January 2016
You have just moved into a new condo. All suites have nice floors, cabinets and other amenities. All is good.
Ten years later many of the original finishings are dated. Perhaps you have installed new kitchen cabinets, hardwood flooring and other lifestyle features. In total you may have invested upwards of $50,000. Your friend who bought in the same building at the same time has not updated the interior so it looks as it did when purchased.
Soon after there is significant water leak that damaged both suites. It costs $50,000 to repair your suite but less than half that to repair your friend’s suite.
The purpose of a Standard Unit By-law is to clarify what is covered under the corporation’s insurance policy when a loss becomes an insurable event.
It is estimated that 80% of registered residential condominiums have a standard unit by-law. Those that do not have such a by-law can experience delays in claims settlements as insurance adjusters attempt to identify original builder specifications and place a value on the loss. This is a growing problem for condo corporations which must often prove the loss and original building standard. This problem increases as a building ages.
The Condo Act states that anything in the unit prior to its registration is the responsibility of the corporation to insure. Without a Standard Unit By-law, using the above scenario, one owner’s choice to upgrade would have given them $50,000 in insurance coverage while another owner receives substantially less. Both are making identical payments for insurance through their monthly fees.
As condos age many are resold and new owners implement upgrades to their liking. Over time some condo suites are upgraded while others remain as they were when first built. As with the above example, these upgraded condo suites and their owners can disproportionately benefit in the event of an insurance claim.
Instituting a Standard Unit By-law helps to maintain fairness by defining the standard unit in an identical way for all suites. The by-law eliminates the obligation of the condo corporation to be responsible for improvements in condo suites and to shift this responsibility to the suite owner’s insurance policy.
All owners are provided with a clear understanding of the value and coverage assumed by the condo corporation’s insurance policy. Condo owners are better able to identify what are improvements in their condo, even if done prior to ownership, for their personal insurance.
The Standard Unit By-law, once implemented, allows the condo corporation to manage claims made with respect to upgrades. This includes items such as floor coverings which can be a large percentage of claims impacting on premiums and deductibles for the corporation’s insurance policy.
Corporations that have implemented a Standard Unit By-law are likely to find a reduction in the frequency of claims and their value.
Reduction in the number of claims for the condo corporation and a lower insurable value per claim is a savings for all condo owners.
