Archive for the ‘Strata Information’ Category

At tax time, get strata to consult with accountant

Thursday, February 20th, 2020

The lines of taxation get blurry when strata corporations run a commercial enterprise

Tony Gioventu
The Province

Dear Tony:

Our strata corporation is a multi-building community in the Fraser Valley. We host five guest suites solely for owner use at a minimal cost to cover expenses, rent 20 additional parking spaces at $25 per month and receive revenues from a lease with Telus for the communication towers on one of our buildings. We also rent the caretaker suite in our building at market rates as we have not had a resident caretaker for a number of years.

One council member has raised concerns over our revenues and insisted we are probably going to pay taxes on the revenues. Our property manager has advised us to not file a tax return as we have never filed a return before and strata corporations are non-profit associations so we don’t pay any taxes.

We are confused about the obligations. Do strata corporations ever have to pay taxes on revenues? Strata fees are not revenue they are simply a method of owners contributing to their own expenses.

— Sheila M.

Dear Sheila:

While tax time is approaching for personal returns, strata corporations returns are determined by their fiscal year end.

All strata corporations in British Columbia must file an annual tax return. Strata corporations are defined as non-taxable corporations under the Tax Act, they are not non-profit associations. There are limits to this exemption and there are strata corporations who have been taxed based on certain levels of revenue and source.

Your strata corporation may also be required to collect GST on non-residential strata fees and strata fees on units in a rental pool, or if your strata corporation is engaged in commercial activities. The routine operations of a strata corporation are generally not taxable. Your monthly strata fees, special levies, interest on your operating account, contingency funds and special levies, fines and penalties imposed for bylaw violations and resident user fees for parking spaces and guest suites are all generally non-taxable.

The lines of taxation get blurry when strata corporations run a commercial enterprise or use or lease property to a significant benefit of the corporation that results in financial benefits to the owners. For example, if your strata corporations owns and manages a commercial marina, a golf course that operates as a commercial entity, or uses their common areas to enter into commercial lease agreements with service providers for communications towers, billboards, public parking lots or signage, those revenues could be deemed to be taxable.

There are strata corporations who have been audited and required to pay taxes on a variety of revenues. Don’t assume your commercial revenues are exempt in a small strata. The number of units in the strata corporation is not necessarily relevant. In addition to the potential for taxable revenues, strata corporations also have an obligation to report funds paid to non contracted employees, including members of council and owners who are paid for on site services and remunerated council members who are not working as an independent contractor.

If your strata corporation generates any external or commercial revenue or retains any staff, consult with a qualified accountant to assist your strata corporation in filing your annual tax return. For those self managed and purely residential strata corporations who are not generating external revenues, you will need a T-2 short form, a copy of your annual financial statement and an information return.

The return is easy enough for strata council to file on behalf of their strata corporation. If there is a chance your strata corporation has a taxable benefit, you will receive a letter from Canada Revenue Agency requesting additional information.

© 2020 Postmedia Network Inc.

Two methods to obtain strata records

Thursday, February 13th, 2020

Buyers can get information about corporation, future maintenance and the insurance policy

Tony Gioventu
The Province

Dear Tony:

Our family has been shopping for a two-bedroom condo for the past three months and finally found a location and price range that fits our needs.

We put in an offer on the condo subject to receiving specific records and documents and reviewing the depreciation report. One of the documents we specifically requested was a copy of the strata insurance policy. As we are following all of the recent news on insurance issues, our agent has recommended we review the insurance and understand the potential risks we may face.

The strata corporation and the manager of this property have advised us that we are not entitled to a copy of the insurance policy until we are owners, as this is a privacy issue. This immediately raised a concern for us; however, if we are not entitled to obtain a copy of the policy before we purchase, how can we determine what risks we may be exposed to if we cannot obtain strata records?

— Darlene M. Richmond

Dear Darlene:

There are two methods of obtaining records from a strata corporation if you considering purchasing a unit.

Buyers are recommended to request a Form B Information Certificate to begin. The certificate discloses general information about the strata corporation including judgements against the corporation in the courts or tribunals, the number of rentals, parking space and storage locker designations and allocations, current balance in the contingency reserve fund and must include a copy of the most recent depreciation report.

