Where a unit owner, tenant or a guest causes damage to an owner’s unit, section 105 of the Condominium Act, 1998 permits condo corporations to charge back certain repair costs by adding those costs as common expenses to that owner’s unit and collecting them by way of lien. Corporations can pass by-laws extending the circumstances under which they can charge back repair costs. The underlying concept is that an owner who is responsible for damage should pay any repair costs not covered by the corporation’s insurance.
This type of charge back is typically limited to the deductible amount under the corporation’s insurance policy, which can range from $500 to $10,000 for most water escape or fire claims. In larger condominiums or those with a poor claims history, the deductible can reach $50,000.
No matter what the amount, few owners can easily afford these charge backs. Thankfully, they can obtain insurance to significantly lessen the impact of such charge backs and protect their personal property and improvements to their unit, none of which are covered by the corporation’s insurance.
The problem is that a surprisingly large number of owners do not secure proper insurance because they do not understand the limitations of the corporation’s insurance and mistakenly assume that they don’t need to obtain their own coverage. The truth emerges very quickly in the aftermath of a water escape or fire, but too late.
Failure to obtain proper insurance can result in a crippling financial burden that can rob owners and their families of their financial security and their home. There are few things as heartbreaking or as avoidable.
Condo boards and managers should take concrete steps to help educate their unit owners about insurance on an ongoing basis and especially when new standard unit by-laws or insurance deductible by-laws are proposed. Here are some ideas:
- Make sure that your welcome booklet for new residents contains detailed information about the owners’ obligation to obtain their own insurance and how to get it;
- Insert information about owners’ insurance on the backside of the condo’s insurance certificate that is circulated to the owners each year – some insurers provide this service;
- Discuss insurance at the annual general meeting every year – there are always people who want to learn more;
- Circulate brochures from your broker or insurer, and keep some literature handy in the office to pass out on request;
- Place a link to your broker or insurer’s website on the condo’s website or blog;
- Ask your broker or insurer to submit an advertisement or helpful article for publication in the condo’s newsletter or website;
- Hold periodic information meetings to discuss insurance issues and consider inviting a representative from your broker/insurer;
- Ensure that information is available in other languages and formats to serve the specific demographics of your complex.
These very simple and inexpensive steps can help prevent disasters for members of your condo community. Implement these steps today.