Workers compensation coverage is essential
Q: Our association requires the usual proof of bonding and licensing for our contractors. Is it necessary to have them show proof of workers compensation insurance?
A: Yes! All contractors and vendors need to show proof of workers compensation, liability insurance and casualty coverage. Request the contractor/vendor require their insurance to name the association as an additional insured. Should an uninsured worker injure himself and the contractor fail to have insurance, the association will be named to cover the medical expenses and possibly compensation and damages. The association's insurance likely will not cover this claim. Be aware that small companies or individuals may say that they are exempt. That may be true but the association would then be responsible for any injury or loss. This is a good point to discuss with your insurance agent and association attorney.
Adding 'lease rider' might create problems
Q: I am a director of a homeowners association and I would like to know if there is a statute called a "lease rider." This rider states that if owners who rent their units out fall behind on their assessment fees, the tenant must deduct that portion from their rent under threat of eviction. Since we have changed management companies, our new property manager says there is no such statute.
A: I do not know of any statute that requires a lease rider. What you are addressing is an association document screening policy or an approved policy by the association. This type of a rider would make the association a third party to the lease and give it claim to the rent should the owner become delinquent or should the renter violate the rules. I would caution you that becoming a third party may create liability problems. Before you move forward, consult with your attorney and insurance agent.
Accounting system follows rules
Q: Our condominium accounting records indicates that our maintenance fees are recorded on the date due and not when they are received. It is my understanding that since we use accrual accounting, our system is correct. Is this right?
A: Your accounting is correct. Many people do not understand accrual accounting systems. In simple terms, you record when a debt is due and receivables when payable, not when paid. At that point, if a bill is not paid or fees are not received, they are delinquent. They show as accounts payable and accounts due on the records. You might have your CPA explain this to your members.
Building code calls for raising roof air-conditioner units
Q: Must our condominium raise the air-conditioning pedestals for each unit? Is it true that the state law has changed to require this of existing buildings? The information was provided to us by management. We need to reroof our buildings and were told this would be a requirement. The cost estimates are in the range of $2,000 per unit.
A: The change regarding AC units and pedestals has been in existence for more than 20 years. It is part of the building code for air conditioners that are on flat roofs. There are several advantages to raising the compressor. One is that it has better air flow to cool the working parts. Another is that it will reduce vibration to top floor units. In hurricanes, it allows wind to flow around and under the pedestals. The problem is that the air-conditioning unit must be disconnected, moved and reconnected. Some older units may be damaged during this process. The board must have a clear understanding of who will be responsible if a unit is damaged.
Richard White is a licensed community associations manager. Write to him at 6039 Cypress Gardens Blvd., No. 201, Winter Haven, FL 33884-4115. Please include your name and city.