The depreciation report is valuable in reviewing future major maintenance and renewal cycles. It will estimate when common components such as roofing, exterior cladding, doors and windows, elevators, plumbing systems are due for replacement and the estimated costs. This will give you an opportunity to compare the balances in the contingency fund with future demands on funds by the corporation. Documents such as the annual budget, copies of the bylaws, minutes of meetings, any other types of engineering reports and the annual insurance policy must be retained by the strata corporation and are available on request of an owner.

When an owner retains an agent to sell their unit, they assign the rights to that person to be able to request records and documents. Have your agent, through the seller’s agent, submit a written request for the specific documents. There are no privacy conditions or restrictions that apply to those items the strata corporation must retain, and they must make them available on request to the owner or their agent(s). The strata corporation is entitled to charge twenty-five cents per page, per copy and may withhold the copies until the amount is paid.

When you obtain a copy of the insurance policy, review the deductible amounts for water escape and other types of claims. In the event as an owner there is a claim from your strata lot where you are deemed to be responsible, the strata corporation is entitled to proceed to the courts or the tribunal to collect the deductible amount. If the deductible is $50,000 or $100,000 you could be responsible for that amount.

To protect your personal liability against claims or the risk of a deductible, it is vital owners purchase homeowner condominium insurance. Bring a copy of the strata corporation policy to your home insurer and they will assist you in understanding the deductible rates and how they are best covered.

It may also be valuable to review the date the policy is renewed. In these times of a restricted insurance market, a renewal in the next month may result in dramatic changes of the policy depending on the claims history, age, and risks of the strata corporation.

© 2020 Postmedia Network Inc.

Insurance options should be considered

Thursday, February 6th, 2020

Strata corporation should consider the options for renewing your insurance

Tony Gioventu
The Province

Dear Tony:

We are a first-time buyer and looking at an older condo in Surrey that is affordable and large enough for our family. The building just posted a notice, without any explanations, they could no longer purchase insurance as of January 31, and our sale is due to complete in mid-February.

We did pre-qualify for a mortgage, but on the condition that sufficient insurance was provided, which we now cannot provide. We are stuck between the obligation to purchase, where we put down a $10,000 deposit that we cannot afford to lose, but at the same time we cannot proceed with the purchase as we have been advised by our bank they cannot provide a mortgage if the strata corporation cannot purchase insurance and the buyer cannot purchase insurance.

We contacted an insurance provider about homeowner/content insurance and they confirmed they can provide insurance for our personal liability and our personal contents including any betterments to the strata lot; however, they cannot provide insurance for the building.

What are we supposed to do next? We will default on our purchase agreement and lose our deposit and may be sued by the seller.

— Marco T.

Dear Marco:

Your first phone call is to your lawyer acting for your purchase and your agent who negotiated the purchase. You will need to review the terms and conditions of the purchase agreement and consider the options. One failed completion of a sale could have a domino effect on multiple sales affecting many families.

Unfortunately, buyers and sellers are caught in the extreme conditions of the insurance market at this time, with serious consequences for the real estate market as well as the personal liability of strata property owners and buyers across British Columbia.

Strata councils should also be aware of their personal liability if the insurance is not renewed. Immediately talk to your manager and lawyer about how to inform the owners and what type of information they immediately require. Large, high-valued strata corporations, aging communities that have deferred depreciation reports or maintenance, or communities with a history of claims are all exposed to much higher costs, certain types of exclusions for claims, higher deductibles and the risk of limitations or cancellation of insurance at this time.

Insurance is a free-market industry with minimal government regulation. This is one of the reasons a competitive industry has worked well for the public to date, but when competition declines and the cost of providing coverage along with increased construction and finishing costs and a rising frequency of claims and construction values intersects, the result is costly and drastic for the public.

There are multiple brokers across B.C. that have access to broader insurance markets and every attempt should be made by your strata corporation to consider the options for renewing your insurance.

A strata corporation may have to consider exclusions or exemptions to certain types of claims, substantially increased insurance deductibles and dramatic increases in costs to renew their insurance policy, but remember, your policy isn’t just about insuring for that inevitable flood caused by a pipe break, failed washing machine hose or an over-flowing bath tub.

When insurance companies agree to insure your property, their obligation is for full replacement value. If your building’s replacement value is appraised at $65 million, the broker and insurers are securing coverage for $65 million. If your building is an apartment style building the risk increases automatically because the likely hood of multiple units being damaged in a flood significantly increases. If you compound that risk with aging building systems, neglected renewals, a frequency of claims and lack of a depreciation plan, it will become much more difficult and costly for a strata corporation to renew their insurance.

