The Condo Damage Fallacy

There is a common misperception among many condominium owners, and some managers within the condominium association community, that the source or cause of damage within a condominium building, what some call the “Source Rule,” automatically equates to liability. Take a plumbing leak, for example. Many believe that if the leak emanated from a common area pipe, the association owns all repairs; alternatively, if the pipe serves only a single unit, then the owner of the unit pays for all damage. This belief, at least in California, is mistaken.

The Damage Statute

There is a statute directly on point. Under Cal. Civil Code § 4775(a):

HOA and Owner Maintenance Responsibilities.


(1) Except as provided in paragraph (3), unless otherwise
provided in the declaration of a common interest development, the association
is responsible for repairing, replacing, and maintaining the common area.

(2) Unless otherwise provided in the declaration of a common
interest development, the owner of each separate interest is responsible for
repairing, replacing, and maintaining that separate interest.

Note there is no mention in the statute as to causation or source of the damage. That is because in a sense, condominium living is a “no fault” zone (absent negligence, misconduct, or intentional conduct). All owners pay into a common fund for insurance, operations and reserves, and should receive the benefit of that community funding and protection.

The CC&Rs

Under many condominium declarations (also known as Conditions, Covenants & Restrictions, or “CC&Rs”), unit owners have the duty to maintain, repair and replace and “keep in good and working condition” plumbing and other equipment, fixtures and systems within their units. Ordinarily, condominium associations “are responsible for the maintenance, repair and replacement of all Common Areas and Association Property.” These maintenance requirements track the Davis-Stirling Act (see Civil Code § 4775(a)) and do not alter who pays for what.

What this means is there is no “Source Rule” for determining liability for paying for damages in a condominium. Absent intentional or negligent acts of an owner or his or her guests or invitees, an owner is only responsible for repairing his or her unit; while the association is responsible for repairing common areas—regardless of the source of the leak.

The Damage Options

Absent unique language within a declaration, there are three ways to evaluate who pays for damage to a condominium:

1. If there is insurance coverage and
the loss exceeds the deductible, then the association’s insurance should be
primary and, if “walls in” coverage exists, pay for damage to common area and unit(s),
other than personal property.

2. If no insurance and no negligence, misconduct or intentional act, then follow the scheme set forth above.

3. If negligence, misconduct or intentional
act causes the damage, then the offending owner (or his or her insurer) should
pay for all damage, regardless of location.

The above is a very basic summary of a complex issue that often includes interpretation of convoluted CC&Rs, mind-numbing insurance policies, and detailed expert analysis of where, what and how damage occurred. Make sure to contact qualified legal counsel to assist you in navigating this damage and liability minefield.