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HO-6 insurance a must for condo

Dear Benny: I live in a condominium. My neighbor’s washing machine drain hose became loose, and the leaking water caused damage to my unit.

There are conflicting clauses in our legal documents. One says that a unit that causes damage to another unit or to a common area is responsible for fixing it. Another clause says that subrogation shall be waived if both units have insurance.

Because of the second clause, my neighbor’s insurance will not accept liability. It looks like I will have to sue my neighbor for the deductible and other out-of-pocket costs.

I am assuming breach of duty. The hose could have been secured. Do I have a good small claims case? – John

Dear John: First, I cannot provide specific legal advice in this column; you should discuss your situation with your own lawyer. Second, whenever I get involved with insurance matters — especially relating to community association — I always seek advice from insurance professionals.

Was the master insurance policy for the entire association advised of the damage? It seems to me that the master should be responsible, specifically to reimburse you for the damage to your unit. Typically, the master policy will cover damage to walls and floors but will not cover what is known as “betterments,” new things added to the original unit, such as a new kitchen or parquet flooring. And, typically, the deductible will be a common expense, paid for by all owners.

I assume from your question that your insurance policy paid for your damage and it is your deductible that you want your neighbor to pay. I do know that the law in some states does not allow the insured to sue for the deductible, but this is something your attorney can tell you.

However, there’s a good lesson here: Every condominium owner should have insurance coverage for problems that occur inside the unit. The insurance industry calls it an HO-6 policy, and the relatively nominal cost may be well worth it in the long run.

One more suggestion: Washing machine hoses are notorious for causing leaks. Many associations require their owners to install heavy-duty, stainless steel-braided hoses, often called “burst proof.” If the unit owner cannot prove that these hoses have been installed, the condo board is authorized to fine the owner on a daily basis until the installation is made. Suggest this to your board of directors.

Dear Benny: I have an adjustable-rate home loan.

I did not know that my lender sold my loan to an investor, who will not let me refinance into a fixed 30-year loan.

This month my payment will go up to at least $3,000. Do they have the right to increase my monthly payment without notifying me? Is there anything I can do? – Karen

Dear Karen: Do you have a copy of the promissory note that you signed when you first bought your house? If not, you have the right to get a copy from the lender or the company that is currently servicing your loan. (That is the company to whom you make your monthly payment.)

Read that document very carefully. If you don’t understand it, ask a lawyer for assistance. I cannot believe that your monthly payment can legally increase to $3,000, although I am not providing a legal opinion since I have not seen that document.

But when a homebuyer obtains an adjustable-rate mortgage, that means that the rate may go up or down depending on the term of the note. Typically, a loan can adjust in one, three or five years. The shorter the adjustment period, the lower the initial interest rate is.

But, as the old saying goes, you get what you pay for. Your rate may increase on a yearly basis with a one-year adjustable.

Some adjustable-rate loans have two caps, or ceilings: (1) how much the rate can increase or decrease on any adjustment period and (2) the maximum rate that the loan can ever go to.

But many adjustable loans have no such ceiling or cap. It is important for anyone considering such a loan to carefully review and understand exactly how that loan works. While the lender must advise you in advance (usually 45 days before the adjustment period) of your new monthly payment, you have no choice in the matter: You signed a legal document and are bound by its terms.

However, because of the size of the monthly increase, you should immediately seek legal assistance. Your loan document may authorize such an increase, but it seems unreasonable and highly unlikely.

Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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