The answer to this question lies in the governing documents for your association, so no one can answer your question without reviewing those. That being said, it is not unusual for a condo association to have that authority. As a practical matter, I certainly understand you not liking being told what to do inside your own home. On the other hand, the association has the duty to maintain the association and building as a whole, and if your water heater or another appliance malfunctions, it can damage common elements and other units. Also, even when an owner has insurance (as you do), typically the association's insurance is considered primary, so a loss even like a water heater malfunctioning and creating a large amount of water damage would end up being a claim on the association's insurance even though you do have your own insurance. So there are a lot of competing practical considerations to consider.
Bottom line, though, to YOUR question, is that the answer probably lies in your association's governing documents.
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Possibly. You'll need to check your HOA agreement to be sure.
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