By Craig Robson, LL.B., ACCI and Michael Clifton, M.A., LL.B.
We are frequently asked questions by condominium boards and managers that indicate confusion about how to determine whether the condominium or the unit owner is responsible when damage occurs to units. There is frequently confusion as to whose insurance should be used and who is responsible to have the repairs done. It is not always the same party that bears these obligations.
A key point to remember is that insurance obligations and the obligation to repair after damage under the Condominium Act, 1998 (the “Act”) and declaration of the condominium are not the same>. Nor is the obligation to insure in any way dependent on and it has no bearing on who has the obligation to repair after damage. These points apply whether the damage is to part of the unit or to the common elements.
This article sets out the basic obligations in the Act and provides a series of questions to go through each time damage occurs that should help in most situations determining who is responsible for what.
Under the Act, in all standard, phased and leasehold condominiums, the condominium is responsible to insure standard units and common elements against “major perils” and other perils defined in the declaration or by-laws of the corporation (s. 99). The Condominium does not insure improvements (as defined by reference to the “standard unit”).
What section 99(1)of the Act actually says is that the condominium shall insure “the unit”. However, section 99(4) indicates that does not include insurance for any improvements to the unit. What constitutes an improvement is to be determined by reference to the standard unit definition for the condominium (section 99(5)). [Note – you can see the importance of having a standard unit definition in place. Without it, the condominium must insure the whole unit.]
If the Unit Owner wants to insure the unit improvements the Unit Owner is free to do so, but is not required to do so by the Act.
As noted, the above basic insurance obligations apply to standard, phased and leasehold condominium corporations.
Pursuant to section 159(2) of the Act, vacant land condominium corporations are exempt from the section 99 requirement to carry insurance coverage with respect to buildings and structures that are located on a unit. In this case, the unit owner is required by the Act to carry such insurance. This does not exempt the vacant land condominium corporation from having insurance coverage for the units and common elements; however, the units are insured by the condominium as if vacant.
Also, as might be obvious but nevertheless bears mentioning, a common elements condominium corporation is not required by the Act to carry insurance coverage for units. Section 144(3) of the Act states, “References to a unit in sections 99 to 105 shall be deemed not to apply to a common elements condominium corporation.” However, those sections will still apply in reference to the common elements of a common elements condominium.
Under the Act:
“Repair after Damage” means to repair and replace after damage or failure. With respect to repair after failure, it is not relevant why something has failed. Even if an item has failed because of wear and tear it’s repair or replacement thereafter is defined as “repair after damage” even though there may not have been any actual damage but merely failure. Like the condominium’s obligation to insure, the obligation to repair a unit after damage is limited to the standard unit, if defined.
"Maintain” includes the obligation to repair after wear and tear, but not to “repair after damage”.
According to the Act, the Condominium must maintain the common elements and repair after damage both the common elements and units. The Act requires the unit owner to maintain the unit.
However the Act allows some (not all) of these obligations to be changed in the declaration of the condominium. Only the following changes are permitted:
The declaration cannot change the obligation to repair after damage the non exclusive use common elements. The Condominium is always the only party responsible for that. Any provision in a declaration which purports to change this obligation is unenforceable.
The cause of damage is not relevant to: (A) who is responsible to insure the damaged item; or (B) who is responsible to repair the damaged item. The cause of damage may give rise to claims by insurers or injured parties seeking compensation for their costs incurred in insuring and/or repairing the damage.
The following steps indicate the key questions you should ask when damage occurs to determine whose insurance is responsible:
1. Is the damaged item part of the Unit or Common Elements?
(Check the Unit Boundaries description in the Declaration – this should be Schedule C in declarations registered under the Act – and the Description Plans of the Condominium.)
a. If Common Elements,
i. Is it Exclusive Use Common Element ?
(To qualify as an exclusive use common element, the item must be shown as such on the Exclusive Use sheet(s) of the condominium description plans and should be listed in a schedule to the declaration.)
