What happens when a property damage disaster occurs in an association? What steps need to be taken at the time of the disaster and afterwards in order to restore the property to its predisaster condition? Who is responsible for taking the necessary actions, the residents or the association? We spoke with Aneil Kersey, Vice President of Concraft in Auburn Hills, Michigan to answer these questions.
Property damage events result in the destruction, ruin, and loss of possessions and property. However, the effects on a property manager, association board members and the affected co-owners can reach much further than just the property involved. Due to this, individuals involved in such situations need to remember two common themes: the necessity to keep a level head under intense emotional stress and perceived chaos and they need to remember the difference that an experienced, qualified, certified restoration contractor can make.
Restoration companies handle clean-ups and repairs for a wide variety of disaster situations. These can include many different situations. Anything from storm damage, such as shingles missing from a roof, siding that gets blown off the exterior, fires, floods and sump pump backups, to a car driving through a building or biohazard clean- up (such as situations where people pass away). Restoration companies have specialized training in a variety of restoration situations, such as smoke removal or determining when structural items should be re- placed depending on how much char they have on them after a fire. They also have a unique knowledge and experience on how to properly clean and restore building materials and personal belongings that have been impacted by fire, smoke, soot, water, microbial growth, etc. A reconstruction or remodeling company, on the other hand, makes repairs, additions, and modifications to buildings without the added challenge of dealing with soot, char, microbial growth, etc. “A restoration company may appear to be the same as an everyday reconstruction company, however, the unique talents and abilities they bring to the table are invaluable in putting the structure back to its pre-loss condition,” said Kersey.
If an association is experiencing any type of water damage, such as a broken water supply line in a common element, water damage from a fire suppression system, or if there is a hole in the roof due to storm damage, they should call a restoration company for emergency help. “We want to mitigate or prevent any secondary damage from the initial catastrophe,” said Kersey. He said for any emergency, the company should be on-site ASAP (within one hour) from receiving that phone call. Arrival on site within one hour is a good guideline with regards to the industry. He explained that in an emergency response, a company should get to the catastrophe as quickly as they can, do an assessment of the damage, and stabilize the site so that there’s no more damage occurring. “You take into account the safety of any of the tenants, co-owners or building owners that might be there,” he said. The company will also stabilize things to the point where an estimator can come in and prepare the repair estimate for the reconstruction company. Also, in the event the loss is very severe, a meeting with the board of directors, affected co-owners, managing agent, and restoration/reconstruction company to educate all parties on responsibility of repairs and timeframes is recommended.
Who should the association call first, the restoration company, or their insurance company? Kersey recommended calling the restoration company first to stabilize the damage and provide an assessment for re- pairs. “Many associations today have larger insurance deductibles, $5,000 or $10,000, so before they submit an insurance claim, they should prob- ably call the restoration company, allow the restoration company on-site to do their initial evaluation, perform any emergency services that need to be done, and then the restoration company can follow up with the association, either directly or through a property manager, to tell them what’s going to be involved and give a rough estimate of the costs associated with what the repairs and mitigation would be,” he said.
Once the site has been stabilized and evaluated by the restoration company the association can make the decision as to whether they want to file an insurance claim. Kersey noted that the restoration company should be involved in every step of the process on behalf of the association. The association should give the insurance claim information to the restoration company, including the name of the insurance company, the claim number and the adjuster’s contact information so the company can meet the ad- juster on-site. The restoration company will then do a walk through with the adjuster and agree to the scope of work. The restoration company should also ensure the association’s coverage is being maintained properly for the necessary repairs due to the damage.
Once the evaluation of the work is done, the restoration company will prepare an estimate for its work. Kersey said this can take anywhere from a few hours to a couple weeks depending on the severity of damage. Once prepared this is submitted to the insurance adjuster. The adjuster will re- view the estimate and call the restoration company with any observations, concerns or requests to the restoration company. Once the estimate is approved there is a work order or contract that should illustrate the dollar amount the restoration company and insurance company agreed to. This is known as the replacement cost value.
The association needs to understand that the restoration company works directly for them and therefore the contract for work should be signed by the property manager and members of the association’s board.
“The restoration company is working for them, whereby the insurance company provides the insurance for the risk that they insure the association for,” he said. The restoration company should meet with the insurance company so that an agreed upon scope of work can be created. Based upon that you will get an agreed upon amount of what the claim will cost. “The insurance company’s legal or fiduciary responsibility is to the association. So once the insurance company has an agreed scope of work that they will pay off of, payment for the agreed dollar amount will be paid to the association,” he said.
The association should check the dollar amount of the contract along with the payment terms for when the monies are due. Associations should also look at the terms for change orders. “Anything that’s outside the scope of work that is listed in the initial agreement would require another written agreement for change orders or supplements along with signatures from all the necessary people so there are no surprises at the end,” said Kersey.
Once the contract is signed and returned, the restoration company will commence work. “Initially this will involve a pre-construction meet- ing with the contractor’s project manager, the association’s property man- ager and any other necessary parties. At this meeting a review of the job scope should be discussed, selections made (such as paint colors, carpet, cabinets, and countertops — anything cosmetically that needs to be select- ed) and any special circumstances discussed. After this meeting, all materials can be ordered, tradesmen scheduled, and an accurate job schedule can be created. With regard to material selections, many of these selections are dictated by the association’s bylaws, but sometimes the co-owners are al- lowed to make these selections.
