Insurance Bureau of Canada (IBC) held a series of round table discussions across Canada to gather feedback from various stakeholders and get a better understanding of issues that are causing significant increases in insurance premiums across condominiums in Canada and what possible solutions may lie in helping to reduce these costs.

COCOA participated in these discussions and we were happy to provide our feedback.  Among many condo distress emails that we receive, insurance has become the latest topic added to the mix.  We support IBC’s efforts in coming up with possible solutions to this crisis.

Our letter to IBC below outlines some of the most common complaints that we receive and our suggestions.
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Dear Mr. Forgeron, Mr. de Pruis, and IBC Organization,

We thank you for the opportunity to have participated in the above event to speak for condo owners in Alberta and to be able to provide feedback on several issues that exist within the condo industry that may impact insurance rates. Our intent is to assist in identifying some catalysts and provide suggestions that may help insurance companies to craft some new requirements that will see a shift in attitude of condo owners, boards and all stakeholders who depend on condo investment and its future survival.

Our organization receives numerous emails about hardships and distress faced by many Alberta condo owners. We have identified these as our most frequent complaints:

1. No qualifications to be on a condo board which consists of elected fellow condo owners. This can lead to detrimental decisions costing condo corporations thousands or more unexpected and/or unbudgeted dollars.
2. No mandatory disclaimers or “buyer’s info” given to potential condo buyers by banks or lawyers that explain all perils and responsibility of condo ownership – especially potential insurance perils.
3. No regulation of condo boards or managers. Condo Property Act is mostly one sided and owners can only go to court to bring boards into compliance. This is an expensive proposition and many owners simply cannot afford to go to court. A resolution tribunal does not exist in Alberta at this time.
4. No oversight of Condo Property Act. No government body to oversee compliance, no accountability for board actions. Director’s insurance available yet no mandatory education required.  This provides blanket cushion for unscrupulous board members.
5. No oversight of Reserve Fund spending or oversight of following Reserve Fund Plan repairs. Many condo boards spend these funds poorly or incorrectly.
6. No limits to legal fees. Many corporations spend unbudgeted, extremely high amounts on legal fees for frivolous and vexatious lawsuits which have no merit and corporations have no hope of winning.  Currently, boards do not need votes or permissions from ownership to commence lawsuits. Yet when boards lose lawsuits, many owners are upset because they were not given opportunity to object or vote on matters. Litigation commencement is too easy with unlimited dollar amounts.
7. Insurance claims made for repairs where funds are sufficient in Reserve Fund and operating account or where amounts of repairs small enough for corporation to pay and/or split with owner. Not enough efforts are made to negotiate responsibility nor educate owners about insurance obligations and risks.
8. Overall poor communication from management companies to owners about condo news, laws, insurance mitigation suggestions, maintenance information, etc.

Our suggestions to insurance companies and government are as follows:

• To legislate that mandatory education of condo board members becomes a requirement in order to serve on the board (similar to Ontario). Eliminate Director’s insurance if no education is completed.
• Condo managers to be regulated and educated. This is currently planned by the government of Alberta.  RECA (Real Estate Council of Alberta) will be the authority to regulate condo managers.  Approximate timeline of implementation is hoped to be spring 2021.
• All condo buyers to be required to have condo documents reviewed by a lawyer or condo review company prior to purchase. Condo document review companies are common in Alberta and can be regulated or approved by Service Alberta.
• Grading system designed by insurance companies of each condo corporation to supply to banks. For example: If corporation has had 4 claims in 5 years, they receive a 20% score.  Banks can decline all mortgages that are below 40% score.  This is an example only.  Insurance companies can design scoring systems in several ways and provide charts to banks.  Banks will not be able to lend on low scoring buildings and this will be a huge incentive for boards to educate owners and maintain properties better.
• Provide a “no claims” incentive to boards. Similar to #4, if a property has several years of making no claims against their policy, they can receive a discount of 5-10%.
• Upgrade discounts. If a corporation is in the midst of repairs and uses new improved fire safe materials, perhaps insurance companies can also offer discounts for these improvements.
• Impose maximum dollar limits on legal expenses in a condo corporation. Legal expenses can only be commenced by condo board receiving a minimum of 2 legal opinions on same issue/dispute and at least 51% of unit owners approval with a vote in person or in writing. If those two conditions not met, litigation cannot proceed. If litigation proceeds without meeting above criteria, insurance rates to increase by 5-10%.  A scoring system on legal expenses should also be established by insurance providers.  Condo corporations with high legal and unbudgeted expenses will show low scores and vice versa for low or no legal expenses.
• Condo buyer education prior to purchase of a condo can be a huge determinant of future outcomes. Insurance and condo financial management information can be made into a brochure or pamphlet that a realtor, banker or lawyer can include with the purchase contract prior to closing.
• Government of Alberta to include condominiums in Consumer Protection Act. Currently not.
• Education, education, education.

We believe that increasing insurance rates are no sudden occurrence.  The deterioration of properties, delayed maintenance, natural disasters, reserve fund depletions, lack of government oversight and other factors have brought us here.

We are greatly concerned that some condo corporations are not able to obtain insurance coverage and in some cases premiums have increased astronomically.  This will mean potentially some owners will declare bankruptcy and some owners will not be able to sell their units.

Our hope is that with this feedback and added voice of Insurance Bureau of Canada, that the Alberta government will realize that condominiums cannot continue to be sold on a basis that is riskier than the stock market.  Condominiums are often purchased by students, single parents, seniors and other segments where entire life savings are invested.  These investments deserve stronger legal protections.

Sincerely,

Shelly MacMillan
President, Condo Owners Council of Alberta
Without Prejudice