Friday, January 10, 2014

Federal Disaster Assistance for Condominium Associations and Cooperatives May be on the Horizon

In the wake of Hurricane Sandy, many communities throughout the tri-state area suffered severe and catastrophic damage.  Community associations, much similar to single family homeowners, turned to the Federal Emergency Management Agency (FEMA) for financial assistance, only to be turned away.  Surprisingly, federal law does not currently permit FEMA to provide financial assistance directly to cooperatives, condominiums or homeowners associations to repair essential common elements.  Despite the fact that many common elements likely to be damaged in a natural disaster are necessary to the continued habitability of the structure, such as the exterior of the building or the mechanical room, these non-profit entities are only eligible to receive low interest loans from the Small Business Administration (SBA).

FEMA offers grants for recovery efforts to “individuals” and “households” through its Individuals and Households Program (IHP).   The Federal Government has interpreted the IHP to exclude condominium associations and cooperatives by considering them to be a business, despite the fact that they are simply non-profit entities set up by property owners.   However, on July 31, 2013, Rep. Steve Israel (D-NY), introduced a bill to amend the Act to provide assistance for condominiums and housing cooperatives damaged by a major disaster.   The bill will amend the definition of the terms “individual” and “household” in the Act to specifically include the “residential elements that are the legal responsibility of an association for a condominium or housing cooperative.”  

The introduction of this bill is good news for condominium associations and cooperatives, which have a fiduciary responsibility to its residents to maintain and repair common areas.  Becoming eligible for FEMA grants to assist in the recovery of natural and other disasters would alleviate additional financial burdens on residents and put these communities on equal footing with single family homeowners.  Interestingly, however, the bill does not include within the definition of “individual” and “household” a homeowners association.  This is probably because damage to the common elements of a typical homeowners association is not likely to affect the habitability of the homes in the community.  Fortunately, homeowners in an association can are already eligible for assistance for their individual homes. 

While the introduction of this bill to Congress is not likely to provide any assistance to those affected by Hurricane Sandy, as severe weather becomes more common in the Northeast region the passage of the bill will serve to ensure that condominium associations and cooperatives are not shortchanged in disaster aid in the future. 

See the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Act”).  Note, individual condo owners can receive assistance for their individual units, whereas individual owners of cooperatives cannot.  In a cooperative, the owners sign leases for the rights to their units, rather than owing them and, therefore, do not qualify for the IHP.  

See H.R. 2887, 113th Congress (2013-2014), http://beta.congress.gov/113/bills/hr2887/BILLS-113hr2887ih.pdf
See fn. 2. 

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