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FHA Condo Approvals – Employee Dishonesty Insurance
FHA Condo Approvals – Employee Dishonesty Insurance
 
Working with condominium projects, probably the most common item that needs to be addressed prior to submission is the coverage of the Employee Dishonesty/Fidelity Insurance.
For all new and existing projects of 20 or more units, the HOA (not the property management company) must provide a policy that covers employee theft.  If there is a property manager, the policy must include coverage of the management company.
In reviewing the certificate of insurance, I look for two main things:
1.     Is the coverage sufficient?
2.     Does it specifically name the property management company?
The required coverage is easy enough to check.  HUD requires that it be at least 3 months aggregate of the common charges plus the amount held in all reserve accounts (not operating accounts).
Thus, for a project with annual common charges of $200,000 and $50,000 in reserves at the time of submission, the minimum coverage of the Employee Dishonesty policy would be $200,000/4 + $50,000 = $100,000 (nice round numbers, right?)
I bolded “at the time of submission” because I once checked this coverage at the time the original bank statements were provided to me.  It took over a month to ... more

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