© 2020 Postmedia Network Inc.

Council must vote on, report use of reserve funds

Thursday, January 30th, 2020

There is more than one benefit to the owners when you issue a special levy for an insurance deductible

Tony Gioventu
The Province

Dear Tony:

Our strata has had a deductible of $100,000 for several years due to a number of claims and the inability to approve a resolution to replace our piping. In November we had another claim over $100,000.

In one of your articles you indicated the strata corporation could levy that amount to the owners without approving a three-quarter vote at a general meeting. Our property manager and president told the council we either had to pay this amount from our contingency or call a meeting, and they paid the amount from our contingency fund without a vote of the strata council.

We are concerned about the significant reduction of our reserve funds, because we would not have any funds to pay for emergencies that are not insurable. Who has the authority to make these decisions?

AJC, Surrey

Dear AJ:

Decisions that relate to bylaw enforcement, major expenses, selection of contractors, when general meetings are called, the agenda and resolutions of general meetings, the recovery or back charging of damages and insurance deductibles, and when a strata decides to levy owners for an insurance deductible that is a common expense of the corporation, are all decisions of the strata council by majority vote.

It is critical the decision is voted on and minuted as the decision will delegate authority to the strata manager to act on your instructions and in the event of an action to recover a deductible or proceed with further bylaw enforcement such as a tribunal or court application, the decision and minutes provide valuable evidence of the actions and authority of the strata council and the strata corporation.

There is more than one benefit to the owners when you issue a special levy for an insurance deductible. In addition to reducing the pressure on your reserve fund and depleting your cash resources, owners are in a position to apply their share of the insurance deductible to their home owner policy if they qualify. This is one of the many reasons we recommend home owners purchase condo insurance.

Unfortunately, we have created a culture in strata corporations where owners and tenants assume the strata corporation takes care of everything. In addition to neglecting their personal insurance obligations we see the same behaviour exhibited in use of energy. We still commonly hear from owners they use their gas fireplaces 24 hours per day to heat their units as the gas is paid by the strata — resulting in excessive energy consumption and fuel costs for strata corporations.

In your strata, the insurance claim was caused from a failed pipe, damaging five units, and the damages were $138,000. The $100,000 deductible applies as a common expense of all owners based on unit entitlement. Your options of payment are your operating fund, the contingency reserve fund or you may special levy owners directly. If a strata corporation does not have sufficient cash flow, they will have no choice and must levy the owners. The special levy of $100,000 is approved by a resolution of the strata council at a council meeting.

Like all levies there must be a due date for payment, the purpose of the levy (payment of an insurance deductible) and the method of calculating payments, which is unit entitlement, the same formula applied to all common expenses such as strata fees. The strata corporation/manager then manages a collection process like any special levy and owners may have liens applied to their units if they fail to pay the amount. Because this is a special levy, your strata corporation must also report this account separately as part of your fiscal year end reports.

When in doubt of who has authority to make decisions, always err on the side of inclusion and first bring the matters to council.

© 2020 Postmedia Network Inc.

Bylaw on deductible won’t benefit insurance renewal

Thursday, January 23rd, 2020

Beware of bylaws that limit or restrict insurance claims

Tony Gioventu
The Province

Dear Tony:

Our strata corporation has consulted with a lawyer and our property manager and have been advised that if we approve a bylaw that limits the amount an owner would have to pay if they were responsible for a claim, it would be easier for the strata corporation to renew our insurance policy.

The bylaw basically limits the amount to $50,000 as we now have a $250,000 deductible for water escape. However, this makes no sense to us because the amount an owner would have to pay for the deductible if they caused a claim has nothing to do with the insurance policy. The strata corporation and the rest of the owners would still be required to pay the remaining $200,000.

How does this benefit anyone?

Carmen R., Richmond

Dear Carmen:

Bylaws that limit, restrict or qualify claims, coverage or limitations of liability are extremely complicated to administer.

For example, while the Strata Property Act sets a threshold for corporations that enables them to recover the deductible if an owner is “responsible” for a claim, strata corporations are under the impression that if they adopt a bylaw that qualifies this condition as negligence, it is easier to collect.

Not so, the higher standards, definitions or thresholds will require a higher test in the courts or tribunal to obtain a successful judgement. A bylaw that limits an owner’s liability will impose a greater liability on the rest of the owners, even if they had nothing to do with the cause of the claim.

