UNDERSTANDINGcondo insurance

2UNDERSTANDING CONDO INSURANCE

TABLE OF CONTENTS1. Condominium lingo

2. Is your condo properly insured?

3. Water damage, the pet peeve of condo owners everywhere

4. Purchasing a condo: myths and tips

5. Legal Access Insurance: A valuable resource for help with condo issues.

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CONDOMINIUM LINGO

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CONDOMINIUM LINGO

LEASEHOLD IMPROVEMENTS AND BETTERMENTS in condominium insurance include all modifications of the unit’s original fixtures that increase the value of reconstruction of a dwelling unit. For example: Replacing melamine kitchen cabinets with oak ones or replacing carpets with hardwood floors.

THE DECLARATION OF CO-OWNERSHIP is a notarized document that governs relations between the co-owners and sets out all the rules and by-laws governing the building. A syndicate of co-owners is officially founded once this document has been published. There are three parts to the declaration of co-ownership: a constituting act, a description of the building’s fractions and the syndicate’s bylaws. All occupants of the building must abide by it, even if they are not condo owners..

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BASIC VOCABULARY

THE CONTINGENCY FUND is a cash reserve that all co-owners pay into for covering major work on the building.

CONDO FEES are required by the syndicate of co-owners to cover shared bills such as grounds common areas and maintenance. In Quebec, the law stipulates that at least 5% of condo fees must be paid into the contingency fund.

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THE SYNDICATE OF CO-OWNERS is a legal entity that groups all co-owners residing in a condominium property. It is managed by a Board made up and appointed by co-owners. The syndicate is responsible for the maintenance, administration and upkeep of the common areas of the building, to safeguard the legal rights relating to the building or condominium, and any common interest operations. It is very important for owners to attend the condo owners’ meetings, so they can also be part of the proper management of the building!

THE REPLACEMENT VALUE is the cost of rebuilding the building using the same quality materials in the event of a total loss. It is determined based on the particular characteristics of the building and the most recent information provided by the Quebec housing construction industry. It is not related to the market value of your residence or the assessment used to determine your municipal taxes.

A LATENT DEFECT is one that is difficult to detect at the time of purchase and interferes with the normal use of the building or lessens its value.

To ensure you’re well protected, your condo should be covered by two insurance contracts: Your home insurance for condominium owners and condominium syndicate’s insurance. But beware! Not all insurance coverages are made equal. It is essential that you choose coverages tailored to your needs.

IS YOUR CONDO PROPERLY INSURED?

HOME INSURANCE FOR CONDOMINIUM OWNERS

In Quebec, it’s not mandatory to have home insurance. Even if it’s not required by law, your declaration of co-ownership may state that you must hold a home insurance for condominium owners.

Home insurance remains your best (and only) option to cover the investments inside your condo. It should cover:

1. Improvements you made to your unit

2. Your personal property (furniture and personal property)

3. Your civil liability, meaning any damage to property or injuries you may have caused to others for which you could be held liable

4. Parts of the building or your unit that should normally be covered by syndicate’s insurance (i.e. walls, floors, cabinets, etc.), if the syndicate is not insured or not adequately insured.

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There are several levels of coverage available to condo owners. Some insurers include coverages that are excluded by others. It’s up to you to make sure you pick the right coverage for you!

For example: A fire damages your building’s exterior walls. The syndicate’s insurer pays for the damages as set out in the contract, minus the deductible, which is divided among the condo owners. Some home insurance coverages for condo owners cover these expenses.

Do you rent out your condo? Notify your insurance representative!

If you’re renting out your condo to someone else, don’t forget to notify your insurer that you’re renting the unit and aren’t living there yourself! Your coverage will be adjusted so that it remains in force even if you don’t live in the unit.

CONDOMINIUM SYNDICATE’S INSURANCE

As opposed to home insurance for condominium owners, condominium syndicate’s insurance is not optional. The law states that the syndicate must maintain an insurance coverage with an amount corresponding to the building’s replacement value.

