Q&A: Hurricane-Damaged

Q Our building was badly flooded by Hurricane Sandy, which “killed” our boilers and elevators, and the building is terribly short on funds at the  moment. Are FEMA loans applicable to condos? Is this something our management  company should be taking care of? What should I be doing to ensure the building  is getting the right help to rebuild?  

 —Battered in Brick  

A “The Federal Emergency Management Agency (FEMA) provides and coordinates  emergency services in disaster areas declared by the president,” says Manalapan-based attorney Hubert Cutolo of the Cutolo Law Firm, LLC. There are two primary federal disaster assistance programs: (i) FEMA’s Individuals and Households Program [IHP] and (ii) the U.S. Small Business  Administration (SBA).  

 “IHP is designed to assist individuals with expenses that are not covered by any  other means. The statute mandates that IHP cannot issue funds for losses which  are covered by insurance policies. An insurance claim for benefits must be  filed, and more importantly, the insurance carrier must have determined that  the loss is not covered. In short, if the loss is covered by insurance,  disaster aid will not be made available. “Accordingly, if the damage to the boilers, elevators or the building itself is  covered by flood insurance or the condominium’s general insurance policy, IHP funds will not be provided. In order to be eligible for IHP assistance you, or someone who lives with you,  must be a citizen of the United States, a non-citizen national or a qualified  alien. Based on the foregoing, a condominium association—i.e., a non-profit corporation—would not qualify for disaster aid assistance under IHP.  

 “Note, however, most disaster aid from the federal government is in the form of  loans from the Small Business Administration (“SBA”). Loans issued by the SBA must be repaid. The SBA provides low-interest loans for damage to property owned by non-profit  organizations, such as condominiums, that are not fully covered by insurance.  SBA loans are made available to businesses, including non-profit corporations,  to repair or replace destroyed or damaged facilities, machinery or equipment  for the maximum amount of $1.5 million. An insurance claim should be filed  prior to applying for an SBA loan. As noted above, an SBA loan will only be  issued for damage not fully covered by insurance. An SBA loan will permit a  condominium association to perform necessary and immediate repairs. The  association can then determine whether an emergency or special assessment is  necessary to manage the loan payments, or incorporate the loan payments into  the operating budget as a line item.  

 “Prior to any repairs or replacements being performed, the association should  seek multiple bids to define the scope of work and determine precisely what  items are in immediate need of repair. Contractors can assist the association  in assessing the condition of the common elements. For more substantial  projects, the association would be advised to retain an engineer or general  contractor to oversee the rebuilding or repair process. The property management company should guide the association through the  disaster recovery process. The property management company has immediate access  to and knowledge of the condominium association’s insurance policies and financial records. Moreover, the property management company can recommend reputable vendors and  contractors to repair or replace the common elements.”  

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