Yes, deductibles are excessive, but the related risks the insurers are adopting may be equally high. At this time owners may be able to obtain insurance to cover high deductibles, but the rational question owners must discuss at your meeting is why they are shielding an owner from such a liability if the owner had caused the claim? Why should the remaining owners pay for a $250,000 if someone has caused a claim as a result of failing to comply with the strata bylaws, maintaining their strata lot or appliances, or an action that caused the claim?

Sadly, there will be owners who lose their homes as a result of high deductibles and claims. We have not identified any related benefits to renewing insurance or cost of policies if strata corporations adopt such bylaws.

An insurance deductible as a result of a claim on your strata policy is a common expense of the strata corporation, and paid by the strata corporation until it is determined who is responsible for the claim and the amount is collected. A strata corporation is automatically authorized by the Act to pay a deductible from the contingency reserve fund, operating fund or directly special levy each owner for their share.

Unlike strata fees and special levies, insurance deductibles do not qualify for a lien priority over charges such as mortgages. While a strata may obtain a decision from the courts or the tribunal for a high deductible amount, if there is no equity left in a property because mortgages are so high the remaining owners may still be at risk of covering the full deductible amount.

A word of caution, if a strata council or property manager indicate they have legal advice on a matter, it is beneficial to either have the lawyer attend the meeting or a copy of the written opinion on the proposed bylaw included with the notice. Managers and council members frequently wordsmith bylaws before they send out notice packages that were not the same advice provided.

© 2020 Postmedia Network Inc

Options available to repay annual deficits

Thursday, January 16th, 2020

There are several options to repay an annual deficit

Tony Gioventu
The Province

Dear Tony:

Our strata corporation recently approved a special levy at our annual meeting to pay for a deficit of $37,000 from 2019 overruns. The resolution required three equal payments: March, April and May. 

At the meeting, several owners objected to the resolution as the payments were due in a short period of time and the fee of $10 to collect the levy was added to each payment. When questioned, the property manager admitted to writing the resolution and advising council the act required the deficit had to be repaid in the next fiscal year and this was the only option. 

The owners at the meeting agreed to amend the resolution and spread the payments out over six months.

We have now received notice of a new schedule of payments with a $10 addition to each of the six payments. Are there other options to paying for a deficit that does not impose additional collection fees on the owners?

Claire Lesley, Burnaby

Dear Claire:

When a strata corporation is left with a deficit at the end of its fiscal year, the Strata Property Act permits three options to repay that amount. A special levy is not the only option, but it is the option that permits the management company to charge an additional fee. 

The first option is to add a line item to the agenda of the next year’s budget to repay the deficit. This does not incur any fees for special levies; it is paid over 12 months, and requires only a majority vote for approval. While this does increase the strata fees for the next year, it is the best payment method because of the least cost and approval requirements.

The other two options require a three-quarters vote resolution approval. The strata corporation may approve a special levy, and depending on your service agreement with your management company, there may be charges for the collection of the special levies. This is charge paid by the strata corporation, not by each individual owner and is a common expense based on unit entitlement the same as the deficit amount being levied.

The management company does not have the authority to charge owners directly for their fees or services for collections of special levies. This additional amount is included in the special levy to pay the deficit. The special levy schedule must be reissued and is based only on the total amount approved by the owners at the meeting.

A third option is for the strata corporation to approve a one-time payment from the contingency reserve account to cover the deficit. While there is no immediate impact on the owners, it will result in the depletion of valuable savings for future renewals or emergencies.  

While deficits occur for strata corporations due to insurance deductibles or emergencies, the cause of the expense is also important to identify. In Lesley’s strata corporation, over $40,000 of emergency expenses for a deck leak and repair were allocated to their operating fund, while they have over $250,000 in their contingency fund. 

Emergency expenses may be allocated from either the operating fund or the contingency reserve fund.  How the funds are allocated is a decision of the strata council.

If you are an active strata council member, take a direct interest in your monthly operations and expenses.  While it is not mandatory, an emergency expense can be replenished to the contingency fund simply by approving by majority vote a higher contribution in the following year’s budget, eliminating the need for special levies. 

People who are not licensed legal professionals, such as strata managers and consultants, and who are compensated for their services, are not permitted to write resolutions or bylaws for strata corporations as this is defined as a practice of law under the Legal Professions Act in B.C.

© 2020 Postmedia Network Inc.

