By Clint Brown and Ashley Koirtyohann

Hurricane Beryl recently made landfall along the Upper Texas Coast, bringing more devastation and destruction than many had anticipated. For some, the question of what to do next may be overwhelming, leaving board members and even some community managers wondering where to begin on the road to recovery. This article will outline steps to take in the aftermath of a devastating weather event.

1. Assess the Damage

As soon as it is safe to do so, an evaluation of association-owned assets should be conducted. With loss of power for the millions of Texans lasting days, and possibly weeks, this step may take time to complete, particularly for assets that depend upon electricity to operate. Things to look out for include roof or surface damage to the exterior surfaces of buildings, playgrounds, pools and water slides, fencing/walls, and signage. Additionally, associations should check the functionality of electronic systems, including pool pumps, HVAC systems, elevators and office equipment. For communities with large-scale amenities, such as large water slides, a professional inspector may be necessary to determine if there is any structural damage that requires immediate repair. The same may apply for high-rise condominiums following a significant wind or rain event, due to the increased risk of water penetration. Once a damage assessment is completed, the board may be faced with difficult decisions on how to repair the damage.

2. Evaluate Insurance and Funding Options

If the damage is minor or otherwise falls below the Association’s deductible, such as broken pool furniture or damage that can easily be repaired by maintenance staff, it may not be necessary to file an insurance claim. Items that do not require immediate attention, such as replacing damaged pool furniture, can potentially be placed on the following year’s budget, or paid for with a small withdrawal from the association’s available reserve funds. For more extensive damage, an insurance claim will typically be necessary. Associations should consult their insurance professional regarding the options available to the association, and for guidance throughout the claims process. The insurance claims process can vary from association to association based on differences in carriers, policies, claims histories, deductibles, and the extent of the damage.

After discussing options with your insurance professional, a review of the association’s current finances is strongly recommended. Inflation and the rising cost of insurance premiums have already had drastic impacts on association finances, and adding unexpected expenses for post-storm repairs can feel like an insurmountable burden.

In a perfect world, every association would have a fully-funded reserve account. However, if that is not the case for your association, your association’s attorney can help you evaluate other options for funding repairs, including special assessments or loans.

3. Utilize Your Network and Resources

Now comes the difficult step of beginning repairs. As we saw following previous storms, it can be difficult for associations to secure contractors for repairs as delays and waiting lists are lengthy. Utilizing resources available through the Community Associations Institute (CAI), your management company’s preferred vendors, and/or vendors with which your association has had positive past experiences is recommended. Do your best to avoid the “fly by night” contractors. Though it may be impossible to avoid delays, having a phone number or email address handy for a contractor is always a good idea.

4. Negotiate a Comprehensive Service Agreement

It is important not to rush the process of executing a service agreement with the association’s contractor. A full review of the contractor agreement by the association’s attorney should take place to ensure the association is protected in the event things do not go according to plan. Associations should consider the following when drafting a master services agreement with a contractor:

• Scope of Work
  • The Scope of Work should outline everything the association wants the contractor to do in connection with the repairs
  • Be detailed about expectations
  • Specify timelines
  • Give your attorney something to point to in the event of a breach of contract claim
• Payment terms
  • How frequently will the contractor submit invoices?
  • How will disputes over charges or non-conforming work be resolved?
  • Can the association withhold payment if the contractor is in breach?
  • Does the contract contemplate the statutorily required retainage?
  • Is your association tax exempt?
• Warranties
  • Used to set the standard for quality of work and materials
  • Warranty period
    • How long does the Association have to assert a claim for breach of warranty?
    • What is the Association’s recourse if the contractor does not cure the breach?
  • Insurance and indemnity
    • May require the contractor to indemnify the association for damages incurred as the result of the contractor’s actions or inaction
    • Should clearly define indemnified losses and triggers
    • Should explicitly discuss how third-party claims will be handled
    • May be subject to certain fair notice requirements, including a requirement to use a certain font
    • Should be paired with corresponding insurance requirements

5. Planning for the Future

Once an association’s urgent repair needs have been addressed, the Board should consider obtaining a reserve study. A reserve study gives the Board a summary of anticipated future expenses, such as routine maintenance and repairs for association assets, and options for funding those expenses over time. Please refer to our recent webinar on reserve studies hosted by Noelle Hicks and Andrew Stoutenburg of Reserve Advisors for more information on this process.

RMWBH will be hosting a special webinar on July 23, 2024, discussing what to look for in a contract for repairs. Ashley Koirtyohann will lead the discussion, highlighting the steps associations should take before signing an agreement for construction, important provisions to look for, and common missteps. This webinar will offer valuable information for those recovering from Beryl, as well as those entering contracts for routine work.