Homeowners Association Could Be 'Eden' of Liabilities
By: Jeff Brown

NEW YORK (MainStreet) -- The Trayvon Martin shooting in Florida was a wake-up call to the nation about the persistance of racism and racial profiling, but for anyone who lives in a community with a homeowners association, or is thinking about moving to one, the case also raises questions about legal liabilities that could wreck your worry-free Eden.
 
Martin, 17, was shot and killed by a member of the community’s neighborhood watch organization, George Zimmerman, who has been charged with murder. Even if Zimmerman is acquitted, the homeowners association could face a civil lawsuit with a costly outcome, according to HSH Associates, a mortgage data firm.
 
While it’s hard to predict how that could affect individual homeowners in the neighborhood, the risk of a big liability judgment is something all residents and prospective residents should keep in mind. Basically, a homeowners association is a way to share common expenses like landscaping, road maintenance and security, but it also means everyone shares the risk of something going wrong.
 
Just how that is shared depends on many factors, including the association’s insurance, local and state laws, and whether the association has any involvement in the activities that are the target of the lawsuit. In the Martin case, the shooter, George Zimmerman, was patrolling as a member of the watch group authorized by the homeowners association, potentially opening the door to a suit against the association.
 
Martin’s family could argue the association did not adequately screen its watch patrol members, failed to give them sufficient guidelines or training, or should have barred them from carrying guns and directly confronting suspicious people rather than simply reporting to police.
 
HSH says it’s unlikely that association members who had no involvement in the incident could be held individually liable for any financial judgment against the association. But individual homeowners could suffer indirectly if the association faced payments it could not easily handle.
 
In that case, the association might be forced to levy a premium on annual dues, either to pay a judgment or for higher insurance costs. That could increase chances of some homeowners falling behind on dues, causing premiums to rise even further and potentially forcing the association to foreclose on homeowners in arrears.
 
If dues being delinquent exceeded 15% of homeowners, it would become difficult or impossible for buyers to get mortgages for homes in the neighborhood. That would drive prices down and make it hard to sell.
 
That may be an extreme case, but it clearly is important for current and prospective members of a homeowners association to make sure it has plenty of liability insurance, and that it keeps a tight rein on armed watch patrols and other risky activities conducted in its name. Of course, homeowners should also make sure their own insurance is adequate.
 
An association that’s already suffering a high number of dues in delinquent status is especially vulnerable to an incident on common property. That should be a red flag to residents, present and future.
 

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