HOA Use of Indemnity Agreements as Condition of Approval of Owner Modifications
Most common interest developments’ declarations contain restrictions that impose aesthetic and architectural controls on the owners. Frequently, architectural control issues involve disputes concerning modifications that an owner seeks to make to the owner’s separate interest property (i.e. their individual unit, residence, or lot). In addressing owner requests for modifications to their separate interest, associations must be concerned about the future impact of the requested changes on common area. For example, an owner may ask for approval to install skylights, or windows, or doors that penetrate the common area building envelope. Such requests, if granted, could possibly have significant financial impact on the association in the future if the modifications result in water intrusion problems or other maintenance issues that the association must address.
When confronted with owner requests for modifications to their separate interest property, board members, as fiduciaries, must exercise their authority in a way that will protect the future financial integrity of the association, without regard to whether the request is made by a friend or relative of a board member or even by a board member. The governing documents of most homeowners associations contain provisions that empower the association acting through its board of directors, or in some cases its architectural control or review committee, to either grant or deny approvals of homeowner requests for modifications of their separate interest property, or to grant approval subject to various conditions. Common conditions of approval include such things as: (i) obtaining the owner’s agreement to accept all financial responsibility for damages or future costs that are incurred by the association as a result of the modifications made by the owner; (ii) requiring the owner to provide appropriate insurance; (iii) requiring that all work be done by licensed and insured contractors; and (iv) requiring that the owner accept responsibility for, and perform, all necessary future maintenance, repair, or replacement of the improvement.
The conditions on which the association grants approval to requested modifications of an owner’s separate interest should be reduced to a written “indemnification agreement” that is capable of being recorded in the office of the county recorder where the common interest development is located. The agreement should also recite that it is binding on future owners of that separate interest in order to avoid problems with future owners attempting to disclaim responsibility for damages or expenses to the association that resulted from the modifications that had been made by prior owners of the subject separate interest.
For a county recorder to accept the indemnification agreement for recording, the document must be signed by each owner of the separate interest, and the signatures must be notarized. The document also needs to recite the formal legal description of the separate interest that is the subject of the modification and indemnity agreement. The better practice is to include the Assessor’s parcel number, the legal description, and the common address of the separate interest. A sample Indemnity Agreement may be viewed via the below link.
It is important to note that, the imposing of conditions on an approval for requested modifications that are necessitated by a disability may not be permissible, or may be limited by state and/or federal laws. Thus, in those situations where an association is requested to approve modifications to an owner’s separate interest that are due to a disability, it is advisable for the association to confer with experienced legal counsel to confirm whether or not there are applicable restrictions that would prohibit the imposition of conditions that are contemplated.
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