Polling ballots will force decisions to be disclosed

Thursday, January 9th, 2020

Strata removed secret ballots from bylaws

Tony Gioventu
The Province

Dear Tony:

In August, we held a third special general meeting to approve a special levy to replace the piping in our 30-year-old building.

Once again, an owner showed up with enough proxies — 28 — to defeat the special levy. She always demands a secret ballot and we have no way of controlling how she votes.

We have held several information meetings with owners since and have discovered several owners instructed the proxy holder to vote in favour of the special levy; however, we have no way of verifying the results because of the secret ballots. 

Our strata received a letter from our insurance broker last week advising that they could not renew our insurance as the strata corporation had we not approved the plumbing project. We have secured a temporary 30-day-renewal extension, but it is subject to the strata corporation approving the piping project in January and commencing work no later than May 1. 

How do we deal with the owner who is clearly attempting once again to control the meeting and vote down the repairs?

Karen J., North Vancouver

Dear Karen:

Despite the efforts of one person to undermine your efforts to deal with your maintenance and renewal issues, there are other options available to address the voting imbalance.

A controlling proxy holder is relying on owners being uninformed and isolated from the implications of the decisions. While the Schedule of Standard Bylaws of the Strata Property Act requires a secret ballot if an eligible voter requests a secret ballot, your strata corporation bylaws were amended in 2015, and the provision for a secret ballot was removed. 

Your voting is conducted either by a show of voting cards, or if a precise count is requested, it is the decision of the chairperson to determine the method of voting. In your bylaws, it is either by ballot, polled ballot or a call of the roll. 

A strata corporation has no control over a proxy holder’s actions. Disruptive proxy holders often demand secret ballots to hide behind the anonymous collection of paper ballots where they can vote at their own discretion, regardless of the instructions on the proxy. 

By polling the ballot, each strata lot is identified on each ballot, and the results of the votes of each strata lot present in person or by proxy are recorded in the minutes. By calling the roll, each strata lot present in person or by proxy, is called, requested how they vote, and the result of each strata lot vote is recorded in the minutes.

While nothing prevents the proxy holder from acting contrary to an owner’s instructions, it does record the outcome of each vote and forces the proxy holder to disclose their decisions. The result often ensures the success of the corporation. 

For contentious meetings that may result in interpretation of the act or your bylaws or the effects of a failed resolution, it is well worth the investment to have your strata lawyer present to advise the owners. 

When a strata corporation is unable to obtain the owner approval for necessary funding for maintenance and renewals, there are several other options available. Under the act, if  a resolution is proposed to approve a special levy to raise money for the maintenance or repair of common property or common assets that is necessary to ensure safety or to prevent significant loss or damage, whether physical or otherwise, and the number of votes cast in favour of the resolution is more than half of the votes cast on the resolution but less than the three-quarters vote required under the act, the strata corporation (council) may make an application to the Supreme Court of B.C. to order the repairs. This is a method frequently employed by strata corporations to proceed with repairs.

If your insurance provider has indicated a risk of insurance cancellation, it is likely sufficient evidence to make an application. 

Likewise, if a strata corporation has a depreciation report, and the report recommends the repairs, the strata corporation requires only a majority vote to approve a project as a contingency expense. If your contingency fund does not have enough money to cover the cost, it is only a majority vote as part of your annual general meeting when you approve the annual budget, your owners by majority vote may approve any amount to be contributed to your contingency fund. While this takes a year or two of planning, if you are anticipating a major project in the future, it is a viable option to consider. 

A valuable tool for major repairs and funding is to maintain an ongoing five-year plan of upcoming projects. Five years will provide any community with sufficient advance time to consider funding and repair options.

© 2020 Postmedia Network Inc.

Think safety first over the holidays

Thursday, December 19th, 2019

Put safety first and be mindful of others during holidays

Tony Gioventu
The Province

Dear Tony:

Our strata corporation has been having the “ban live-cut Christmas trees” debate for several years, without much success. Every year, there is at least one owner or tenant who abandons their dead tree in the parking garage or rams it down the garbage chute or tosses it off their balcony into our landscaping or drags it through a hallway leaving a trail of needles in the carpets.  

Our cameras only capture the front entry of our building and the suspected culprits always mysteriously remain unidentified. How can we best encourage our owners to support our bylaws that would prohibit live trees for holidays and festivals?  

