Being on the Board of Directors can feel like a constant juggling act, balancing common area issues with Owner concerns, trades schedules, special projects, insurance claims, fees, fines and financials. Not only does your Board need to be organized with great time management, but you may feel like you need to be a Jack or Jill of all trades!
This is why we are committed to providing you with helpful tips and tools throughout your time on the Board. We’ve prepared some solutions to some of the Board’s most common issues to help you get through the weeds.
Over the past 18 months, the insurance industry has seen extreme fluctuations in rates and deductibles, and Condo Corporations have had to deal with the impact. While it can be hard for us to predict exactly when the market will fully recover, the upward trend of insurance rates points to a low volume of competitors and an increase in natural disaster claims as primary causes of the surging prices.
In fact, BFL Canada’s Market Data Summary indicates that there has been a 30%+ supply reduction in recent months and that this decade (2010-2019) has seen the greatest number of losses as a result of severe weather and natural disasters.
In Calgary, old condos are not the only ones that might be assessed for additional risks. With the unprecedented spike in the home-seeking population, the rush to build new condominiums is suspected of resulting in sub-standard quality workmanship. There are some insurers who apply a Builder’s Risk deductible for this reason and some insurers will decline to quote at all.
For Condo Corporations, this makes identifying what could be driving your deductible and premiums up, and what is required (and what is recommended) as far as insurance policies go, even more important.
Here are some best practices for you and your Condo Board to keep in mind when getting or renewing your Condo Corporation insurance:
In understanding what is required to be insured by the Condo Corporation, we turn to the Condominium Property Act. Specifically, to note section 47:
47 (1) Subject to the regulations, a corporation
(a) where a building is divided into units, shall place and maintain insurance on the units, other than improvements made to the units by the owners, and the common property against loss resulting from destruction or damage caused by any peril prescribed by or otherwise required by the regulations to be insured against,
(b) where a parcel is divided into bare land units, shall place and maintain insurance on the common property against loss resulting from destruction or damage caused by any peril prescribed by or otherwise required by the regulations to be insured against,
(c) shall, if required to do so by bylaw, place and maintain insurance on the improvements made to the units by the owners against loss resulting from destruction or damage caused by any peril prescribed by or otherwise required by the regulations to be insured against, and
(d) may place and maintain insurance on the units and the common property, or either of them, against additional perils other than those required to be insured against under clauses (a), (b) and (c), and for that purpose the corporation has an insurable interest in the units and the common property.
So, what are some common areas where insurance coverage needs to be considered?
Quoting Condo Law for Albertans, a Condo Corporation must minimally insure to the replacement value of the property against losses caused by destruction or damage. To clarify, under Section 62.5 in the Condo Regulations, it is stated that the Condo Corporation must carry a full limit coverage for their reserve fund.
Examples of common damages and destruction cause to be insured against include:
D&O coverage is required by the Condominium Property Act, under section 47.7. D&O coverage helps protect claims filed against Board Members, Officers of the Corporation, and governing figures such as Property Managers.
Although this is not specified under the act, some Condo By-Laws may indicate that any property registered as a Condo Corporation MUST carry a minimum of $1 Million D&O Liability coverage regardless of the number of owners. If you’re unsure of how much coverage your property has, make sure to clarify!
While your insurance policy must cover the full replacement value of assets on your property, there may be situations where your insurance limit does not meet the costs associated with the damages. Whether this price difference will need to be paid out of pocket or if will be covered by your insurance company depends on your insurance policy.
The first step to understanding which option is best for you is to get an appraisal of your building. From here, it’s time to start exploring your options with excess replacement:
Extended Replacement Cost – Prior to the market correction, insurance companies have offered close to a 130% Extended Replacement Cost – meaning that if your building was appraised for $10M, and it was burned to the ground, you would be covered for $13M. However, as the market continues to harden – with demand increasing, and supply decreasing – it has become more common for insurance companies to move towards a 110% Extended Replacement Clause, covering only $11M of the aforementioned building.
Note: In addition to the decrease of the Extended Replacement Clause, the coverage of the insurance has also been reduced. Now, excess replacement typically covers only certain major perils such as a fire.
Stated Amount – With a Stated Amount policy (which the industry has continually moved towards), you will only be covered for the value of your appraisal. This means that if your $10M building was burned to the ground, and costs ended up being $10.5M, you would have to pay the $500K out of pocket.
With the industry continuing to stay in a hard market (for the meantime), insurers have had to overcorrect it by reducing the Extended Replacement Cost as a minimum requirement. Without these changes, they would not have the capacity to insure everyone.
This is an option that has been recently introduced to our team at Tribe by one of our insurance providers, BFL Canada. Having deductible top-up coverage means that you can increase the deductible amount in your community by adding onto your existing insurance policy.
