Passing on Common Expenses to Benefiting Homeowners

A common problem faced by many homeowner associations, especially associations in a condominium setting, pertains to the extent of an association’s obligation to maintain and repair units. If there is a maintenance or repair issue in a condominium, then many times the homeowner will place the first call to the association instead of a repairman. Depending on the association’s community documents, associations in some situations may have a right or duty to assist in the repairs, but the costs associated with such repairs may be charged back to the units receiving the benefits therefrom.

Pursuant to A.R.S. §33-1255© of the Arizona Condominium Act, any common expense benefitting less than all the owners must be assessed exclusively against the units benefitting from the expense, unless the community documents expressly provide otherwise. In other words, while the financial expense for a repair might be initially born by an association, the ultimate financial responsibility is oft times that of the unit owners benefitting from the common expense in the first instance. (A.R.S. §33-1255 applies only to condominiums, as such term is defined in the Arizona Condominium Act, but the terminology in the statute is helpful for understanding an association’s responsibilities in townhouses and other similar planned communities as well.)

An example of the foregoing can be found in a hypothetical situation where a water pipe breaks in a fifty unit condominium complex consisting of five buildings. Consider the following three hypothetical situations:

(1) Assume a water pipe services three units. Further assume the water pipe breaks before it gets to any of the three units. Since a break in a water pipe affecting three units solely benefits the three units in question, and not the remaining units, the association’s expense in repairing the water line could be passed on to the three units benefitting from the repair cost. (Moreover, absent an emergency, the association might even consider requiring the three unit owners to secure approval for a competent and licensed plumber to implement repairs and accept responsibility for the charges in the first instance.)

(2) Assume a water pipe services an entire building. Further assume the water pipe breaks after it leaves the main association line, but before it enters the building. Since a break in a water pipe affecting the building solely benefits the ten units in the building, and not the remaining units, the association’s expense in repairing the water line could be passed on to the units benefitting from the repair cost.

(3) Assume the main water line servicing all units breaks and the break is not the result of any owner’s intentional or negligent conduct. Since a break in the main water pipe affects all units, the association would be solely responsible for repair of the water line and the associated costs. (The association, however, should not have any liability for resulting damage from the water leak, absent negligence.)

In addition to the foregoing, many condominium associations are confronted with requests to repair damage caused to the interior of units. Unless specifically stated otherwise in an association’s governing documents, damage to interior portions of a unit are generally within the responsibility of an owner. If an owner fails to secure insurance for such occurrences, the owner cannot expect the association to be his or her insurer. Again, pursuant to A.R.S. § 33-1255©, any common expense incurred in resolving interior damage solely benefits the affected unit and requires assessment of said amounts exclusively against the benefitted unit. (This analysis also applies to limited common elements.)

Support for the foregoing analysis is found in Wayne S. Hyatt’s book entitled Condominium and Homeowner Association Practice: Community Association Law, Section 6.03(m), pages 341-43 (2d. Ed. 1988), wherein he states:

“[A] point to remember is that the Association is not an insurer of the unit owners. It is not automatically responsible for damage to a unit simply because the problem originated, in, on, or from the common elements. (Schwarzmann v. Association of Apartment Owners of Bridgehaven, 655 P.2d 177 (Wash. App. 1982)). . . The Association, for example, in the absence of fault, is not responsible for interior damage caused by a runaway auto crashing through the wall. Why then should the Association be responsible for ‘runaway’ . . . water that leaks in? . . . As long as the officers and directors have performed reasonably and with diligence, and in the absence of negligence, the board will not be liable simply because an individual unit owner has suffered harm.”

As a final note, homeowners should be reminded to purchase insurance for their units to cover items not generally covered by the association’s insurance. Such a policy is generally known as an HO6 policy. The association may have a general insurance policy, but homeowners should purchase insurance for any items not covered by the association’s insurance, including damage to the interior of units.

The association has many duties and obligations pursuant to Arizona law. Nevertheless, associations should not take on the additional responsibility of being an insurer of units where no such obligation otherwise exists.

By Charles E. Maxwell and Brian W. Morgan

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