Over the past year, there has been significant discussion within the condominium industry regarding the challenges faced by many condominium corporations who are finding it difficult to control insurance costs and in some instances even obtaining insurance coverage. Many corporations have been faced with wildly increased premiums and deductibles, which has, in turn, forced corporations to figure out a way to tackle these rising costs.
Insurance providers consider a number of factors when assessing a corporation’s risk, including geographic location, claims history, repair and maintenance procedures, and materials used during construction.
One of the ways to assist in decreasing this risk is for condominium corporations to shift the responsibility of insurance from the corporation to the unit owner by enacting a standard unit bylaw to define the standard unit as “bare-bones”.
A standard unit by-law describes what portions of the unit are “standard” to a unit which would be covered by the corporation’s insurance policy. Any items within the unit which are not listed in the standard unit by-law, would be considered an “improvement” to the unit and be the responsibility of the unit owner to insure.
A “bare-bones” standard unit by-law essentially limits what is considered “standard” to be only the essential, structural components of the unit which would be defined in Schedule “C” (the unit boundaries) of the Declaration of the corporation. For example, a bare-bones standard unit by-law may include the walls and ceilings up to the drywall, but would exclude primer, paint, and any wall coverings.
With a bare-bones standard unit by-law in place, the condominium corporation’s insurance policy will cover fewer components of the unit, resulting in fewer claims being made under the condominium’s insurance in relation to unit damage. This, in turn, will likely decrease the overall cost of insurance. This can be compared to a more inclusive standard unit by-law that may include commonly damaged finishes such as counter-tops and flooring, which would likely increase the number of claims made under the corporation’s insurance policy, and increase the overall costs to the corporation.
With a bare bones standard unit by-law, it is the unit owner who bears the ultimate risk for damage to his or her unit, and all owners in the corporation can rest peacefully knowing that there is a decreased likelihood that their common expenses will be paying for damage to a neighbor’s unit caused by an insurable event.
Although there are many corporations that have standard unit by-laws in place that remove the items that are usually the damaged items in claims i.e. countertops and flooring, we are now seeing more corporations revising those by-laws to go one step further and create a bare-bones standard unit by-law.
When trying to a pass a standard unit by-law, education is key. We have heard stories of owners objecting to standard unit by-laws for fear of “losing” coverage, or that doing so will result in an increase price for owner insurance policies. Oftentimes, these concerns can be mitigated by education and conversation.
Ultimately, it is important to highlight that standard unit by-laws are solely about insurance. They do not change the obligations to maintain, nor do they change the boundaries of the unit, both of which are outlined in a corporation’s Declaration. A standard unit by-law simply clarifies which party, being the condominium corporation or the unit owner, is responsible for insuring what portion of the unit.
Remember that this by-law requires a vote of fifty percent (50%) plus one of all voting units. Consider presenting this by-law along with a virtual meeting and electronic voting by-law at your upcoming virtual AGM or special owners meeting using electronic voting.
Photo by Brad Javernick of Home Oomph.