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Responsibility for condo repair a complex issue

Condo owners may wonder who is responsible for restoration after their unit sustains water or other damage, but issues relating to repair and insurance are some of the most complex in this area of law, Toronto condominium lawyer Deborah Howden writes in The Lawyer’s Daily.

In terms of a primer, Howden, a partner with Shibley Righton LLP, says the current Condominium Act, 1998 requires that every condo corporation repair both the common elements and suites after damage (up to the standard unit), whatever the cause.

However, she adds, “the Act also provides that this obligation may be altered by the corporation’s declaration, and most declarations in fact do so. Specifically, most declarations make the obligation to repair a unit after damage the responsibility of the unit owner.”

Upcoming reforms to the Condominium Act, says Howden, will reflect this industry standard, such that condo corporations will no longer be responsible to repair units after damage. 

“However, this will be subject to other provisions under the Act (for example, the obligation of the corporation to insure the units, up to the standard unit) and in the declaration,” she writes.

In terms of insurance, Howden says there is a related obligation on the corporation to obtain and maintain insurance in the event of damage caused by major perils to either the common elements or units.

“Condominium building insurance policies cover only the common areas, such as a lobby or a party room, and the standard unit. They do not cover any upgrades made to a unit, or the contents of a unit. Therefore, when a unit is damaged by a major peril, the condo corporation can turn to its insurer for repairs, but owners must look to their own insurer to repair any damage to the contents or any upgrades to the unit,” she writes.

The question of who pays the corporation's building's insurance deductible depends on the cause of the damage, says Howden. Current legislation permits the corporation to charge back to a unit owner the lesser of the insurance deductible and the cost of repairs to their suite if they or a guest caused the damage through an act or omission.

In addition, she writes, under the current Act, a condo corporation may pass an ‘insurance deductible bylaw’ that would allow it to recover its insurance deductible when an owner has caused damage to other units and common elements.

“The clear idea behind the bylaw is to make unit owners responsible for all damage they have caused, not just damage limited to their unit,” writes Howden.

Under the new legislative regime, the ability to extend the circumstances under which owners can be required to pay the deductible will no longer be available through a bylaw. Once the reforms are proclaimed, this can be achieved only through an amendment to the declaration, requiring 80 per cent of owners to agree. This is not an easy threshold to achieve for most condos, she says, and many corporations have instead taken steps to quickly pass insurance deductible bylaws, which require a simple majority of owners to be approved.

When it comes to floods, Howden says damage caused by a hurricane or heavy rainfall is not specifically listed as a major peril for which a corporation must insure suites or common elements under the Condominium Act.

“The major perils under the legislation are ‘fire, lightning, smoke, windstorm, explosion, water escape, strikes, riots or civil commotion, impact by aircraft or vehicles, vandalism or malicious acts.’ Whether coverage for other, non-listed perils is required depends on the content of the condominium declaration and bylaws,” she writes.

In terms of insurance nomenclature, she says, “water escape,” relates to sudden events such as an overflowing toilet or a burst pipe, but flooding caused by severe weather is typically not included in water escape coverage.

“In addition, if water enters the condominium unit through a crack in the foundation, this is properly ‘water seepage,’ as opposed to water escape. Water seepage is a general exclusion in insurance policies, as it commonly occurs from a lack of maintenance,” writes Howden.

Extraordinary flash floods in Toronto and Calgary in 2013 led some insurers to start offering “overland flood” coverage, says Howden, which protects against damage caused by a sudden weather-related event, such as the overflow of a river or unexpected accumulation of water from heavy rainfall.

Ultimately, says Howden, “Time will tell whether developing insurance coverage and the amendments to the Condominium Act will have any significant effect in helping to clarify the condo insurance regime.”

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