How it works: If your Condo Corporation currently has a deductible of $250K and your maximum coverage for deductible assessment is $100K, purchasing the $150K short fall will allow your community to gain a total coverage of $250K.
This can help you reduce the financial shock to your community. The best part? You can stay with your insurance provider while shopping around for alternative options.
With all these different options to consider, it’s best to work with your insurance broker to find the plan that is right for you. You can invite your broker to attend an in-person or virtual Condo Board of Directors meeting to explore these options and have it explained by a true expert in the industry.
A common question we hear about condo insurance is: “What does Condo Corporation Policy cover and what does Individual Policy cover?”
According to BFL Canada:
Condo Corporation Policy covers all property within property boundaries. This includes “common property, common assets and buildings” as shown on condo plans. Condo Corporation Policy insures both original fixtures that were placed at the time of construction as well as “new additions, extensions, attachments and services” when included in the appraisal (subject to policy exclusion).
Individual Policy covers all items on personal property (that are in a unit or storage locker on-premise), additional living expenses (that may arise in the event of an insured loss), betterment & improvements (such as renovations), condo deductible assessments (to cover losses and damages) and personal liability (for injury).
Note: As BFL states, most policies cover personal property even if it is temporarily taken off condo premises, such as when travelling on vacation. In most cases, this includes personal liability as well.
Per Section 47.6 of the Condominium Property Act, in the case of destruction or damage resulting in loss, the Condo Policy is deemed to be first loss insurance, and the insurance placed by the owner of a unit in respect to the same property that is insured by the Corporation is deemed to be excess insurance. The Act confirms the Corporation is primary to respond to resulting damage to property they insure. See below:
(6) Notwithstanding the Insurance Act or any policy of insurance, if insurance is placed by a corporation and an owner against the loss resulting from the destruction of or damage to the units or the common property,
(a) the insurance placed by the corporation is deemed to be first-loss insurance, and
(b) the insurance placed by the owner of a unit in respect of the same property that is insured by the corporation is deemed to be excess insurance.
What this means is regardless of fault and the cause of the loss, the Corporation has a duty to respond to the resulting damages (excluding betterments and improvements in some cases). Once the repairs are concluded and the Corporation has paid for the invoicing, we would review the Act and Bylaws to confirm if up to the applicable costs/ deductible can be charged back to a unit owner.
Confused? You’re not alone. As of June 20, 2020, the Condominium Property Act added that all condo corporations must provide a Standard Insurable Unit Description (SIUD) to their insurance providers and all unit owners to draw the lines clearly, indicating what the corporation will cover, and what will be the responsibility of Owners. Read more about the SIUD and how to create one on the Alberta Government’s Publications page here.
Once you’ve decided on the plan that is best for your community, it’s important to work with the Owners of your building to manage any risks.
Here are some quick and easy tips for your Condo Board:
Note: According to BFL Canada, throwing cigarette butts in planters also serves as a common cause of many fires.
While these are all ways for your Condo Board and your fellow neighbours to help your community, the government is also doing its part by looking into implementing more regulations to monitor condo risks. This includes asking for potential increased compliance on regular maintenance (for older buildings) and emphasizing the need for Owners to uphold their individual responsibilities to take care of their units.
In fact, as of January 7, 2020, the Insurance Bureau of Canada announced it was engaging a risk manager who can help condo corporations in Alberta identify risks, and provide direct advice on how to address them, in order to better obtain the insurance needed for their properties. Read more about the news here, at the Canadian Underwriter.
If you’re with a Property Management company, your Property Manager can help you work with your current insurance broker to discuss the process of getting Condo Corporation insurance.
Although the past few years have shown increasing rates, we’re confident to say that the market will eventually open up again. With insurers constantly pulling out of and coming into the market, there will come a time when Condo Corporations will be able to receive quotes from multiple providers. However, currently, as of June 2020, we are still in an extremely volatile market that has yet to plateau.
In our experience at Tribe, we’ve stayed in close communication with our Insurance Providers – BFL Canada and Hub International. They’ve kept us up-to-date – educating us on insurance best practices and always recommending ways we can minimize our financial risk. We pride ourselves on keeping informed and being able to help educate our clients.
Is it the responsibility of the Condo Board or the Property Management Company to organize the maintenance of the building? As usual in Property Management, the answer is not all black and white. There are responsibilities that fall under the Owners and then there are other responsibilities that fall under the Condo Board.
Let's take a minute to recognize the responsibilities that fall into the hands of Condo Boards and the Owners.
This includes areas such as the lobby, hallways, elevators and recreational amenities. While it is the responsibility of the Condo Corporation to maintain the common area of a community, they should be aware of possible delays in maintenance due to global supply chain issues.
