An increasing number of condominiums are being built both in major urban centres and small municipalities. Cities and towns see this as a way to increase population density, and buyers see it as a way of becoming a property owner while investing in real estate.
At the same time, buying a condominium may lead to confusion when it comes to responsibilities and loss settlements resulting from damage to the building and your unit.
Common and private portions
First of all, it is important to distinguish common portions from private portions. In short, private portions are the areas of the building and land owned and used exclusively by the co-owner. For example: your unit, bedroom, bathroom, etc.
The Insurance Bureau of Canada (IBC) has created a very practical lexicon to help you demystify condominiums and relevant terms.
Who pays what? The syndicate or my contract?
When the syndicate of co-owners is created, the declaration of co-ownership serves to establish rules for things to run smoothly for everyone within the condo, and to define the boundaries of the common and private portions, among other things.
To help co-owners and syndicate board members shed light on the scope of each insurance contract involved, the IBC has developed a table to enable the distribution of indemnification during claim settlements for condominiums, with respect to what is admissible under the building’s insurance policy, i.e. the syndicate’s policy, or the co-owner’s policy.
When you are in co-ownership, you are charged condo fees every month to cover common costs, such as costs related to pool and elevator maintenance, hallway and lobby cleaning, and of course insurance!
One of the purposes of a condo is to distribute building and land maintenance fees between co-owners, it is a form of mutual support to cover all the costs related to the proper functioning of everything within the building.
However, in the event of a claim, if there is not enough liquidity in the condo fund (i.e. the cash amount available after paying all fixed expenses from the amount received by the co-owners), the “missing” amount must be paid out, based on the percentage determined in the declaration of co-ownership by each person.
Each co-owner’s insurance policy enables them to be covered for their assets, leasehold improvements, and civil liability. This means that they are covered for their belongings, the materials selected for their unit of greater value than those that originally came with the unit, and the damage that may be caused to others.
The syndicate’s insurance policy covers damage to the building and everything related to it (roof, walls, hallways, etc.), as well as civil liability pertaining to the premises.
Examples of claims
A ruptured pipe causing water damage to several units, as well as the co-owners’ belongings. First, the syndicate (building) insurer’s steps in for the damage to the building. Next, each co-owner’s insurer will step in and pay for leasehold improvements (for example, the payment difference between the hard wood floor and the carpets originally installed in the units), damaged assets belonging to the co-owner, and relocation costs during repairs, if applicable.
A visitor falls on the premises—in the hallway—gets injured, and sends a formal notice to the condo. This claim will be taken care of by the syndicate’s insurer under its civil liability section.
As a co-owner, are you fully aware of the agreement included in your declaration of co-ownership? Do you know if the building you live in has adequate coverage, and if that coverage includes all the risks you may be exposed to?
This information should certainly be checked to avoid ending up in an unfortunate situation where you would have to personally pay for damage caused to the building.
If you would like to get advice and make sure you are covered for every situation, contact your Lareau broker, they will be able to offer you appropriate coverage and peace of mind!