This insurance covers all damages to the building, both in common and private areas. It should cover:

1. The building itself, for the replacement value, including:

• Parts of the building included in each private unit, such as floors or walls

• Common areas (gyms, hallways, garages, roofs, etc.)

2. Original fixtures in units, such as cabinets and counters

3. Property belonging to the syndicate (i.e. to all condo owners)

4. The syndicate’s civil liability (with this mandatory coverage, condo owners avoid any financial impact resulting from a lawsuit in the event of damage caused to property or injury caused to another person for which the syndicate could be liable).

5. The civil liability of the syndicate’s directors

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6. (optional)

Condominium syndicate’s insurance carries legal obligations that are shared by all condo owners. As members of the condominium syndicate, all condo owners are responsible for making sure all losses affecting the building or one of the units are reported to the syndicate insurer.

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IN SHORT, WHO COVERS WHAT IN THE EVENT OF A LOSS TO YOUR UNIT?

Your home insurance

Will compensate you for:

• Damage caused to your personal property, i.e. your furniture

• Damage caused to improvements made in your unit (for example, if you replace your melamine kitchen cabinets with oak ones, your home insurance will cover the difference in value between the melamine and wooden cabinets)

• Inadequate or insufficient syndicate insurance (if your insurance policy provides for it)

Syndicate’s insurance

Will be responsible for restoring your unit to its original state (whether during the building construction or when the building is being converted to a condominium).

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HERE’S WHAT YOU SHOULD VERIFY TO BE SURE YOU’RE ADEQUATELY COVERED

Refer to the declaration of co-ownership, which may specify which insurance covers each part of the building. This document may also outline certain requirements, such as mandatory coverages for water damage or specific coverage amounts. Get a copy of the condominium syndicate’s insurance policy and verify:

• The amount for which the building is insured. It should be enough to rebuild it in the event of a major loss. If the coverage amount is insufficient, the condo owners would have to take on the reconstruction expenses that exceed the coverage amount. Also find out how frequently the building is reappraised by the syndicate’s directors. A professional appraisal should be carried out every 3 to 5 years.

• Coverages taken out, i.e. especially water damage, in order to be sure they are adequate. Otherwise, you and your fellow condo owners will have to offset any inadequate coverage by taking out additional coverage on your unit’s insurance, which means higher premiums. If your insurance and that of the syndicate’s does not include adequate water damage coverage, you would have to assume the financial consequences of this type of loss.

• The exclusions and limitations of endorsements, to be sure they provide adequate coverage, particularly in the event of water damage.

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Verify if you need additional coverage.

The insurance representative’s role is to help you evaluate whether the basic coverages are adequate for your needs and advise you on any necessary changes that need to be made.

Feel free to ask him or her for advice!

Seepage through the roof or walls, a water heater breakdown, an overflowing bathtub that seeps into the unit of the neighbour below, sewer backups...there are too many to name. That’s why they’re the main cause of claims by condo owners. But how should you deal with them and how can they be prevented?

WATER DAMAGE, THE PET PEEVE OF CONDO OWNERS EVERYWHERE

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WHY DOES WATER DAMAGE OCCUR SO OFTEN IN CONDOS?

Some of the main causes are difficult to control, like changes in temperature or inattentive condo owners (windows or faucets left open accidentally).

You can easily avoid other inconveniences According to the Insurance Bureau of Canada (IBC), proper maintenance of the building can significantly reduce the risk of losses. This reduction in risk will obviously be reflected in more stable insurance premiums.

Of course, maintenance expenses are a necessity in condo living, because the group formed by the owners (the syndicate) is mandated to maintain all condo owners’ assets.

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HOW DO YOU DEAL WITH WATER DAMAGE

By being proactive and well-informed

Attend the condominium’s general meetings! You will then know how much effort is dedicated to the maintenance of common areas.

By asking the directors of your syndicate a few questions, you will have a better understanding of your building’s overall condition and will know how to react if water damage occurs in your unit.

A few questions to ask yourself:

• Does your building keep a maintenance book, which logs all completed work?

