Montebello Insurance and What Changed After 2024

Which two insurance policies does a home at Montebello sit under?

Two property policies stand behind a home here: the association's master policy on the insurable common elements, and the owner's own policy on what sits inside the front door. Section 82.111 requires the association to maintain property insurance on the insurable common elements to the extent reasonably available, and where a building contains units having horizontal boundaries described in the declaration, that insurance must include the units, again to the extent reasonably available, while improvements and betterments installed by unit owners need not be included.

A kitchen an owner paid for is an improvement installed by a unit owner, and whether the declaration describes horizontal boundaries is what decides how far the association's side reaches. The monthly assessment at Montebello covers common area insurance, which is a line in the fee rather than a description of what the master policy covers. The deductible on that master policy is not a published figure.

The Texas Department of Insurance describes condominium insurance as covering your personal property and the interior of your unit, with liability protection and payment of additional living expenses. That is the owner's half of the pair, and it is the half a buyer shops for with an agent.

A third policy runs alongside both. General liability insurance is required for all condominium projects except those that qualify for a waiver of project review, and one buyer of mortgage loans requires at least $1 million for bodily injury and property damage for any single occurrence, with the association as the named insured and the premiums paid as a common expense. Texas separately requires the association, to the extent reasonably available, to carry commercial general liability, including medical payments insurance, in an amount the board determines and not less than any amount the declaration specifies.

Who pays the deductible when the association claims?

Section 82.111 answers that in two steps, and the split turns on the size of the loss. Where the cost to repair damage to a unit or common element covered by the association's insurance is less than the amount of the applicable deductible, the party who would be responsible for the repair in the absence of insurance pays for it.

Where the association's insurance provides coverage for the loss and the cost to repair runs above the deductible, the dedicatory instruments determine payment of the association's deductible and of costs incurred before insurance proceeds are available. Where the dedicatory instruments are silent, the board of directors determines payment of those costs by resolution, and where the board approves no resolution, the costs are a common expense. So the answer for any one building is a document question: ask whether a recorded board resolution on the deductible exists, and ask what the dedicatory instruments say about it.

Two other parts of the same section shape how a claim runs. A claim for a loss covered by the association's property insurance must be submitted by and adjusted with the association, and the proceeds are payable to an insurance trustee the association designates, or otherwise to the association, rather than to a unit owner or a lienholder. Where damage is due wholly or partly to an act or omission of a unit owner or the owner's guest or invitee, the association may assess the deductible expense and any other expense above the insurance proceeds against that owner and that owner's unit.

The association's policy is also the primary one. Policies carried under the section must provide that each unit owner is an insured person for liability arising out of ownership of an undivided interest in the common elements or membership in the association, that the insurer waives its right of subrogation against a unit owner, and that where an owner holds other insurance on the same property, the association's policy provides primary insurance. Except as Section 82.111 provides otherwise, the cost of repair or replacement above the insurance proceeds is a common expense, and the board may levy an assessment to pay it in line with each owner's common expense liability.

What changed after 2024, and who changed it?

Fannie Mae changed the rules a buyer's lender applies, and that is the only side of this that moved: the changes are what one buyer of mortgage loans requires before it will buy a loan, not law.

The Texas side stands where it stood. Section 82.111 was last amended in 2013 and reads today as it read then.

The 2025 condominium act worked on paperwork. It rewrote the resale certificate, the management certificate and the duty to keep dedicatory instruments online, and it left the insurance section untouched.

Lender Letter LL-2026-03, dated 18 March 2026, is where the changes sit. It caps the maximum allowable per unit deductible for all required property insurance perils covered by a master property policy at $50,000 per unit, for loan applications dated on or after 1 July 2026. It retires the Limited Review process for applications dated on or after 3 August 2026, so an established project that once qualified for that shorter look goes through the Full Review process or, where it applies, a waiver of project review. It revises the reserve allocation for capital expenditures and deferred maintenance from a minimum of 10 percent to a minimum of 15 percent of annual budgeted assessment income, which lenders must comply with when using the Full Review process for applications dated on or after 4 January 2027, and it stops lenders using the baseline funding method, the option that lets a reserve cash balance approach but never fall below zero.

