Save Yourself $20-Million Dollars

Making headlines this month was the story of an HOA being successfully sued for $20-Million Dollars because of a faulty swing set. The Nevada court jury agreed that the playground equipment was improperly maintained and not inspected regularly.  When the swing set finally broke, it caused a serious head injury to one of the tenant’s children.

This case highlights the importance of regular maintenance inspections. All HOAs need a routine maintenance schedule and inspection plan to avoid accidents and lawsuits. A Reserve Study would have ensured the HOA was well funded when the time came to replace the swing set.

The injury and resulting lawsuit could have easily been avoided by paying the $150/monthly inspection fee offered by the manufacturer. Our office offers maintenance inspections of HOA common areas and equipment for less than that on a monthly or quarterly basis.  Every HOA should have regular maintenance inspections and reserve studies performed. You can’t afford not to!

This is why companies like ours exist. Hiring a certified Reserve Specialist is the easiest and most prudent way to protect your investment and ensure that the HOA is in good financial health, prepared to make necessary repairs when needed.

Sadly, this is not the first time an accident victim has sued and won.  Most notably, in 1988, Martha Ruoff sued residents of a 152-unit condo project after suffering permanent injuries when she fell down a flight of stairs after visiting her friend.  This was a landmark case that sent chills throughout the development community, causing changes to the way many common interest developments and their HOA’s are structured.  (For more information on the Ruoff case, click HERE)

You see, in a traditional condominium development, the buyer owns their unit together with a fractional share of the common area which is typically the buildings and grounds.  When Mrs. Ruoff fell, she fell down stairs that were owned by ALL 152 owners together, and after the HOA’s insurance liabilities were maxed out, she sued all 152 individual owners, and won!  Because the HOA was not the owner of the common areas, Ruoff successfully sued individual condo owners, as well as the project developer, architect, general contractor, and the HOA.

By eliminating the personal ownership of common area in a condominium, the HOA could have retained complete ownership, and therefore total liability, freeing individual unit owners from possible lawsuits. This can be done by limiting the “condominium common area” exposure when the Condominium Plan is created.

I could go on for hours, but, let’s not forget the focus of this article: a routine maintenance inspection and/or a Reserve Study would have helped to ensure that the association addressed the faulty stair railing or swing set timely to avoid accidents.  I would have laid the foundation for them to be funded adequately to afford the maintenance and repairs needed to the stairs.

According to the Community Association Institute, there are over 45,000 homeowner associations in California.  That’s a lot of stairs and swing sets!  Who knows how many of those HOAs are lacking in routine maintenance inspections and Reserve Studies.

We encourage any and all HOAs and managers to take the steps necessary to put these routine items in place.  It’s a small change, but it could potentially save you from a $20-million-dollar mistake.

In related news, the Bureau of Labor Statistics is estimating there will be 65,000 more lawyers by 2026.