• What measures are taken when a defect is discovered in the building?

• Who should I inform if water damage occurs in my unit or in a common area?

• Does the maintenance staff or one of the condo owners know where the building’s main water supply valve is located?

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Make sure your home insurance provides adequate coverage.

Think you don’t need to be covered for sewer back-ups because you don’t live on the ground floor? Think again, it’s not that simple!

If there was water damage in the building’s lobby, the expenses that are not covered by the condominium syndicate insurance would be distributed evenly among the condo owners. If you’re covered for groundwater damage, your insurer will assume the cost of the expenses. Otherwise, you’ll have to pay from your own pocket.

The insurance coverage you choose should therefore take into account the types of coverage included in the syndicate’s insurance and related limitations and loopholes.

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1. Be mindful when you fill up your bathtub or sink. If you must leave the area, turn the water off.

2. Don’t throw solid waste such as cat litter or grease into the toilet. It can clog the pipes.

3. Only use the washing machine or dishwasher when you are at home. In the event of a problem, you’ll be able to react quickly. Get into the habit of checking your hoses every year. If you see any signs of weakness, have the hoses replaced as soon as possible.

Prevent and limit the damage caused by water damage

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4. Check the joint sealings around your showers, bathtubs and sinks often. If you see signs of change, reapply sealant. You can also try placing a few drops of food colouring into the toilet’s tank to see if it leaks. If the colouring appears in the toilet bowl, there’s a leak.

5. Replace your water heater every 10 to 12 years. It must also be replaced if you see rusty water running from faucets and seepage or leakage from the water heater. A water heater should be installed in a rspill tray connected to a floor drain to allow water to drain in the event of leakage. Also make sure that the appliance is installed in compliance with the manufacturer’s requirements. If you don’t, the manufacturer may waiver liability in the event of a defect.

6. Consider having leak detectors installed on your household appliances that use water. The principle is quite simple. Small sensors are set up where water damage is more likely to occur. As soon as they detect water leakage, a warning (alarm, email or text) is issued to you to stop the leakage. Some models shut off the main water supply automatically. Other devices are linked to a central monitoring station that contacts the home owner or any other designated person if a leak is detected.

7. Use sinks, traps and sanitary appliances that are in good working condition. Handy trick: Keep a strainer (round metal mesh basket) in shower, bathtub and sink drains to prevent hair or any other debris from clogging the pipes. Too late? Pour some baking soda into a clogged drain and wash it down with at least 500 ml of hot vinegar. Use a plunger to unclog the drain until water flows freely again.

8. Plan to be away for several days? Ask a friend or neighbour to check in on your home once in a while to make sure everything is under control.

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Here are a few tips to help you make an informed decision, ensure that the purchase you make is in compliance and the seller has provided you with all the information required.

PURCHASING A CONDO: MYHTS AND TIPS

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DEBUNKING A FEW MYTHS…

Owning a condo means less maintenance and expenses than owning a house

It’s true, the price of buying a condo is often lower than a single family house. However, don’t forget that you’re not only responsible for maintenance expenses for your unit, but you’re also partially responsible for the building’s maintenance expenses.

Of course, since building maintenance is carried out by a third party, you don’t have to do any of the actual work. However, you would do well to keep an eye out over the maintenance work and make sure the condominium syndicate is managing the contingency fund correctly In cases of negligence caused by the condominium’s directors, you and the other condo owners will have to deal with the inconveniences.

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I don’t have to get insurance for my condo: one less expense!

In Quebec, it’s not mandatory to have home insurance. However, your declaration of co-ownership may state that you must hold home insurance for condominium owners.

Read it carefully to know what your obligations are regarding insurance and those of the syndicate. Don’t forget that you must comply with the Declaration.

Your decision will depend on your tolerance for risk since the syndicate’s insurance includes limitations, namely your personal property and furniture.

