Forbes Bender & Paolino P.C.

By Katie Robinson

The community aspect of a homeowners association or condominium can unify residents and facilitate healthy communication. Along with that, though, comes the issue of liability as residents and groups organize social gatherings. Events held in common areas can raise issues for associations, especially when alcohol is a factor. Many events can take place without any problems, but associations should always be aware of the possibility of an individual bringing an action against them were something to go awry at an event.

Before delving into the issue of liability, associations are not even required to host events sponsored by them, as issues of financing the event come into play. Gregory Chandler of Eads Murray & Pugh, P.C, in Indianapolis, IN, noted that the estimated cost of any functions held should be itemized in the annual budget. Boards should open up a discussion regarding hosting events. “Boards should not simply assume that they have an unchecked right to use community money for social events, however popular they may be,” Chandler said.

While associations should be consistent with regard to whether or not they allow events, they have no obligation to allow them to begin with. Stacey Patterson, Esq., Counsel, of Herrick Feinstein LLP in New York City, said, “The association is a private community, and they have a right to establish reasonable and legal rules with respect to the use of their common areas. As far as what they can limit them to, the association has to tread lightly to make sure that they’re not infringing on anybody’s constitutional rights. They can’t exclude certain religions or races, or anything of that nature.”

As far as liability when an event actually goes forward, Joel Meskin, Esq., CIRMS, Vice President of Community Association Insurance & Risk Management at McGowan Program Administrators in Fairview Park, OH, said, “The key issue you need to keep in mind is not whether an ‘association is liable for damage,’ but if its insurance policy will provide a defense if someone brings an action against the association.” Meskin said that associations should take seriously the assumption of any additional liability. Associations deal with enough liability as it is without taking on the liabilities of a social gathering for an outside group on their property.

Meskin further noted the difference between an event held by an outside group and one held by the association itself. “If the association is going to allow an outside entity to use its facilities, it should make sure that all corresponding costs, including insurance, are incurred by the group.  In addition, the group should make the association an ‘additional insured’ on the group’s policy for the purpose and to the extent of liability arising out of the use of the association’s facilities.  A copy of the additional insured endorsement should be sent from the group’s insurance agent and not delivered by the group itself,” he said. When acquiring insurance, the association should determine what events are and are not covered by the proposed insurance. This can then guide them in the planning of any future events to avoid liability. “The association can even require the holder of the party to obtain their own insurance in the event of any issues,” Patterson said.

Associations greatly increase the risk of liability by serving liquor, and it should be noted that general liability policies do not cover liquor liability. By making a party BYOB, that liability is reduced though still present. Chandler said, “The potential cons, in my opinion, far outweigh the pros. At a minimum, associations should get the perspective of their insurance carriers before hosting any community events at which alcohol will be present.” Regarding the level of risk when serving alcohol, Alexander DiSanti, Esq., an attorney at Forbes Bender Paolino & DiSanti, P.C., in Media, PA, said, “In the event that someone is injured or property is damaged as a result of someone drinking alcoholic beverages at a party sponsored by the homeowners association, anyone involved in the party could be sued.”  Patterson noted the further issue of the presence of minors at such events.

DiSanti stated that “apart from hiring a professional to serve alcoholic beverages, the only legal way for a homeowners association to serve alcohol would be in the capacity of a social host. A social host means by definition that no money is exchanged for the alcoholic beverages.” Attendees cannot purchase tickets or make any donations to help fund the event, either. With regard to a BYOB event, DiSanti said, “In my mind, this is the safest way to proceed if you want to serve alcohol at parties if hiring a professional is cost prohibitive.” Chandler further recommended that, at non-BYOB events, the associations should hire a licensed and bonded caterer or distributor. Taxi or designated driver services also help to ensure the safety of attendees, Patterson added.

Oftentimes, boards choose not to offer common areas to outside organizations, as this only increases risk and often presents boards with the conundrum of picking and choosing which groups should be allowed. Written policies should be presented to outside groups if the board does choose to allow them to hold events. Chandler said, “The renter should sign a written agreement and be given a copy of the rules in advance. I also recommend that boards have the renters sign an additional indemnity agreement holding the association harmless for damage or personal injury.” He further noted that many associations require refundable security deposits.

Associations are encouraged to use their discretion in such situations, always erring on the side of caution to reduce risk and liability. Although social gatherings seem like simple ways to bring the community together, they can often pose too much of a problem for associations to actually be worth it. Keep in mind that adding factors such as alcohol only increase risk. Associations can consider tamer educational or social events as an alternative, allowing them to facilitate an enjoyable, community atmosphere.

Alexander D. DiSanti, Esq., is an officer of Forbes Bender Paolino & DiSanti, P.C.  Forbes Bender Paolino & DiSanti, P.C., is a full service law firm with offices located in Delaware County (Media) and Chester County (West Chester), Pennsylvania.  Alex has been representing condominium and homeowner associations for over 25 years.  He has the highest lawyer rating given by Martindale-Hubbell of AV Preeminent.  Alex was selected for inclusion in Legal Leaders Presents Philadelphia’s Top Rated Lawyers of 2014 and Pennsylvania’s Legal Leaders Presenting Top Rated Lawyers for year 2013.  At the request of the National Business Institute, he has served as a faculty member and instructor of Legal Aspects of Condominium Development and Homeowners’ Associations, a legal education seminar for lawyers.  Alex can be reached at (610) 627-1700 or adisanti@fbpdlaw.com.  Visit his website at www.fbpdlaw.com.