You shop or you own a condo ? The building was-t-he a fund of self-insurance ?
The answer is no. But it’s going to change in the next few months, because the draft law 16 and 141 adopted in recent years have introduced the principle of the fund of self-insurance for each building to condos.
This fund has nothing to do with the pension fund, which should be used for major repairs and replacement of common parts of the building.
The contingency fund should be 5% higher contributions to the common expenses paid by the co-owners.
How does it work ?
The condominium building is insured in two ways : by the union of the building and by each of the co-owners. The insurance of the trade union protects the common areas and each of the condominium (the condominium unit). The invoice is integrated to the condo fees. The insurance of each owner covers its property and liability insurance for his unit.
In the event of a claim, the insured must pay a deductible, either a portion of the value of the cost of reconstruction, repair or cleaning.
The fund of self-insurance is supposed to cover this deductible. For example, for a building of 100 units in which the deductible is $ 250,000, there is talk of $ 2500 per unit. The act gives two years to the co-owners to constitute the fund, which here corresponds to $ 104 per month. In comparison, a franchise for a single-family home is often between $ 500 and $ 1000. We have seen condominiums have deductibles of $500,000…
Crisis in sight ?
For the experts, the majority of condominiums are very poorly managed (especially the small). Contingency funds are usually insufficient to cover the needs, while the park condominium complex has close to 30 years. And the state of the buildings, which are often in deficit of maintenance, is very poorly documented, if at all. For example, the co-owners do not know when it will be necessary to redo the roof or how much it will cost. The new requirement to establish a fund to self-insurance will complicate this reality.
“The co-owners are not aware that they should constitute a fund of self-insurance,” says Yves Joli-Coeur, lawyer of the condominium. It is an education to the public and property managers. Unfortunately, many owners believe they are tenants or who are thinking of pay for a hotel way of life at a low cost… “
Many will have to tighten the belt when it is required to establish a fund to self-insurance.
- You are shopping for a condo ? Require the syndicate of co-ownership all the relevant documents : report of the evaluation of the condition of the building, report the original finishes of the private parts (from June), insurance policy, settlement of the building (to check the bans), financial balance sheet, prosecution, and, soon, fund of self-insurance.
- If the evaluation reports are more than five years, they are obsolete : it asks when the next will be made. A simple glance to see if they have been written by an expert.
- The real estate brokers should always check the insurance coverage of the condominium building, especially the franchise.