Real Estate Risks

Have you considered all important aspects to protect your properties at their fair value? Our team of brokers is providing you with some suggestions to make sure that this is the case for insurance purposes.

IS THE MUNICIPAL ASSESSMENT SUFFICIENT TO ESTABLISH THE REQUIRED AMOUNT OF INSURANCE?

The limit of coverage must be equal to the cost of reconstruction of your building, no matter the municipal assessment or resale value of your property. The aim of the insurance policy is to put you back into the situation you were in prior to the claim.

WHAT ARE THE ADVANTAGES OF A PROFESSIONAL APPRAISAL?

A professional appraisal is the best way to determine the cost of reconstruction of your building. Here are the advantages:

• The first is related to complying with the co-insurance clause. This clause can be found in most insurance policies and applies only in cases of partial loss. Since the probability of partial loss is higher than that of total loss, if your insurance amount is less than the minimum required to comply with this rule, you may have to pay a significant amount out of pocket. This is why it is important to take the necessary measures to properly establish your insurance amount.

• In addition, a good appraiser will also include architects’ fees to redo the plans, as well as an amount for costs associated with the removal of debris and its transport to landfills, which can be high.

• The appraiser will also take into account the features of your building that could influence the cost of its reconstruction, whether it is a food processing facility, a retired person’s home that has adaptations, or a historical building located in a restricted access area.

DO THE GST AND QST NEED TO BE ADDED TO THE COST OF RECONSTRUCTION?

For individuals’ residential homes and residential syndicates (condominiums), taxes do need to be added to the cost of reconstruction because they cannot be recovered by the various levels of government. On the other hand, for commercial property, taxes are recovered, so it is not necessary to add them to the cost of reconstruction.

WHAT HAPPENS IF A CLAIM OCCURS FOLLOWING A NEW ZONING BY-LAW OR AN AMENDMENT TO THE MUNICIPAL CODE OF QUÉBEC?

Even water damage or a partial fire may prevent you from rebuilding based on your situation before the claim. For example, the owner of a factory with no automatic sprinklers will be obliged to comply with the new standards following a claim. In other words, this means that the owner will need to rebuild or repair the building and add automatic sprinklers, even though it was tolerated beforehand by insurers and the city due to the infamous grandfather clause.

Knowing about these legal provisions will allow you to determine and adjust your insurance amount, so as to avoid many unpleasant surprises.