Texas is no stranger to natural disasters. Over the last 10 years, our state has faced drought, wildfires, tornados, numerous floods and hurricanes, but this past February brought us something almost none of us could have predicted, a long hard freeze that devastated the state’s power grid and caused a tremendous amount of property damage from the resulting burst pipes.
Like many of our fellow Texans, those of us who work with or serve on the boards of property owners associations were left shocked and feeling helpless by the magnitude of the devastation. Severe weather events and the resulting fallout are inevitable, so preparedness and proactivity are of critical importance in coping with and overcoming the damage these events cause.
If the ongoing threat of devastating weather events was not enough, Texas is still feeling the impacts of COVID-19 and its effects on our economy and ways of life. As more Texans become vaccinated, we are hopeful a new normal can begin soon, but until that time, POAs should keep COVID-19 procedures in mind while making disaster preparations.
This article will discuss a number of topics that your association should consider to prepare for any disaster, especially as another hurricane season is right around the corner.
For your association, the sorts of conversations and decision-making factors regarding insurance may be highly different from those of another association and the recent winter storm added another wrinkle to those conversations. First, particularly for condominiums, if your association is located in a high-risk flood zone, a master flood policy may be required as a condition of purchase or sale of units. Additionally, for condominiums, understanding the differences in coverage between the Residential Condominium Building Association Policy (RCBAP) and a master hazard policy is vitally important. It is also important to note that owners should consider insuring the contents of their unit over and above what may be provided for in a RCBAP or master hazard policy because, as the February winter storm showed, the question of who is responsible for damage in a condominium as a result of a disaster may arise.
After February’s storm, Marc Markel and Clint Brown detailed how condominiums should look to their declaration and Sections 81.105 and 82.052 of the Texas Property Code for responsibility on different types of damage in a condominium unit. As Marc and Clint detailed, it is important for condominium associations to work with their manager and legal counsel to develop a responsibility matrix that will help categorize the items that are the association’s responsibility and the owners’ responsibility while providing clarity to the board and owners.
For other associations, a review of the governing documents should be performed to determine the sorts of insurance policies the association must maintain. It is possible flood insurance may be one of these policies.
Flood insurance can be a significant expense for an association with several different options on the market. The association should work with a professional and knowledgeable insurance agent to obtain quotes and determine the best policy for your association.. Additionally, inviting insurers to speak at a Board meeting can be highly beneficial in determining what sort of policy and rates make the most sense for your association.
2. Reserve Study/Reserve Account
A review of your association’s finances in light of the February freeze, ongoing pandemic, and hurricane season is strongly recommended. COVID-19 has impacted the financial expenditures of associations in different ways. Some associations have seen added expenditures to enable the association to meet the standards and policies set forth by the Governor when opening facilities during the pandemic. Others may have a larger reserve because they have not opened their amenities.
If your association does not already have a capital reserve account, opening one is a good idea. Following a severe weather event, your association may have to significantly repair or even replace association-owned buildings and other property. It is not advisable to dip into the association’s operating account to fund these projects. A reserve study is also recommended. A reserve study provides the Board with a funding plan for anticipating and preparing for major repair and replacement projects in the future. Please refer to my article “Planning for the Future: Strategic Planning in a Community Association” from RMWBH’s May 2020 newsletter for additional information on this topic.
3. Communication and Assistance
One of the silver linings of a natural disaster event like the winter storm is the triumph of the human spirit. With regard to the winter storm, it was inspiring to see financial and physical aid not only from Texans but also from all corners of the country and even the globe.
You may be asking what, if anything, your association can do to aid owners before, during, and after the disaster. Staying informed and making sure others are informed is essential for coping with a devastating natural disaster. If it is possible and safe to do so, your association can play its part by keeping owners informed of local conditions and assisting displaced owners with information or referrals to nearby shelters and humanitarian aid groups by use of the association’s online portal/messaging service or other social media. But, as we saw during the winter storm and have seen with other severe weather events and hurricanes, power and cell service can be down for days, if not weeks. As a result, communication between the association and its members may be impeded. Associations should consider designating several points within the community owners can look to for communication from the association in the event cell and internet service are down for an extended period of time.
For example, I moved to the Energy Corridor in Houston just prior to Hurricane Harvey, and the area was heavily affected by the controlled releases after the storm. Up-to-date information was critically important, especially before and during the controlled releases. I utilized a number of different resources, including word of mouth from neighbors, social media, weather-tracking websites and the Harris County Flood Control District press conferences. The association can do its part by making sure owners are aware of these resources. For associations outside of the Houston area, utilize the resources of your local area and county officials.
Be cautioned that the association’s charity should be measured and limited: outright donations of association funds to one or more owners affected by a severe weather event can draw claims of favoritism or misuse of association funds from other owners and can subject the association to potential liability. If you have questions concerning what actions are appropriate for your association to take to assist owners in connection with a severe weather event, contact your legal counsel.
Your association should take stock of how your particular community was affected when considering how to proceed with collection and deed restriction compliance actions following a natural disaster event. A compassionate and understanding approach is recommended and eliciting feedback from owners may be beneficial. However, barring extreme conditions, collection and compliance efforts should resume as normal without a significant delay. Also, board members should be aware that while an owner’s obligation to pay mandatory assessments can be deferred, the obligation cannot be waived.
4. Utilize Your Network and Resources
As we saw following the winter storm, it was difficult for associations to secure contractors for repairs as delays and waiting lists were lengthy. Utilizing CAI, your management company’s preferred vendors, and even suggestions from board members or owners to secure reliable contractors in a pinch is recommended. Though it may be impossible to avoid delays, having a phone number or email address handy for a contractor is always a good idea.
Although it’s impossible to predict the short-term effects and the magnitude of damage in connection with a severe weather event, your community does not necessarily have to endure long-term, detrimental effects. Following these tips will assist your association in coping with a devastating storm at every stage.
Join Shareholder Eric Tonsul and myself on Wednesday, May 26, for a Preparing for Disaster webinar. During the webinar, we will offer tips and guidelines to help your association prepare a disaster readiness plan, discuss insurance needs for different disasters and strategies for communication after the disaster has occurred.