Read more about these supply chain delays in our blog “How are Supply Chain Issues Affecting Condo Communities?”
This includes anything within the four walls of your unit.
Tip: A good question to ask your fellow Board members is whether your Condo Board is responsible for certain safety features in units. This includes replacing smoke detectors and upgrading rubber hoses to braided steel. For some communities, Condo Boards have transferred these responsibilities to Owners by stating it in the bylaws.
Now to help your Board get work done efficiently, consider creating a detailed maintenance calendar. This will not only help your Condo Board document which projects you will pursue, but also provide you with the information to clearly communicate to your community.
To make an effective calendar, include the following:
Financials serve as the backbone of every Condo Corporation. This means that having a good understanding of the financial position of your community is essential to helping you support your neighbours.
If your Condo Board is working with a Property Management company, your Property Manager is responsible for acting as the middleman in communicating with the accountant and addressing any of your concerns. The accountants almost never report to the client directly. Some helpful questions to ask yourself to ensure you and your Property Manager are aligned, and no financial details get lost in the relay include:
At Tribe, we are dedicated to taking care of the financials of all our communities. We treat them like our own and offer guidance to support our Condo Boards. Here are some of the best practices we follow, and you should make sure your Property Manager follows them as well.
Rather than waiting for invoices to pile up and for mistakes to carry over, we help recognize and address issues as soon as they come up. We prepare financial statements for our clients every month and work with our Board of Directors to ensure they read through the reports and ask about anything they don’t understand.
Knowing how to read financials is not a natural skill that everyone has been born with. The best thing to do if you’re unsure is to ASK. Don’t be afraid to reach out to your Property Manager.
At Tribe, we’re here to help. With our clients, we offer one-on-one calls with our accounting department to help walk through the financials of your community. If you aren’t currently a Tribe client and have questions about your financials, reach out and we’ll be happy to chat with you.
Nothing beats a well-run Condo Corporation like an extra pair of eyes – especially when it comes to financials. You should work with your fellow Board of Directors to ensure that everyone has a similar understanding of your community’s financial position.
Having a secure, yet easy-to-access place to store your community’s financials is key. At Tribe, we provide our clients with a Community Documents section on our Tribe Home Platform to ensure that everything is taken care of.
Community Documents is a section specific to your community where Owners can access files and folders relevant to your building, such as financial statements and meeting minutes. You can adjust the privacy settings on each folder – making it safe, secure and all in one place.
As we mentioned earlier, our accounting department at Tribe is pretty amazing (and we truly mean it). Their mission is to help make sure the Board of Directors understand the financial position of their communities and maintains control of both cash flows and financial assets. They provide clear financial statements, proper banking procedures and trusted advice.
As a Property Management Company, our Managers (which we refer to as “Community Managers”) are happy to serve as trusted advisors to the Condo Board. We listen to the needs of your community and put you in touch with experts on our team to help you gain the knowledge you need – whether it be financials or any other tasks you need help with.
By now, you may have picked up a few useful tricks and tools to help you and your fellow Condo Board members serve your community. Whether it be understanding the many options you can pursue to optimize your insurance policy, establishing a clear plan for building maintenance or learning best practices for managing financials, we hope you feel more supported.
Creating and maintaining a successful Condo Board isn't easy, and it comes with a lot of responsibility, but you aren’t in this alone. It is your Property Management Company’s job to help guide you.
At Tribe, we’re Condominium Management specialists – committed to helping our customers integrate cutting-edge solutions for everyday issues. We strive to build positive long-term relationships and work to provide Community Management with Heart.
If you’re interested in learning more about who we are and how we can help, feel free to get in touch!
We know these three issues aren’t the only challenges Condo Boards face across Alberta, but covering them all in one article would be impossible.
However, here’s one more quick thought before you go. During this pandemic, remote Board meetings have continued to become a “hot topic”, and we want to provide you with some extra help to get you through these difficult times.
In recent times, the world has made major advancements in technology and continues to do so. With the ease of technology, businesses and educational institutions have shifted to going digital, and the condo world is no exception.
At this time, Condo Board meetings may continue to take place remotely if your Board chooses. BILL 53: SERVICE ALBERTA STATUTES (VIRTUAL MEETINGS) AMENDMENT ACT, 2021 allows meetings to be held by electronic means at the option of the Board.
We’re flexible with our method of remote meeting delivery and prefer to find a medium where everyone feels comfortable! We enjoyed hearing how our communities felt about online meetings - in fact, during a survey of Tribe clients, 60% of them said they would consider virtual meetings, which is why our team has adapted to the needs of our clients and continues to offer online council meetings.