Condo rules…the why, how and where of change

Starting a new year always means new resolutions and rules; your condo property isn’t any different, many boards will wait till the first of the year to implement new or revised condo rules. By having a designated period in which they make condo rule changes, it helps the residents to learn when and where to look so they can stay in compliance.

Why condo rules change

Many people wonder why condo rules must change at all; I mean, they should be fairly basic, right? Truth is, there are societal and operational changes happening daily and with that will come changes to condo rules. For instance, your condo rules may currently indicate that trash should be left by your door on Monday morning for pickup that day; if the trash day moves to Wednesday, the rule must change.

Changing some condo rules can go beyond affecting a single concern. Rules could create an even more dangerous and complex issue for residents. A recent example of this happened in Placer County, CA. One resident in a condo community was allowing people to live in their garage; with the garage door constantly being closed, it was hard for management to catch them breaking the rule that prohibited this. To remedy the situation, a new condo rule was written, and a notice sent out that everyone had to leave their garage door open from 8 am to 5 pm daily. Residents of course are up in arms due to privacy and security concerns. You can read the article here ( The consensus is, there has to be another way to address this random issue without endangering other residents.

My daddy always said, “Be careful when you say there ought to be a rule against that, because many times in protecting one, we endanger the masses.” Not sure where it came from, but it makes sense. Condo rules should not be altered to address what is basically an isolated instance with one or two problem residents.

Condo rules and public opinion

Another area to be careful about when making new condo rules is how they will be seen in the court of public opinion. You always have to be thinking about the resale of your property based on your public image. Sometimes public opinion is just a matter of how a rule is presented, it’s a very simple formula:

Identify the Issue-Explore Options-Make Rule-MARKET Condo Rule to Homeowners

Yep, you read that right, market the condo rule; when you release a new condo rule, homeowners should have a clear definition of what the problem was, the process you went through to arrive at your rule and the actual condo rule. They need to buy in and know you have their interest at heart. The same is true of the public. One HOA in Houston has taken a PR hit after they posted signs banning photography sessions on their grounds. ( Now there’s even a challenge to their legal right to do so.

Making condo rules-proceed with caution

If you are sitting on your condo association board, the best advice is to proceed with caution when making new rules or revising existing ones. Be sure the rule is being made because you are “Acting, not reacting.” Most condo rules made as a reaction with limited forethought become legal challenges in the future.

Be sure your condo rules clearly state the expectations and the whys for those expectation as well as the penalty for non-compliance. Even more importantly, communicate the changes in multiple forms for all residents. Many condo bylaws address how changes can and will be made; be sure you are aware of these. Final advice, before you announce your new rules, run them by your legal team and management team.

Want to know how to effectively manage your condo rule changes, check out RISE at or contact RISE at (713) 936-9200 or

Reserve Fund Study – Helping you to plan for the future

A reserve fund study is a tool that allows for long term planning by identifying the condition of capital expense items and setting funds aside for those expenses based on their life expectancy. The reserve fund study is made up of two parts: the physical analysis and the financial analysis and is best completed by an independent consultant or an advanced management company who has experience in this area, both are easily found in the Houston area. Normally capital expenses are identified as items where replacement and/or repair is a major long term expense and is not easily budgeted for in your standard operating budget.

Benefits of a reserve fund study

A reserve fund study provides important information to the maintenance department of what major expenses can be expected and even a possible time frame for when those expenses might occur. The reserve fund study also provides owners and perspective buyers a snapshot of the condition of common area critical components and the level of financial prep that has been done to avoid last minute assessments when they fail.

A growing number of states, (30) at this time, require some form of reserve planning or disclosures. While Texas is not one of the states requiring this type of planning by law, it is still highly recommended. Houston condo buyers are savvy buyers who will require this type of planning. In fact, for a condo complex to be considered Fannie Mae or FHA insured loans they must demonstrate that they have a minimum of 10% of the total budget dedicated to reserve contributions plus they may ask the property to provide a reserve fund study that is no more than 24 months old.

Reserve contributions are normally one of the largest budget line items and often account for 15-40% of the total budget. Again, the importance of a reserve fund study to you is the help it provides in making sure your condominium project is acting in a fiscally responsible manner that will result in little to no surprises for you as an owner.

