Insurance
What tangible impacts do these laws have for condo owners? A few mainly financial impacts. This article offers an overview of the situation as it stands today. Let’s find out together what you need to understand and remember about these changes.
Perhaps you manage or are involved in a condominium syndicate. Perhaps you are simply a condominium owner. Whatever the case, it is in your best interest to stay informed about how these changes will impact both you and your budget.
Two laws enacted over the last few years provide a framework for condo management. This has changed the landscape of co-ownership in Quebec. Bill 141 was adopted in June 2018 and Bill 16 in December 2019. Both have implications for condominium insurance.
For the record, let’s keep in mind that condominiums are quite recent in Quebec. In fact, the AQGC (Association québécoise des gestionnaires de copropriétés) informs us that 2019 marks the 50 th anniversary of condos in Quebec. On November 28, 1969, Bill LQ 1969c.76 came into effect and co- ownership was born. It should also be noted that the AQGC was formed in the wake of Bills 141 and 16.
Bill 141 was adopted on June 13, 2018. It amends the Civil Code of Québec with respect to divided co- ownership insurance. Two measures of this law came into force on April 15, 2021:
What is a private portion?
A condominium unit belonging to a co-owner is called a private portion. It is part of the building and includes the walls, floors and ceiling of the unit in question.
Law 141 requires the syndicate to provide a precise description of these private portions. This is to facilitate the identification of any improvements made by the co-owners. This description must be included in the registry of co-ownership so that it remains accessible to all co-owners who request it. This novelty will allow for a clearer picture of improvements made to the private portions. It will also outline the roles of both the syndicate’s insurer and the co-owner’s insurer, reducing the risk of litigation.
Under the law, a certified appraiser must conduct a reconstruction value assessment every five years. This exercise has an impact on co-owners’ finances, as the deductible may be revised downward or upward.
This obligation to assess the reconstruction value of a building has insurance-related consequences. Indeed, from now on, buildings will have to be insured for their real reconstruction cost.
Also, as of April 2022, the co-owners’ syndicate is under the obligation to set up a self-insurance fund. This is in addition to the contingency fund and the operations fund. It must contain the equivalent of the highest deductible of all insurance policies taken out by the syndicate.
The deductible is the amount paid by the insured party in the event of a claim. When the deductible is increased, the syndicate must adjust contributions to the self-insurance fund. This can be done when the following year’s annual budget is determined.
Condo owners will only have to contribute once to this self-insurance fund, except in the event of a claim. In the event of a claim, if the deductible must be paid, the self-insurance fund must be replenished. This means that an additional contribution may be required during the year. Some believe this could be an incentive to keep the property in the best possible condition.
From now on, every owner within a building with less than 13 fractions must add civil liability to their condo insurance. This insurance must cover a minimum of one million dollars. For buildings with 13 or more fractions, the amount is two million dollars.
A “fraction” is any portion of a building used as a housing unit, or for the operation of a business. Private areas such as parking or storage spaces do not meet these criteria. Therefore, they are not fractions.
The Government of Quebec’s Bill 16 came into effect on January 10, 2020. It is designed mainly to regulate building and divided co-ownership unit inspections, to change the name of the Régie du logement and to improve its operation.
Why Bill 16?
With Bill 16, the government has two main objectives :
Many condominium syndicates have tended to neglect contingency funds in order to limit condo fees. However, there comes a time when important maintenance work becomes necessary: replacing the roof or the windows, for example. When this happens, if the contingency fund is insufficient, syndicates are faced with a conundrum : hey have to ask the co-owners for additional contributions, or postpone the work, which may lead to a deterioration of the building.
What is the purpose of a maintenance log?
Bill 16 provides for the creation of a maintenance log to ensure proper maintenance. This log includes the building’s history as well as information regarding repairs, improvements and renovations made over time. It is the ideal tool to ensure an efficient transition between administrators. The maintenance log also helps to determine the contingency fund.
What is a contingency fund?
The contingency fund is used for major repairs or replacement of the common areas. This money is not used for routine maintenance.
The maintenance log is used to determine the contingency fund contribution. A contingency fund study details the major work to be performed in the common areas over the next twenty-five years. This may include underground parking, siding, windows, roofing, etc. It provides a cost estimate and then establishes the annual amount to be paid into the contingency fund.
Such a study affects both the condo fees and the contingency fund. If the building is older and the syndicate has neglected this fund, it may be in need of a serious cash infusion. However, the law provides for a ten-year period to replenish this fund in order to avoid a sudden increase in fees for condo owners.
Obviously, it is always a good idea to adequately maintain a building. Timely work will often prevent greater expenses later on, when the situation has worsened.
Things to remember about these laws and their impact on condo owners :
Your broker will be happy to discuss condominium insurance with you.