Two older requirements went the other way. The letter retires the requirement that project developments carry inflation guard coverage, and it retires the requirement to insure roofs on a replacement cost basis, though roofs must still be insured.

The letter's own stated reason for the package is market conditions rather than any one building. It says that in certain areas rising premiums and limited insurance availability are creating challenges for borrowers and homeowners' associations, while keeping its focus on the risks of underinsurance and underfunded condominium projects. It also names February 2024 as the date of the property insurance clarifications it responds to, after industry partners raised concerns about complying with them.

The rulebook a lender reads caught up on 5 August 2026, when a Selling Guide announcement incorporated most of the letter's policy changes and reorganized the property and flood insurance chapter without further policy change. The new reserve standard was held out on purpose: it enters the Selling Guide after 4 January 2027, when it takes effect for new loan applications.

What does a buyer's lender look for in the association's policy now?

A lender reads the association's policy against what one buyer of mortgage loans requires before it will buy the loan, and the first line of that list is the coverage amount: at least 100 percent of the estimated replacement cost value of the project improvements, including common elements and residential structures.

Set that beside the Texas floor. The statute asks for at least 80 percent of the replacement cost or actual cash value of the insured property, to the extent coverage is reasonably available, measured at the effective date and at each renewal date of the policy. The mortgage buyer asks for 100 percent. An association can satisfy the statute and still sit below what a buyer's loan needs, which is why the question to put to the association is the coverage amount as a share of estimated replacement cost value.

Then the perils. The policy should be written on a Special coverage form or equivalent, and at a minimum it must cover the perils of a commercial Broad form: fire, lightning, explosion, windstorm including named storms designated by the National Weather Service or the National Oceanic and Atmospheric Administration, hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic action, falling objects, weight of snow, ice or sleet, and water damage. Where a master policy excludes or limits one of those, the association has to obtain acceptable coverage for the limited or excluded peril, a stand-alone policy for example. Ask which perils the policy names, and whether any of them is cut back.

Two deductible ceilings apply on top of the cap. Per occurrence, the maximum allowable deductible for all required perils is 5 percent of the master policy coverage amount. Per unit, the ceiling is $50,000. A deductible buy-back policy the association purchases may be used to meet the maximum deductible requirement, provided it meets the other property insurance requirements in the same chapter. Ask for both deductible figures, and ask whether a buy-back policy is in place.

Endorsements finish the list. Building ordinance or law coverage is required in three parts, covering loss to the undamaged portion of a building, demolition costs and increased costs of construction, and it is not required where it is not obtainable in the insurance market available to the association. Boiler and machinery or equipment breakdown coverage is required where the project has central heating or cooling, at the lesser of $2 million or the replacement cost value of the buildings housing the boiler or machinery. A condominium project's master policy must be endorsed with a Condominium Association Coverage Form or its equivalent, including recognition of an insurance trustee, a waiver of the insurer's rights to recover payment from any unit owner, and a statement that the association's insurance is intended to be primary and not to contribute with a unit owner's other insurance.

When does an owner have to carry a policy, and how much?

An owner's own property policy is required in two situations, as a condition one buyer of mortgage loans sets before it will buy a loan: where any portion of the interior of the unit or improvements to the unit are not covered by the master property policy, or where the master property policy includes a per unit deductible.

The amount is set as a floor, and the floor is the greater of two figures. One is an amount sufficient to cover any portion of the interior or the improvements the master policy does not cover, so as to restore the unit to its condition before a loss event. The other is the amount of the per unit deductible, where the master policy has one. Coverage is on a replacement cost basis, and the owner's own deductible may not exceed the greater of 5 percent of the coverage amount or $2,500.

The owner's policy carries its own required perils: fire or lightning, explosion, windstorm including named storms designated by the National Weather Service or the National Oceanic and Atmospheric Administration, hail, smoke, aircraft, vehicles, and riot or civil commotion. Where the master policy carries a per unit deductible applying to a specific required peril, the owner's policy has to include coverage for that peril. Coverage sufficiency is judged on the best information known or available to the lender or servicer, which can include what a borrower supplies working with the insurer or agent, or the association's legal documents.