Funding methods for a reserve fund study

There are two basic funding methods for reserve funds and they are “Cash Flow” or “Straight Line”, with cash flow being the most popular due to its flexibility which allows it to operate with all four of the following funding objectives. The four funding objectives being: full funding, threshold funding, baseline funding and statutory funding. Of these four, baseline funding is most likely to have higher probability of special assessments or deferred maintenance.

Types of reserve fund studies

There are actually three types of reserve fund studies and each association needs to determine which better meets their budget preparation and disclosure needs:

  • Full Reserve Study-This is the most complex and involves listing all components and measuring reserve components for Useful Life, Remaining Useful Life and Current Replacement Cost. This will be done by a vigorous onsite inspection of all components. Fortunately, this type of reserve study normally only needs to be done once and a less time consuming method can be used for subsequent years.
  • Update with Site Visit Reserve Study-Performed every two to five years, this reserve study assumes that all components have been identified by a full reserve study and thus is much quicker.
  • Update No Site Visit Reserve Study-This type of study is normally done by just visiting with maintenance personnel, vendors and owners to determine if any conditions may have changed.

What should you do to insure a Reserve Fund Study is in place?

To read in more detail about reserve fund studies click here. Then, call your management company or condo association board today and make sure that they have a current Reserve Fund Study in place and are keeping it current year to year. Make certain the budget for your condo association includes a reserve fund line item that is at minimum equal to 10% of the annual budget. Don’t get caught with high unexpected assessments, when you can act today and protect your property.

Condo insurance preparedness; because no one likes an “Oops”

Condo insurance is that bet you make with your insurance company that the “oops” will happen. Even if the “oops” doesn’t happen, you need to be prepared. Condo insurance is a little different then insuring a single family home, so let’s see what you need to look at. Don’t understand insurance, contact one of the many fine insurance agents int he Houston area to review what you may need in condo insurance.

What condo insurance does the condominium association carry?

The good thing about condo insurance is that it is normally less expensive due to the cost being spread across multiple owners. Most condo insurance policies carried by the condo association itself cover studs out and common areas, plus liability for the common areas. That essentially means that anything inside your unit is NOT covered. So, if you get a water leak and it damages your carpet or flooring, your condo insurance is responsible for the loss. If you don’t have a copy of the master insurance policy, ask for one from your condo association and review exactly what they are covering. In rare cases, there is an All-In policy that covers the entire property inside and out (remember, even All-In policies do not cover your personal belongings. Also look at the deductible on the master policy and encourage your condo association to keep that deductible in reserves for the condo insurance; again, planning is always your best bet.

What you need to cover

If the condo insurance policy handled by the condo association is a ‘studs out’ policy, then you will need to have a policy that cover:

  • Damages within your unit (studs in)
  • Your personal belongings in case of loss
  • Liability to cover a guest who may be injured inside your unit-(If you are doing short term rentals with your unit as is common in Houston, this one is important).

It may sound like a lot of condo insurance considering you are paying on the master policy through your HOA dues, but consider the consequences of being under-insured. A typical water leak that damages flooring and cabinetry can easily run in excess of $5000 per incident and those incidents never seem to come at a good time financially. Don’t forget flood insurance if you happen to be in a flood plain; this can be purchased through your state and normally will be mandatory at closing.

Confused yet?

The best recommendation is to have a professional insurance agent review the master policy for the condo so they can confirm what coverage may be lacking and recommend additional coverage if needed. By doing this, you will be certain that one of those little “oops” won’t wreak havoc on your finances. If you’re looking for an agent or would like more information about what is actually covered with a condo insurance policy you might consider Allstate.

Don’t forget to check out what your lender requires

If you are just now purchasing your condo be sure to find out what if any requirements your lender may have regarding condo insurance. Again, a copy of the master policy and a reputable insurance agent should be able to help you out on the rest so there are no budgetary surprises.

So get on the phone and make the call, first to your condo association for a copy of the master policy and then to your favorite Houston condo insurance agent.

FHA Condo Approval – the fiscally responsible option

Pushing your association to go for FHA condo approval can open up many options to you as an owner. This is true no matter if you plan to sell your unit, or if you plan to stay in it long term. A list of FHA approved condos for cities such as Houston is available on the FHA website.