1. If the damaged item is Common element but not Exclusive Use Common Element,
a. the Condominium has the obligation to Repair after Damage and
b. the Condominium insures the Repair.
2. If the damaged item is Exclusive Use Common Element,
a. check the declaration and Act to confirm who has the obligation to Repair after Damage, and
b. the Condominium insures the Repair regardless of who has the obligation to Repair after Damage.
b. If Unit,
i. Does the condominium have a Standard Unit Definition in place?
(Check the by-laws of the condominium.)
1. If there is no standard unit definition[1],
a. check the declaration to confirm who has the obligation to Repair the Unit after Damage[2], and
b. the Condominium insures the Repair (regardless of who has the obligation to Repair after Damage).
2. If there is a standard unit definition, is the damaged item part of the Standard Unit or Improvement?
a. if Improvement,
i. the Unit Owner has the responsibility to Repair after Damage, and
ii. the Unit Owner insures the Repair.
b. if Standard Unit,
i. check the declaration and Act to confirm who has the obligation to Repair after Damage, and
ii. the Condominium insures the Repair (regardless of who has the obligation to Repair after Damage).
Where the Condominium has the obligation to insure the damaged item, the board must determine whether a claim will be made to the condominium insurer.
The condominium may choose not to put the claim through insurance because of expected increased premium costs or possible loss of insurance or simply because the cost of repairing the damage may be less than or equal to the deductible on the condominium’s insurance policy.
Where a damage claim is processed through the condominium’s insurance, the deductible is a Common Expense and paid by the condominium unless the bylaws of the condominium clearly make the deductible the responsibility of the unit owner in the circumstances or unless the provisions of Section 105 (2) are applicable.
Section 105 (2) states:
If an owner, a lessee of an owner or a person residing in the owner's Unit with the permission or knowledge of the owner through an act or omission causes damage to the owner's Unit, the amount that is the lesser of the cost of repairing the damage and the deductible limit of the insurance policy obtained by the corporation shall be added to the common expenses payable for the owner's Unit.
This section has only limited application, requiring the unit owner to be responsible for the deductible (or the cost of the repair up to the deductible amount) if the damage is to the owner’s unit and the owner, lessee of the owner or person residing in the owner’s unit with permission or knowledge of the owner, through an act or omission, causes the damage.
However, section 105(3) permits the condominium in its by-laws to expand the circumstances in which the unit owner will be responsible to pay the deductible with respect to the repair of any damage that the condominium corporation, its directors, officers, agents or employees did not cause.
If the board decides not to process the claim through insurance, and the unit owner is responsible to repair the damage, the condominium must pay the Unit Owner who has suffered the damage the amount such owner would have received had the claim been processed through insurance.
The unit owner may also be entitled to be paid the amount of the deductible (that would have been paid by the condominium if a claim had been processed through the condominium’s insurance), unless the bylaws of the condominium clearly make the deductible the responsibility of the unit owner in the circumstances, or unless the provisions of Section 105 (2) are applicable.
It is essential a condominium does not undertake any repairs that the condominium is not obligated to make, even if the condominium is obligated to insure the damaged item.
If a unit owner is responsible to repair a damaged standard unit the condominium should not effect the repair but simply be involved to be sure:
The claim is not put through insurance if the condominium prefers to pay for the damage out of general funds;
The owner finds out who to contact at the insurers if the claim is to be put through insurance;
The most efficient and cost effective repair is done;
The repair costs covered by the insurance do not include anything over and above damaged standard unit and that any damaged unit improvements are not paid for from the condominium insurance.
Craig Robson and Michael Clifton
Kitchener, Ontario
[1]take steps to have one put in place. If there is no standard unit definition there cannot be any “improvements” because the Act defines improvements in relation to the definition of standard unit. This is not a unit boundary description in the declaration but a definition in the bylaws of the condominium or in rare occasions in a definition turned over by the developer after May 5th 2001.
[2]It is very possible the Unit Owner has the obligation to repair the damaged unit but the condominium has the obligation to insure. This obligation to insure does not somehow or in any way make the condominium responsible to repair damaged unit.