Deferred Maintenance:


The Hidden Costs of Aging HOA Properties in Orange County


Tina Neubauer, CMCA, CIRMS, NEXTIER Insurance Services, Inc.


“HOAs that wait too long to address known maintenance issues are likely to pay more in repairs, in liability claims, and in insurance premiums.”


How Deferred Maintenance Impacts Insurance Costs, Increased Risk Equals Higher Premiums


When an HOA’s infrastructure is visibly deteriorating, insurance carriers take notice. Electrical systems,


in particular, pose


serious risks. Communities with outdated components like aluminum wiring or legacy panels, such as Zinsco or Federal Pacifi c, are fl agged as high fi re risks. These issues can lead to dramatic insurance cost increases. One HOA in Southern California, for example, saw premiums jump by more than 600% after an inspection revealed unsafe electrical panels. Even with upgrades underway, their options for affordable coverage became extremely limited.


Underfunded Reserves Raise Red Flags


Carriers don’t just assess physical risks; they also examine fi nancial ones. Associations that can’t demonstrate adequate reserve funding are viewed as less capable of handling emergencies. A lack of reserves can delay necessary repairs, which increases the risk of damage and claims. Insurers often request reserve studies or fi nancial statements to ensure the HOA is equipped to manage its responsibilities. If those documents suggest poor planning or underfunding, the HOA may face unfavorable policy terms or even denial of coverage.


Liability Risks Escalate Exposure Deferred maintenance isn’t just about structural decay,


don’t cover maintenance itself, they do respond to third-party liability. If someone is injured due to an unaddressed hazard, the HOA may face a lawsuit, and insurers may be reluctant to cover future claims. Associations can also be found negligent for failing to act when hazards are identifi ed.


Securing Coverage Becomes Challenging


Repeated maintenance-related claims or obvious signs of disrepair can drive insurers away. In today’s hardening insurance market, many space altogether. This


carriers leaves are exiting the HOA fewer choices, particularly


for older communities. Without evidence of upkeep and improvements, the HOA may fi nd itself placed with surplus lines carriers, often at signifi cantly higher costs and more limited coverage. Associations that are proactive in addressing risks stand a much better chance of securing standard, competitively priced coverage.


Structural Failures Lead to Catastrophic Outcomes


The fi nancial and human cost of structural failure can be


devastating. Balcony collapses, roofi ng failures, and plumbing system breakdowns have led to injuries, lawsuits, and repair bills that dwarf the cost of routine upkeep. California’s Senate Bill 326 (the ‘Balcony Bill’) was introduced in response to such risks.


It mandates regular inspections it


creates real safety hazards. Broken stair treads, cracked sidewalks, non-functioning lighting, or unstable balconies all increase the likelihood of injury. While insurance policies


20 July | August 2025


of elevated exterior elements, like balconies, decks and walkways, to ensure resident safety. While some board members may not yet be fully familiar with the law’s specifi cs, the message is clear: failure to maintain structural components can result in serious legal and insurance consequences.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36