UNPERMITTED WORK - LOAD BEARING WALLS - INSURANCE

 UNPERMITTED WORK: ONE SWING OF A SLEDGHAMMER CAN EXPOSE AN ASSOCIATION TO MONTHS OF LITIGATION AND THOUSANDS OF DOLLARS. 

By Phil Masi, CIRMS, President, Assured Partners Insurance Agency

When a unit owner performs unpermitted and unauthorized construction to the structural components of their individual units it can have grave consequences to the condominium association’s ability to obtain future property insurance coverage for the association.  If an owner removes a load-bearing wall through unpermitted and unapproved construction work and it causes structural instability to the building this is usually going to be noticed either through obvious visual changes to the building (sagging, cracking, etc…) or by someone reporting the work to the building code department.  The building department may condemn the building until the structure is reinforced, and they may apply fines, liens, etc...  When the condo association comes up for their next property insurance renewal the property insurance carriers will ask basic underwriting questions that almost certainly would point out the building’s structural issues.  After the Champlain Towers South collapse in Surfside, there is no property insurance carrier appetite to insure any building with structural integrity issues especially buildings of the age, size, construction type, etc… of the ones at Century Village West Palm Beach.  No underwriter is going to get that approved in this current market environment.  What then ends up happening is that the association has to go bare (without property insurance coverage) until they can show proof of structural repairs so the carriers will consider providing property coverage.  The Catch-22 these boards can find themselves in is that the cost of making these structural repairs often exceed the funds the association has on hand and the association then needs to obtain loans to pay for the repairs.  The lenders will likely not provide the loans without the proof of property insurance on the buildings which the association cannot get until the repairs are made.  We have several associations throughout the State that find themselves in situations like this for various reasons including a few due to the exact issue of owners performing unlicensed & unpermitted structural work to their units.  It is basically the worst possible situation a condo association can find itself in. 

The biggest impact post-Surfside to the insurance market has been the additional underwriting questions and materials the underwriters are now asking for in order to provide a property quote on a condo association building.  With recently passed State Laws requiring structural inspections and structural reserve studies statewide this will only create more documents the underwriters can ask to review that could potentially show structural issues that may otherwise have gone unnoticed.  Our advice to all of our condo associations, especially the 25+ yr old 3 story or taller condos, is to get a handle on the structural condition of the building, do NOT put off any needed structural repairs as the damage and repair costs rise exponentially the longer you wait, keep great records of all structural work and repairs along with photos, invoices, etc… In this current environment (bad insurance market, post surfside scrutiny, supply chain disruption, inflation, lack of qualified vendors, changing lender requirements, changing real-estate sale disclosures, etc…) it is really bad for a condo association to get stuck behind the eight ball on these structural issues.  It is like quicksand.  You need to be proactive to avoid the worst-case outcomes and the very minimum an association can do is make sure condo unit owners aren’t self-creating structural issues through unapproved unpermitted work in their units. 

posted by Richard Handelsman. Assured Partners provides Insurance for WPRF properties and, through UCO, more than 280 Century Village Associations.

 

Posted by Old Nassau '67