As the State of Texas continues to enjoy strong population growth, condominiums will continue to proliferate particularly in Texas’ largest cities. For subrogation professionals who occasionally see claims associated with condominium associations, it is helpful to have an understanding of the Texas Uniform Condominium Act (“UCA”) and how it may affect potential subrogation rights.
The UCA is codified in Chapter 82 of the Texas Property Code and applies to all condominiums in Texas for which the condominium declaration is recorded on or after January 1, 1994. However, if the declaration was recorded before January 1, 1994, the UCA may control if the unit owners vote to amend the pre-exiting declaration to have the UCA apply and that amendment is filed for record in the county where the condominium is located. Alternatively, the unit owners could record a declaration or amendment before January 1, 1994 stating that the UCA will apply in its entirety as of January 1, 1994.
Certain key provisions in the UCA will retroactively apply to all condominiums even if the declaration was recorded before January 1, 1994. These provisions include requirements that the condominium association purchase and maintain property and commercial general liability insurance where each unit owner is an insured person under the policy and the insurer waives its right of subrogation against each unit owner.
A cursory review of the UCA would lead one to the conclusion that pursuit of a unit owner by a subrogated condominium association insurer is pointless. However, this is not always the case. While the UCA provides that provisions related to insurance, additional insured status and waiver of subrogation apply even if the declaration was recorded before January 1, 1994, it also provides that such provisions cannot “invalidate existing provisions of the declarations, bylaws, or plats of a condominium for which the declaration was recorded before January 1, 1994.” What does this mean then for subrogation professionals?
Essentially, this latter provision confirms that while requirements for insurance, additional insured status and waiver of subrogation will retroactively apply to condominiums formed before January 1, 1994, those provisions cannot contradict or invalidate what unit owners previously agreed to with respect to those issues. For example, if the unit owners agreed in a declaration filed before January 1, 1994 that a negligent unit owner and/or his or her tenant would be responsible for damage to all common elements of the condominium complex, this language would arguably control over the insurance provisions in the UCA since the UCA cannot “invalidate existing provisions of the declaration…recorded before January 1, 1994.”
In sum, if you are reviewing a potential subrogation claim against a unit owner where the condominium association is your insured, do not automatically assume that your subrogation rights are extinguished by the UCA. Instead, determine when the declaration was recorded and whether it was ever amended. If it was recorded before January 1, 1994 and never amended, pay particular attention to any provisions which address a unit owner’s potential liability/responsibility for property damage. If the declaration provides that unit owners are responsible for reimbursement of certain damages that were covered by the association’s property insurer, you may have a very good argument that the UCA does not necessarily invalidate your subrogation claim since the UCA cannot invalidate a property damage allocation scheme previously agreed upon by the unit owners.