Kyra Browning, Surrey

Dear Kyra:

Holiday decorations are a wonderful way to brighten up the dark winter months and to celebrate festivals year round, but they do come with liabilities.

Live trees still capture our nostalgic celebration of Christmas, and yet they also come with the dangers of increased fire risk, damaging building common areas, pest infestations (always a treat when the bugs hatch), and increased maintenance.

Even if your owners adopt a bylaw that prohibits live trees, don’t be surprised to find a few owners who still smuggle in live trees during the late night hours.

In many situations, a good dose of resident awareness may solve your problems. A seasonal flyer will encourage owners to properly care for their trees, tell them how to reduce fire hazards and provide locations of when and how to recycle their trees. A complimentary tree bag also encourages everyone to seal their trees before they drag them through the common areas.

In addition to trees, attention should be paid to exterior decorations if they are permitted, such as lights or displays. Strings of lights stapled to a building exterior may result in far more damage than a dried old tree dragging down your hallways.  

While the displays and lights seem like a good idea, not everyone in your complex may share the same beliefs. Be open minded about supporting other festivals through the year and avoid restricting your bylaws to the Christmas season. If you decorate your common areas or lobby for the Christmas season, consider the traditions of all residents and how they wish to celebrate their holidays.  

There are also activities associated with new year celebrations and festivals to be considered. Fireworks and firecrackers also increase the risk of fire, and may result in noise that is a nuisance to residents and a harm to pets. Lighting fireworks off a rooftop deck or a balcony is just a bad idea.  

After the recent Halloween season of fireworks disasters, several townhouse complexes have now adopted a ban on any types of fireworks, firecrackers or sparklers within a strata lot or on the common property.  

Living in a strata corporation comes with the routine noises and disruptions of everyone sharing the same common facilities and walls. The traditional countdown party to New Year’s Eve is anticipated, but the party that is raucous until 4 a.m. is a nuisance.  

In a strata corporation, your home is not your castle, but it is a great living experience for many of us who understand that our activities and behaviours need to be tempered with consideration and respect for our neighbours.

A safe holiday season to all.  

© 2019 Postmedia Network Inc.

Comprehensive inventory vital for new strata corporations

Thursday, December 12th, 2019

A complete building commissioning best for strata budgeting

Tony Gioventu
The Province

Dear Tony:

I am on the first strata council of a new building in Metro Vancouver and we are having some challenges trying to determine our obligations. We have a management company that is helping us set up the operations, but we don’t have any type of master plan of operations.

Who would normally set this up? Do we hire a consultant or can we expect our manager to set up an operations plan? We are concerned that we might be missing obligations that could result in building systems being affected or risk our warranty.

Carol Myers

Dear Carol:

To ensure your strata corporation is properly budgeting for operations and administering the common property and common assets through a management plan, a best practice is to start with a complete building commissioning. 

You are absolutely correct: it is critical to establish a complete operations plan to ensure your assets are maintained and inspected on a routine basis, and for any defects or building claims to be properly documented for your strata corporation to file warranty claims. 

When a new building is completed, the owner developer at the first annual general meeting — which in your case occurred three months after the first unit was occupied — must transfer to your strata corporation:

(a) a complete list of names and addresses of all contractors, subcontractors and persons who supplied labour or materials to the project, as required by the regulations;

(b) manuals, warranties, plans that were required to obtain a building permit and any amendments to the building permit plans that were filed with the issuer of the building permit;

(c) any document in the owner developer’s possession that indicates the location of a pipe, wire, cable, chute, duct or other facility for the passage or provision of systems or services, if the owner developer has reason to believe that the pipe, wire, cable, chute, duct or other facility is not located as shown on a plan or plan amendment filed with the issuer of the building permit;

(d) all contracts entered into by or on behalf of the strata corporation;

(e) and all records required by the corporation under the act and the regulations. 

An inventory of the records provided by the developer is a good place to start, and a website for your strata corporation to host all of these records will be valuable for your strata corporation, your manager, contractors and service suppliers. 

When a building is commissioned, a complete inventory of all services and facilities is established, along with the service requirements and inspections. Everything that is an obligation of the strata corporation to maintain and repair is identified. This will include mechanical equipment, such as elevators, heating and ventilation blowers, fire safety systems, water-pump circulation systems, drainage systems, hydro/geo thermal systems, heating and air conditioning, sump pumps, security and door entry systems, roofing drainage and access and emergency back-up generators. 