FHA Condo Approval

FHA Condo Approval means a broader buyer pool

When you have FHA condo approval, you expand your buyer pool by 60%. It is a known fact that most American buyers use FHA approved loans, and Houston is no exception. It is also a known fact that most buyers look at your approval as a seal of quality in fiscal responsibility.

FHA Condo Approval means eligibility for reverse mortgages

Even if you don’t plan on selling your condo, consider this, as you age you may want to take advantage of a reverse mortgage. An FHA condo approval allows you to consider a reverse mortgage to supplement your retirement income if needed.

Approval says we are more fiscally responsible

The financial crisis of the past hit the country hard, even Houston felt the heat; increased delinquency and foreclosure rates for many condo associations. Because of the strict rules in place by FHA, FHA condo approval reflects a much stronger financial platform. Reserve fund requirements, rental to permanent resident requirements all build a solid financial platform for your condominium to operate on and give you and any potential buyer or lender peace of mind.

If FHA condo approval is so great, why aren’t all condos FHA approved?

Most condominium projects when new seek FHA condo approval because quite frankly, it makes the units easier to sell. If for some reason there is no approval in place, the condo association normally is not likely to seek it at a later date unless residents overwhelmingly insist.

Oddly enough, most condominium projects would have little challenge in FHA condo approval, but due to lack of interest by the majority of owners, they never seek it.

Requirements for FHA condo approval vary with the type and size of complex, and most of the process actually has to do with acceptable documentation and procedures because protecting residents against financial trauma is really what the approval is all about.

You also should consider that Fannie Mae and Freddie Mac have condo requirements that are very similar to those of the FHA, so again you can open up financing opportunities for buyers and owners, capturing a larger percentage of the Houston market.

Check with your condominium association today and see if your condominium complex has FHA condo approval, if not, consider being the driving force that gets your complex headed down that path. The pros definitely outweigh the cons and provide financial peace of mind for you as an owner.

Hurricanes and Windstorms; Texas Facts of Life

The folks at RISE in Houston will tell you, evacuate when told and be certain your condo insurance is current prior to the Gulf hurricane season. Advice that is important to follow, particularly with condo insurance. You need to know what your HOA provides and what is your responsibility. Houston not so many years back had issues with massive flooding after a hurricane hit the coast; even the large medical centers downtown suffered.
Hurricanes and Windstorms condo insurance
Hurricanes and windstorms are a fact of life if you are going to live in the great state of Texas and have advantage of coastal recreation like Houston. What exactly does condo insurance including wind and hail coverage actually pay for and where do you get it? For starters, we suggest you refer to this handy chart from the Texas Department of Insurance.

Buying Windstorm and Hail Condo Insurance

Condo insurance in any one of the 14 coastal counties and certain parts of Harris County on Galveston Bay can require the purchase of windstorm and hail insurance through the Texas Windstorm Insurance Association (TWIA). Policyholders in the balance of the state have the option to purchase wind and hail coverage in their normal condo insurance policies. So if you live anywhere but the above, contact your insurance agent and they can guide you through the process; for all others, contact TDI at 1-800-252-3439 or

What does condo insurance cover?

Condo insurance that includes windstorm and hail covers direct physical loss cause by a windstorm or hail. It does not cover physical damage caused by floods, rain or storm surge, whether wind driven or not. There is a little cavort here, if the rain enters through a hole in your dwelling that was a direct result of wind or hail, then you are covered on the rain. Either way, insurance is a must in the Houston area and any other coastal area in Texas.

What’s the payout on condo insurance?

Condo insurance coverage for windstorm and hail can be purchased up to 1.77 million for your dwelling and contents. If you want replacement cost coverage, your TWIA policy limit is based on what it would cost to rebuild your home if completely destroyed by a covered windstorm peril. This amount will obviously differ with each condo insurance policy.

It does not however pay for additional living expenses. You may buy an endorsement TWIA 310 or 320 to add ALE coverage to your policy.

The bottom line on condo insurance, who buys the hurricane and windstorm?

Let’s face it, what you really want to know is who is buying the hurricane and windstorm insurance? Normally this condo insurance is purchased through the HOA as either a part of the master policy or in conjunction with the master policy. Some HOAs will incorporate the expense of this option in your monthly homeowner fees, while others will bill the insurance separately. Either way, the additional condo insurance should provide you, the homeowner additional peace of mind.

