JEANNE REARDON - Attorney at Law

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Real Estate Law Blog

September 2011

Master Policy and Insuring Your Condo or Co-op

The master policy provided by your condo/co-op board covers the common areas you share with others in your building such as the roof, basement, elevator, boiler and walkways for both liability and property damage.  If the roof of your condo gets damaged, for example, and water leaks into your unit, the master policy would cover the roof repair but not the individual repairs to your unit for damage to things like the ceiling, walls, carpets or furniture.  In addition to property damage, the master policy will have liability insurance for common spaces, such as lobbies, hallways and sidewalks. 

As the unit owner, however, you will need to purchase a personal home insurance policy (type HO-6).  The building's master policy does not protect your personal belongings or offer liability coverage for occurrences within your unit.  Your personal insurance policy will provide coverage for damages to your unit and your possessions, and additional coverage for living expenses if you are the victim of fire, theft or other disaster covered by your policy.  Your policy should also provide for liability coverage.  This way, you will have coverage for accidents that occur within your unit.  If someone falls and injures himself in your unit, your policy would provide the liability coverage, not the building's master policy.  

To adequately insure your unit, it is important to know which structural parts of your unit are covered by the master policy and which are not.  You can do this by reading your association's bylaws and/or proprietary lease.  If you have questions, talk to your condo association, management company, insurance broker or real estate attorney. 

Be aware of the deductible on your building's master policy.  If there is damage to the common spaces, every unit owner will be required to contribute money to reach the deductible.  If the policy actually covers some damages that are specific to your unit, you will have to reach that deductible yourself.  As a unit owner, you would want your personal policy to cover the difference between your individual policy deductible and the master policy's deductible, if you are required to use the building's insurance for something like a burst pipe.

Finally, make sure your policy has coverage for unit assessments.  Unit assessments are fees charged to unit owners to pay for repairs to common areas or property.  If your building is damaged by an insured disaster, and the cost of that damage is not fully covered by the master policy, this type of coverage would pay for your share of an assessment charged to all unit owners.

Certificate of Occupancy

The purchase of a home is the biggest investment most people make in their lifetime.  To help ensure that you "get what you pay for," make sure that the home has a proper Certificate of Occupancy.

Unless the house was built prior to 1938, obtain a copy of the Certificate of Occupancy (CO), which describes the legal use and occupancy of a property.  To obtain a copy of a CO, visit the Department of Buildings in your borough or town.

Buildings constructed prior to 1938 are not required to have a CO.  If your house or property was constructed before 1938 and there has been no change in the use or additions to the property, or a change to the ingress or egress of the building, it may not have a CO.  If proof is required that no CO exists, the Department of Buildings will provide you with a letter confirming that a CO is not required for the building because it was built before 1938.  If you need proof of the legal use of a building that does not have a CO, you must obtain a "Letter of No Objection" from the Department of Buildings where the property is located.

If you are purchasing a property, especially new construction, check to see whether the CO is marked "Final" or "Temporary".  A Temporary Certificate of Occupancy (TCO) has an expiration date.  What this means is that although the house is safe for occupancy, this is a temporary approval that is subject to expiration.  If you purchase a home that has a TCO, you should consult an attorney and an architect or engineer to determine the requirements and costs for obtaining a final CO.

Your real estate attorney should obtain a written agreement and sufficient escrow from the seller/developer that will ensure that the seller/developer finishes any outstanding work and gets the permanent or final CO.

Take note of any construction that looks new or different from the rest of the house, such as an addition or deck.  Prior to closing, make sure that you get the proper CO from the seller for this work.  If you do not, as the new property owner, you will be responsible for legalizing any work that was previously done on the property without the proper permits or that was done in violation of the Building Code.  If you purchase a home with outstanding violations, you must correct the illegal conditions even if they were present when you purchased the property.  You will also be responsible for paying any outstanding fines or fees in connection with the violations. 

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