This is best done by an experienced building consultant who understands how these systems operate and the best practices for maintenance and inspection. The consultant will create a vital inventory along with your service obligations, which are valuable for the development of depreciation reports and to quickly identify any deficiencies. 

Working closely with the owner developer/contractor is also a valuable exercise as they retain the intimate knowledge of how your building was constructed. 

Once you have completed a building commissioning, a proactive operations plan ensures your building performs to its best energy and service levels, will reduce the risk of insurance claims or equipment losses, and protects your owners’ investments.  

The greatest challenge many strata corporations face? They don’t know what to repair or maintain if they don’t have an inventory that itemizes all common components and the annual duties for maintenance and repairs.  

© 2019 Postmedia Network Inc.

Coping with rising cost of insurance for strata Properties

Thursday, December 5th, 2019

Premiums and deductibles have increased substantially

Tony Gioventu
The Province

Over the past few months across B.C. there has been an industry struggle to renew strata corporation insurance polices. With renewals, the cost of the insurance has increased anywhere from 50 to 300 per cent and the deductibles to cover claims have also increased substantially, from rates of $25,000 per claim to as high as $250,000 and $500,000.

While not all regions of the province have been affected in the same manner, there have been targeted building types or large strata communities across B.C. that have seen the dramatic increase.

British Columbia has over 30,000 strata corporations, which vary from a duplex to over 1,000 units in a single strata community. Many conventional strata corporations are low-rise wood-frame apartment buildings, townhouses or highrise buildings.

When a water failure or fire occurs in multi-unit buildings, multiple units are often affected. The result is an increased risk of cost for damages and losses by the insurance industry.

Under the Strata Property Act, a strata corporation must insure for full replacement value of all common property, common assets and fixtures. This basically means in a duplex, townhouse, low rise or highrise community, the original construction, including finishing attached to the building, is covered under the strata corporation insurance policy.

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What is the cause of the dramatic increases?

In addition to worldwide catastrophes, we live in a high-risk earthquake zone, and with several major building claims in the province, there are a reduced number of insurance companies that are covering strata insurance in B.C. The hardest-hit regions are the high-density metro areas, but resort properties and communities with large developments of more than 250 units are also feeling the crunch as they have the highest compound risks when there is a claim.

In addition, with a limited number of insurers, increase in claims, higher property and construction values and a high demand for insurance, a supply/demand imbalance has been created where the insurers have imposed much higher costs and deductibles to manage risks.

How does this impact owners of strata units in B.C.?

If your strata is faced with a substantial increase in insurance rates, the cost will be reflected in your annual budget, which determines your annual strata fees. If the deductible is dramatically increased to $100,000, for example, it means any claims under $100,000 are not covered by insurance and subject to your bylaws, each owner is likely responsible for damages to their strata lot and the corporation is responsible for the cost to repair common property. The result is many of the past insurance costs will now be downloaded onto the affected owners in the event of a claim.

If an owner is responsible for a claim — for example, their washing machine hose fails, flooding out the building — the owner could be responsible for the $100,000 deductible.

This time, more than ever, homeowners need to consider condo home owner insurance to cover their liability in the event of a claim for damages to their unit, the cost of a deductible or the risk of being sued by other owners if they cause a claim. If there is a claim from a failed pipe and the amount of the claim is over $100,000, resulting in an insurance claim, the $100,000 deductible becomes a common expense of the strata and the council may pay it from the contingency fund or directly levy owners without the need for a three-quarters vote at a general meeting.

What can our strata do to limit the risk?

Work closely with your broker. If the strata corporation is faced with a change in insurance or the possibility of no coverage, immediately give notice to owners. If you fail to obtain insurance, contact your lawyer to determine the liabilities for owners and council members and what next steps you should consider.

Maintain your buildings. Work with your owners to manage risks. Verifying that all units with washing machines have upgraded their hoses to braided steel. Failed rubber hoses in cramped closets and spaces are a chronic cause of water damages.

Address risks that may result in a claim. Smoking, barbecues on balconies, balcony gas heaters and in-suite hot water tanks all present a higher risk. Repair access or building issues that may risk an injury.

Update your bylaws. Bylaws that present a risk of human rights complaints or court actions also increase your risk.

What should buyers consider 

Before you purchase, obtain a copy of the strata insurance and confirm the insurance cost, deductibles for water escape, and the renewal dates. Over the coming year, the increases will likely continue.

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