After a large claim that is covered, a fire for example, it is not uncommon for the insured to be faced with the issue of rebuilding his home according to the new building standards required by the Régie du bâtiment or the municipality. These new standards are also called statutory conditions, zoning by-laws, or by-laws.
So, if a loss were to occur and you had to rebuild a section of your building, who will pay for the part that isn’t damaged if the city requires it to be demolished because the building no longer respects the mandatory distances?
Who will pay to tear down this part?
And finally, who will pay for the difference between the initial estimated costs and the costs under the new standards?
You’ve guessed correctly… it’s the client!
In terms of insurance
In order to benefit from the replacement cost coverage of a new building, you must respect the following conditions during reconstruction:
- The building must be rebuilt at the same location or an adjacent location;
- The reconstruction timeline must be reasonable;
- The new building must have the same purpose has the previous one;
- The materials used must be the same or be of equivalent quality
Be aware that your indemnity amount could be reduced if there’s a statutory condition that prevents you from respecting any one of the conditions stated above.
Here’s an example:
Following a fire, our client has informed us that he must add a concrete wall that extends beyond the wall between his neighbour and him, even though the initial construction met the standards set out just 15 years ago. The additional cost to erect this wall respecting the new construction standard is $15,000. It was a good thing that we had advised the client to add the statutory conditions clause.
Food for thought:
- Does your building meet the new reconstruction by-laws?
- Are you protected by a grandfather clause?
- Do you know exactly how much additional cost to expect?
- Has the zoning changed?
There are endorsements you can add to your insurance contract that will help you mitigate this problem. Do not hesitate to contact us for more information.