the Community Associations Institute Update

The Michigan Chapter of the Community Associations Institute now has a legislative action committee (the Michigan Legislative Action Committee of MLAC).

The purpose of this committee is to work with the Michigan State Legislature, the governor's office as well as local governments to inform,

educate and promote legislation that is beneficial to community associations. We will also be aware of legislation at the national level that may have an effect on community associations.

Legislative issues pursued in other states have included manager licensing, securing a primary position over the first mortgagee in the case of the collection of delinquent assessments for a specific period of time (i.e., six months), "family" day care, group homes, mandatory reserves and reserve studies.

One of our first tasks will be to make the members of the legislature just how many of their constituents reside in community associations.

If you know who your state senator or representative is please feel free to convey that information to David Cowan via email to dcowan@inrhodes.com.

If you are a member of the Community Associations Institute you will receive updates on the activities of the MLAC in CAI MICHIGAN, the bi-monthly publication of the Michigan Chapter of the Community Associations Institute.

adding a coverage called "loss assessment". This coverage is intended to pay for a condominium
owner's assessment from the association for an uncovered loss or an assessment to meet a deductible for a property loss. By way of an example - if the association experienced substantial water damage and water damage was excluded from the policy, the association could assess each owner a portion of the cost of the repair. Each owner could then file a claim with the carrier of their HO-6 policy and be reimbursed for the assessment.

Board of Directors should encourage their owners to consult this coverage with their insurance agents.

New Roads at In Rhodes

Update on the Lock Box Arrangement with Fifth Third Bank
Pat Gargaro, Stacy Russell, Angela Warner

We recently sent out a letter to all of our Boards of Directors noting the selection of Fifth Third Bank as the bank In Rhodes Management will be using for the deposits of assessment payments into a lock box and the ability to offer ACH or Electronic Funds Transfer (EFT) as a means to pay assessments. The original target date was February 1, 2003 to have the system operational. Fifth Third Bank has requested that we move the start up date to March 1, 2003.

We did take the precaution of sending out three coupons to the communities that have monthly assessments.

We appreciate your patience during the transition to Fifth Third Bank.

Please do not hesitate contacting us should you have any questions regarding this change.
Musings

Insurance:
The issue of the shrinking availability of property casualty insurance has become such a
critical issue that the National Association of Realtors (NAR) has made this a top issue for their legislative agenda in 2003. Their concern lies with the availability for insurance for homeowners purchasing homes. The NAR has some other concerns with this issue specifically related to the banking and finance industry entering into real estate.

But this concern also touches on the sale and resale of condominiums and the need to provide certificates of insurance to mortgage companies.

The shrinking market for insurance companies may also lead to less competition and increasing rates.

Responsible Ownership:
In the REAL ESTATE section of the December 15, 2002 DETROIT FREE PRESS there was an announcement for a new condominium project (conversion) in Allen Park. Under the description of the insulation it was noted "Probably R11 walls, R19 ceiling, common in 1970. Heat loss is mitigated by stacked construction. In any case, condo owner doesn't pay for heat, except as part of the association fee." Sounds like a perfect case for sub metering to me.

Bankruptcy Reform:
Congress has been working on bankruptcy reform for several years. The Institute of Real Estate Management (IRM) and the Community Associations Institute (CAI) supports the provision that dictates fees or assessments that accrue while the debtor has an ownership interest in a condominium or homeowners association are non-dischargeable.

In Closing…
Please feel free to contact David Cowan should you have any questions, comments or concerns regarding the management of your community.

How to Contact Us
Ph: 248.652.8221, Fax: 248.652.0662
Email: dcowan@inrhodes.com