One of the most often misunderstood sections of the Texas Uniform Condominium Act (“TUCA”) is Section 82.111. Pursuant to Section 82.002(c) of TUCA, Section 82.111 applies to all condominiums in the State of Texas - regardless of whether a condominium was formed under TUCA or its predecessor Chapter 81 of the Texas Property Code - and establishes minimum requirements condominium associations must meet for property insurance.

So, what are the property insurance requirements set by Section 82.111?

Section 82.111(a)(1) requires that a condominium association maintain “property insurance on the insurable common elements insuring against all risks of direct physical loss commonly insured against, including fire and extended coverage. . .” However, under Section 82.111(b), for condominium developments with horizontal boundaries (i.e. stacked units), a condominium association’s property insurance must also include the units. 

While the minimum requirements set by Section 82.111(a) provide that a condominium association’s insurance only cover at least 80% of the replacement cost or actual cash value of the insured property as of the effective date (and any subsequent renewal date) of the policy, compliance with this requirement does not satisfy federal mortgage lending underwriting requirements. Specifically, for a condominium to be eligible under Fannie Mae, the condominium association’s property insurance must cover 100% of the replacement cost. 

Finally, under Section 82.111(b), condominium associations are not required to maintain insurance on improvements and betterments installed by unit owners. However, while not required, it is advisable to draft the condominium declaration in such a way so as to give the condominium association the option to include improvements and betterments installed by unit owners under the condominium association’s policy.