The work starts with any necessary demolition, deodorization or restoration, then after that, any repair work would be done. “On a larger job that would be framing, the mechanicals, heating plumbing, electrical, then insulation, drywall and paint, cabinets, trim, carpet, right through the end,” he said.
What the association should expect up front is a start to finish schedule from the restoration contractor, and then throughout the process there should be open, transparent communication between the contractor, the property manager and the association. This way the project should go smoothly, and any issues that are brought up by the co-owners, condo association and property manager can be dealt with promptly by the restoration company.
What is the role of the restoration company in regard to dealing directly with co-owners? The restoration company can communicate directly with anyone who has concerns. One caution is to make it clear to the co-owner that the restoration company is working for the association, typically through the property manager. He said that many times co- owners are unclear about what they own or what the process is. So there needs to be open communication between the association, the property manager, the restoration company and the co-owners. One area this be- comes apparent is with regard to damage in a co-owner’s unit that is their responsibility based on the association’s bylaws. If the materials inside are a ‘betterment or improvement,’ the co-owner’s HO-6 insurance policy would cover a portion of the cleaning, repair, and/or replacement of these materials.
The association doesn’t need to wait for a disaster to happen to put the pieces in place in case one does. Restoration companies can be part of the disaster planning process for associations. The company can come in and instruct the association on who they should call if they have a water or fire event. They can also point out where all the water shut-offs and electric shut-offs are in the building. “So when something does happen, the on- site manager, property manager and condo board can all know what to do and who to call. Because once something does happen, there will be a lot of emotions involved,” said Kersey.
He pointed out that, depending on the severity of the loss, there could be a lot of chaos involving multiple co-owners. “That’s not the time to be making a decision as to what contractor you want to do the work. It’s better to do that upfront, when you can think things through, interview multiple contractors if necessary, and then set things up to get all emergency contact numbers and the names of people you should talk to,” he said. A restoration company can take the lead in working all these things out for an association.
The choice of what restoration company to use is up to the owner of the property, not the insurance company. “The association has the right to choose whomever they want to do the work,” said Kersey. The insurance company can make recommendations, but outside of providing referrals, they have no role in selecting what company will perform the work. Kersey highly recommended that the association make sure that the company they do select is an active member with the Restoration Industry Association (RIA). “The company performing the work would ideally have a Certified Restorer (CR) on staff, as this designation is the ‘gold standard’ of certification for restoration personnel. Other advanced designations are Water Loss Specialist (WLS) and Certified Mold Professional (CMP). Another organization that many respected restoration contractors belong to is the Institute of Inspection Cleaning and Restoration Certification (IICRC),” he said.
Kersey said that the biggest misconceptions in disaster restoration stem from managing agent, board of directors, insurance adjusters, and co-owners not understanding the association / co-owner responsibility. Oftentimes, the parties involved in the repair process / insurance claim do not realize or understand their responsibilities. This can cause friction, if co-owners do not understand where the association’s insurance ends and their personal homeowner’s policy begins. Also, some insurance adjusters are not properly trained on reading bylaws, which leads to coverage based on “interpretation,” and this could lead to delays and confusion.
He explained that many associations have a builder’s standard-grade insurance policy. However, there are three known association policies that deal with condominium associations that all parties should be aware of (Bare Walls policy, Single Entity policy, All In policy). Responsibilities and how they relate to different parties involved will depend to a large degree on the insurance policy that was purchased. The co-owners could have made a lot of upgrades to their unit after they purchased it, and if the association has a Single Entity policy, when a catastrophe occurs the con- dominium association only owes the co-owner for how their unit was the day it was purchased from the original builder. “That causes a lot of stress if the co-owners don’t have proper insurance,” he said. Those co-owners would need to pay out-of-pocket to restore their unit to include all the upgrades, and this, according to Kersey, causes them to be upset with the association, property manager or restoration company. So co-owners need to make sure their individual homeowner policies will adequately pick up where the association’s insurance responsibility ends.
Another misconception is that the restoration work will start in just a few days following the damage-causing incident. If it’s a substantial loss, there are a lot of things that need to happen. In the case of a fire, for ex- ample, there needs to be an origin inspection for the cause of the fire and allowing the adjusters for all materially-interested parties to walk through the entire job site. This would include adjusters from not only the association’s insurance company, but those from the co-owners’ individual insurance policies’ companies. “The process takes a little bit longer on the front end than a lot of people think it will,” said Kersey. Good communication, letting people know what to expect, is key to a successful restoration job. How well the repairs to the damaged structure(s) within the association proceed is largely up to the property manager and association board. Of course, the contractor who performs the work must be qualified, skilled, and certified to do the work they perform, but it is the job of the property manager to communicate exactly what they expect during the job. If you are not sure, make sure to ask plenty of questions and do not move on until you understand the information given as an answer. Through good communication, patience, transparency, and trust, an emotionally stressful and overwhelming situation can be handled promptly and professionally with great results for all parties involved.