On how much to buy, Fannie Mae's own text is a referral rather than a number: it recommends that lenders and servicers encourage borrowers to closely collaborate with an insurance professional to determine their individual insurance needs. Texas leaves the same room. An insurance policy issued to the association does not prevent a unit owner from obtaining insurance for the owner's own benefit, and the section does not affect the right of a holder of a mortgage on a unit to require an owner to acquire insurance in addition to the association's.

Do wind, hail and flood work differently in Houston?

Wind and hail usually sit inside an ordinary homeowners policy away from the coast, often under a deductible of their own, and flood is a separate policy everywhere.

The Texas Department of Insurance is plain on both counts. Along the coast, a homeowners policy might not cover wind and hail damage, and a separate windstorm policy is the answer, often from the Texas Windstorm Insurance Association, which sells wind and hail coverage for coastal residents. The department also names the Texas coast and Harris County on Galveston Bay as places where a home policy might not cover wind and hail. Windstorm insurance is not required by law in Texas, though a lender near the coast will likely require it where there is a mortgage.

A policy from that association has three conditions: living or owning a business in its service area, having asked an insurance company for wind and hail coverage and been turned down, and holding an inspection and certificate showing that the property was built or renovated according to certain construction codes.

The Insurance Code draws the geography by county. Harris County is listed as a second tier coastal county rather than a first tier one, and the first tier counties are a separate list in the same definitions. A catastrophe area is a municipality, a part of a municipality, a county or a part of a county that the commissioner designates under Section 2210.005. After at least 10 days' notice and a hearing, the commissioner may designate an area of the seacoast territory of the state as one, unless doing so would adversely affect the exposure of the association, where windstorm and hail insurance is not reasonably available to a substantial number of the owners of insurable property in that territory because it is subject to unusually frequent and severe damage from windstorms or hailstorms.

Flood is the other separate purchase. Most home policies do not cover damage caused by floods. A lender requires flood insurance where a home sits in a designated flood zone, and more than half the homes flooded by Hurricane Harvey were outside designated flood zones. Most flood policies have a 30-day waiting period before they take effect, so the calendar matters in a sale as much as in a storm.

Windstorm and hail are both required perils on a master policy, so the question to put to the association is whether either one is limited or excluded, and what stands behind it if so.

What should an owner at Montebello ask for?

Ask for the resale certificate and the insurance summary that comes with it. The certificate is issued by the association and must contain the current operating budget and a statement of the insurance coverage provided for the benefit of unit owners, and the association has ten days after receiving a written request from an owner to furnish it, signed and dated by an officer or authorized agent.

The promulgated condominium resale certificate, form TREC No. 32-5, carries one insurance line: the association does or does not provide insurance coverage for the benefit of unit owners, as per the attached summary from the association's insurance agent. That summary is a required attachment, along with the operating budget and the balance sheet. The form's face carries the date 4 November 2024.

Then a list of questions to put to the association in writing, each drawn from a requirement above rather than from anything known about this building: the coverage amount measured against estimated replacement cost value; the per occurrence deductible and the per unit deductible; whether a deductible buy-back policy is in place; whether any required peril is limited or excluded, and what covers it if so; whether ordinance or law coverage is carried in all three parts; whether boiler and machinery coverage is carried and at what limit; whether the condominium endorsement includes the insurance trustee, subrogation waiver and primary insurance provisions; the general liability limit; whether a recorded board resolution allocates the association's deductible; and the reserve allocation in the current budget as a share of annual budgeted assessment income.

Two notice periods are worth knowing before a sale date is fixed. An insurer may not cancel or refuse to renew the association's policy less than 30 days after written notice of the proposed cancellation or nonrenewal has been mailed to the association. On your own policy, a company must give you 10 days' notice before it cancels.

Put the request in writing at the point you decide to sell, and read the insurance summary the day it arrives rather than the day a buyer's lender asks about it.

What can this page not tell you?

It cannot tell you what Montebello's master policy covers, what it costs, or what deductible it carries.

It cannot tell you whether this association's policy meets the requirements set out above, which is a document review a lender does on a given date rather than something a page settles.

It cannot tell you whether premiums here have risen.

It cannot tell you which flood zone this address sits in.

It cannot tell you whether any part of Harris County near this address is a designated catastrophe area.

It cannot tell you what a lender other than one buying loans on these terms would ask, because a portfolio lender, a cash buyer and an FHA path each ask different questions.