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FOUR THINGS WORTH MONITORING

1. Condo fees are very low? Then it’s probably too good to be true!

Are there very low condo fees for covering shared bills such as grounds maintenance and common areas? Beware! Too often, low fees mean an inadequate contingency fund. They may also be a sign of negligence with regard to needed repair work and preventive maintenance. This type of negligence increases the risk of losses, like water damage caused by water seepage through the roof or exterior walls, and is the main cause for an increase in home insurance premiums for condo owners.

In Quebec, the law stipulates that at least 5% of condo fees must be paid into the contingency fund. However, this rate is usually

insufficient. Reality could catch up with you when major repairs become necessary, gouging a hole in your budget.

The Insurance Bureau of Canada (IBC) recommends you don’t cut corners when it comes to paying into

these accounts. This will avoid losses and unnecessary worries.

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You should also know that condo fees are often cited for information purposes only and may vary significantly.

2. Condo rules and declaration of co-ownership: take them seriously

Take the time to read through these documents and ensure that you understand them. It’s tempting to skip this when you’re impatient to buy a new home. However, the documents could tip the balance when it comes time to make a decision.

Remember that:

• Some rules are very strict. Examples? In certain condos, it is not permitted to use a barbecue, own a pet or cover hardwood floors.

• When the time period in your purchase offer to consult these documents has expired, it could mean that you accepted to buy the condo that is regulated by these documents. At that point, you must comply with them.

• Rules can be very different from one building to another.

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3. New condo? Consider title insurance

Is your dream condo under construction? Your notary may suggest that you take out title insurance. This insurance protects the buyer and the mortgage creditor in the event of problems with ownership titles.

Your notary is the best person to advise you on this subject because each title insurance product is different.

For example, title insurance can provide that if the contractor does not pay the sub-contractors or if the work is not in compliance and must be partly re-done, you will be protected against the financial consequences of these events.

It can also cover other expenses, such as legal fees.

Your notary is the best person to advise you on this subject.

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4. The questions to ask before purchasing a condo

When buying a condominium, the purchaser should require in the purchase offer that the seller allow him or her to examine the:

Declaration of co-ownership

Building rules Minutes of condominium meetings

Syndicate’s financial statements

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It would also be good to have a list of improvements made to the unit since it was built or when the building was converted into a condominium, or a detailed description of the basic unit.

These documents play a major role in the sales process. In fact, the purchase offer may provide that the purchaser must state that he or she is satisfied in order for the sale to be finalized.

Good to know: if the Board of Directors has adopted an expense to be paid at a future date, the seller is obliged to inform the purchaser of this in writing, failing which the seller could be sued by the purchaser for not having sent important information to the buyer.

Useful link

Pour mieux comprendre tout ce qui entoure l’achat d’un condo, consultez le Guide pratique de la copropriété du magazine Protégez-vous.

You invested in your dream condo. But now the dog next door barks all day. Condo owners’ rules are crystal clear: Dogs are not allowed, and all occupants of the building are entitled to live in a quiet environment. You take it up with the condominium syndicate of co-owners to resolve the matter of the disruptive neighbour.

LEGAL ACCESS INSURANCE: A HELPING HAND!

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CONDO OWNERS: LEGAL ACCESS INSURANCE CAN HELP YOU!

In case of a disagreement with a neighbour or with the syndicate’s directors, the help of a legal expert can help you avoid many problems. A lawyer can help you find the right path toward a solution. For example, he can send the neighbour a formal notice to get him to abide by the Declaration of co-ownership and its rules. He can also require the condominium syndicate of co-owners to enforce the compliance of these rules.

If need be, the lawyer can also help you take more significant steps toward the compliance of the Declaration of co-ownership and the rules of your building. His involvement can help you find a quick and easy resolution to the conflict.

Legal Access Insurance gives you access to the advice of specialists and reimburses the legal expenses you incur, including the professional fees of the lawyer handling your case.

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REFERENCES

Infoinsurance

Condolegal.com

Insurance Bureau of Canada (IBC)

HAPPY PURCHASING!https://www.lacapitale.com/en/individuals/insurances/home-insurance/condominium-owners