To make sure you are covered, contact your HOA or management company and ask for a copy of the windstorm policy today. Purchasing this type of policy during the hurricane season is nearly impossible and rates skyrocket! Don’t get caught off guard; if your HOA does not have this coverage, ask for a vote of the homeowners to get coverage in place. Insure it well, pack your bags and walk away is sound advice.

Condo Pet Policy

Dog and pet policies for condominiums

The Elephant in the Complex – My name is Pat and I am a pet owner; I must confess that my dog Luci has more clothes than most small children, enjoys full run of my home, sleeps in my bed on my pillow and eats from the table. Yes, I am todays’ typical pet owner and you as a condo association need to understand the condo pet policy, this new member of the family, and how to deal with the Elephant in the Complex.

The place to start as a member of the condo association is to look at all of your legal documents including your bylaws. Somewhere in that mound of paper will be a section that goes over “restrictions on use”. Normally the restrictions on use covers items such as noise, sub-rental, use of common areas, etc. In your bylaws, you may even find a section devoted to pets. Remember, in most cases if your bylaws forbid pets, you as an owner’s association or board, cannot over rule the bylaws on your own; this will take a vote of all owners. If your bylaws do allow pets, then you may be able to adopt rules and regulations regarding pets and come up with a plan that works for everyone. Be sure when you are setting up your rules and regulations that you check with your city and county for restrictions that may be actual law such as registering all pets with a city, restricting certain breeds of pets or vaccination requirements. No association can ignore or override local laws.

So, where do you start?

  1. First you want to define what types of pets are welcome. Many limit pets to dogs (up to a certain weight limit and restrict certain aggressive breeds), cats, small caged animals such as lizards, turtles, gerbils, fish, etc. Be careful not to be too vague when settings criteria, a small dog to some may be 60 lbs. and that opens the residency to a number of large breeds. You also may want to limit how many animals per unit (we’ve all heard of the cat lady with 20 cats, right?). Again, do not be vague when setting your policies, this only opens you up to challenges and possible litigation.
  2. Next we get into behavior; I lived next to a couple once that had a dog that barked incessantly every time they left the dog alone; since both worked, this was 9 to 12 hours a days of constant yapping that those of us who worked from home had to endure. You’ll want to check not only your noise ordinance in your bylaws, but also your city code for such noise disturbance and regulate accordingly.
  3. Another common issue is leash laws; most cities require animals to be on a leash any time they are in public; this is inclusive of cats and dogs. To stay within city code, that means that you need a rule that says any time an animal is out in a common area it must be on a leash. We have to remember, not everyone is an animal lover and not all animals are well behaved when not on a leash.

The Clean Up

Clean up is another common problem with pets. In the high rise office building I ran which was offices only, I actually had a tenant bring in their dog and it defecated in the elevator and they failed to clean it up. You can imagine what an issue this could easily become. Not only do you need a rule regarding their responsibility in regards to cleaning up after their pet, but if possible you may want to consider providing free waste disposal bags as an encouragement.


Let’s talk insurance; it is not uncommon for persons to be asked to carry a liability policy that covers to a certain dollar amount if their animal injures someone. Don’t be fooled by the belief that a small dog cannot hurt anyone; certain small breed aggressive dogs can be just as lethal or even more so than a 100 lb. mastiff.

Service Dogs

Service dogs are another issue; even if you have a bylaw that states no pets, service dogs are not included in that restriction by law. These dogs are protected under the American with Disabilities Act. In a 2006 court case in Washington DC (United States v Douglass Management Inc.) the company told prospective renters (who were actually testers from the Department of Justice) that no dogs, including guide dogs were allowed. They ended up paying $25000 to compensate would-be tenants who had been discriminated against and another $20000 penalty to the government. You can read about it here. Believe it or not, there is even an ADA law that covers miniature horses. For more information on the details of that you can visit the ADA website.

Condo Pet Policy Conclusion

Regulating the Elephant in the Complex can be a very complex task when you consider cultural shifts in the viewpoint of the general public regarding this new member of the family and laws that must be taken into consideration. Remember, it is always wise to have your legal counsel review any new policy prior to making it public.