HOA Detective™ – Jan 21, 2025: As of the third week of January 2025, several significant developments are impacting homeowner associations (HOAs) and condominium communities across the United States. The recent Los Angeles wildfires being only one newsworthy event.
Impact of Los Angeles Wildfires on HOAs and Condominium Associations
The devastating wildfires in Los Angeles have severely affected numerous communities, including those governed by HOAs and condominium associations. Federal and state agencies have mobilized to support these communities, providing resources and assistance to those impacted by the natural disaster.
Economic Losses Exceed Insurance Values
The economic repercussions of the LA fires are already substantial. With economic losses being estimated as high $150B, and insured losses estimated as high as $40B, the 2025 LA fires have set a record for wildfire-related insurance claims in U.S. history while the fires are still burning!
https://www.insurancejournal.com/news/national/2025/01/14/808113.htm
This financial strain is compounded by the fact that several major insurance companies, including State Farm, Chubb, and Allstate, had withdrawn from high-risk fire areas in California prior to the fires, leaving many homeowners without adequate coverage.
In the aftermath, individual property owners and community associations face major challenges if they are going to insist on rebuilding in high-risk, fire-prone areas.
https://www.theatlantic.com/ideas/archive/2025/01/la-wildfires-preparation-forests/681308
California is not the only place where insurers are dropping customers or reducing casualty insurance coverage. This article by the Washington Post discusses a “growing number” of states in which insurers are dropping coverage or reducing the limits of coverage under the policies they do issue.
https://news.yahoo.com/california-isn-t-only-place-183104369.html
“Never Let a Good Disaster Go to Waste”
Meanwhile, only the foolish will sit back and wait for the new Presidential administration to come to their aid. In keeping with his strategy of leveraging every newsworthy event to his best advantage the incoming U.S. President, Donald Trump, has seized the opportunity to politicize the disaster by blaming the Los Angeles wildfires on policies implemented by California’s Democratic leadership, particularly Governor Gavin Newsom. With prominent Trump supports like Marc Andreessen and Jeff Bezos reportedly invested heavily in LA real estate, you might think the new President would be a bit more sympathetic?
Broader Trends Affecting HOAs and Condominium Associations
Beyond the immediate impact of the wildfires, several broader trends are influencing HOAs and condominium associations nationwide. Among the notable developments around the country include the following stories:
- Rising HOA Fees and Assessments: The Wall Street Journal reports homeowners across the country are experiencing significant increases in HOA dues and special assessments. In Washington state, some communities have seen dues more than double over the past year. Similarly, parts of Florida have reported increases up to 15%. These hikes are attributed to escalating maintenance costs, insurance premiums, and the need to fund reserve accounts for future repairs.
https://www.wsj.com/personal-finance/homeowners-association-hoa-dues-increasing-costs-aa6eddf5
- Legislative Changes in Florida: In response to the 2021 Champlain Tower collapse, Florida enacted laws requiring condo associations to maintain sufficient reserves for major repairs and to conduct regular structural inspections. While aimed at enhancing safety, these regulations have led to increased financial burdens for condo owners, particularly in older buildings.
Meanwhile, State Representative, Jason Pizzo warns the state doesn’t have enough structural engineers to handle the increased workload that is expected because of the 2022 legislation requiring a structural condition assessment for every high-rise in the state. Under the 2022 law the deadline for completing the initial “milestone inspection” for the oldest buildings in Florida was 12/31/2024. Three weeks after the deadline it remains to be seen how many buildings have completed the initial inspection.
- Maryland’s House Bill 107: Also passed in 2022 in response to the Champlain Tower collapse, Maryland HB 107 included a provision requiring affected community associations to complete a reserve study by 10/1/2023. Maryland’s poorly crafted legislative mandate requires certain condominium and homeowner associations to conduct reserve studies, and to “adequately” fund reserve accounts.
This legislation has reportedly resulted in significant financial obligations for unit owners, with some facing five- to six-digit bills to meet the new requirements. The problem with HB 107 is that the legislation exempts many older associations from the reserve study and funding requirements, which effectively defeats the point of the effort to “reform” the state statutes that govern reserve studies and funding of the reserves by HOAs, condominiums, and cooperatives.
https://www.wikiwand.com/en/articles/Maryland_House_Bill_107
- Insurance Challenges: The increasing frequency of natural disasters has led to a more volatile insurance market. As noted, the recent California wildfires have exacerbated an already challenging environment, with major insurers pulling back from high-risk areas. This trend is not isolated to California; other states are also experiencing shifts in insurance availability and premiums, impacting the financial stability of HOAs and condominium associations.
https://www.nbclosangeles.com/news/local/los-angeles-wildfires-california-home-insurance-impact
These developments underscore the evolving challenges faced by HOAs and condominium associations. Homeowners and association boards must stay informed and proactive to navigate the complex landscape of regulatory changes, financial pressures, and environmental risks.
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