3 Common Issues Condo Boards In Alberta Face [+How to Solve Them]
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.
Table of Contents
Understanding and obtaining Condo Corporation’s insurance
Building maintenance and getting work done (especially during COVID)
Understanding the financial position of the Condo Corporation
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1. Understanding and obtaining Condo Corporation’s insurance
Over the past 18-months, the insurance industry has seen extreme fluctuations in rates and deductibles, and Condo Corporations have been having 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 the GTA, old condos are not the only ones who might be assessed for additional risks. With the unprecedented spike in the home-seeking population, the rush to build new condominiums are 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:
1.1. Understanding the needs and options for your community.
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?
(A) Natural Disaster & Destruction coverage
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 causes to be insured against include:
- Fire and/or leakage from fire protective equipment
- Explosion of natural, coal or manufactured gas
- Water damage caused by flood
- Water damage caused by sewer back-up or the sudden and accidental escape of water or steam from within a plumbing, heating, sprinkler or air conditioning system or a domestic appliance that is located within an insured building
- Impact by aircraft, spacecraft, watercraft, and land vehicles
- Riot, vandalism, or malicious acts (other than vandalism or malicious acts caused by an owner, occupant or tenant to the unit) and
- Any other causes as required by the condominium by-laws.
(B) Directors’ and Officers’ (D&O) Liability coverage.
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!
1.2. Checking for excess replacement
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 it 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 on 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.
1.3. Having the ability to top up your deductible
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.
1.4. Condo vs Individual Policy
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 premise, 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 a 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 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 in your building to manage any risks.
Here are some quick and easy tips for your Condo Board:
- Confirm that Owners know where the water shut-offs are in their units. This will allow them to quickly turn off the water if there is ever a leak in your building.
- Remind Owners to be fully attentive to running water or heat. As advised by our Insurance Provider, it is important to avoid using the dishwasher or washer when you are not home to monitor it. This also goes for pots and pans on cooking elements. It takes very little smoke to ensue to set off the sprinkler system. Once the sprinkler system is activated, it will cause large amounts of damage to your building. Worse yet, a large fire to break out, destroying the entire building.
- Check that all units use braided steel hoses. This will help reduce the risk of water damage in your building as faulty rubber hoses that are stored in tight areas often cause significant damage.
- Suggest that Owners use the proper type of soap. Using the correct types of soap can prevent blockage in pipes caused by dishwashers, washers and laundry machines.
- Communicate rules for in-suite activities that may pose as fire hazards. This includes any activities such as barbeques on the balcony to heating equipment throughout the building.
Note: According to BFL Canada, throwing cigarette butts in planters also serves as a common cause for many fires.
- Remind Owners to avoid dumping cat litter in the toilet. You read that right! While the toilet is a convenient place to discard cat litter, it is one of the most damaging. As cat litter mixes with water, it turns into concrete (crafty…yet dangerous). On the topic of things that should not be flushed down the toilet, Owners should be advised against dumping “flushable” wipes into the toilet as well, as they are never actually flushable. This has been a common problem in-suite and in building stacks.
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 a 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 it, 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 where 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 in keeping informed and being able to help educate our clients.
2. Building maintenance and getting work done (especially during COVID)
During COVID, the Condo Board must continue building maintenance as usual – especially when it comes to getting work done in common areas. But as physical distancing continues, some Boards have asked Owners to defer in-suite work – minimizing the safety risks of their community.
Some of our clients at Tribe have found that trades (such as security) have been too busy to assist with building maintenance, and some have been unwilling to work given the current conditions. Remember we are in new territory that requires kindness and patience as everyone determines their personal safety and comfort levels.
But before we get into it, let’s recognize the difference between what work falls into the hands of the Condo Board, and what work falls into the hands of Owners. You don’t want to be funding projects that aren’t your responsibility.
Common area work is the responsibility of the Condo Corporation.
This includes areas such as the lobby, hallways, elevators and recreational amenities.
In-suite work is the responsibility of Owners.
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 during COVID, 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, make sure your Condo Board include the following:
- When maintenance will occur. This will provide Owners and Residents with a notice of when they should be anticipating more people, equipment and noises in the building. It’s better to give them a warning in advance than to have them surprised at the time of crews arriving.
- Where maintenance will take place. This dictates which areas will be set as “off-limits” and which areas should be avoided or approached with more caution. Remember, physical distancing is still expected.
- Frequency that maintenance will happen. This will prepare your community for projects that may take place over a period of time. You want to be clear about establishing the frequency right away, so Owners and Residents don’t file complaints telling you that they weren’t aware.
During this time, you may also be wondering:
Should I get work done?
As we continue to move through the phases of Alberta’s Restart Plan, it is important to exercise continued safety. While postponing mandatory maintenance and repairs isn’t encouraged because it could impact warranty, extra precautions must be made. If you have a Property Manager, speak with them to establish a plan that fits the needs of your community.
How can I reopen conversations about allowing maintenance and repair crews into my building?
As with non-COVID times, communication is key. The most important thing to do is to keep everyone informed of your maintenance calendar, and let Owners be in-the-know for some of the impacts COVID-19 might have on fees.
For example, one of the most pressing projects for condo corporation right now is the maintenance and modernization of elevators. With COVID-19 restrictions in place that reduce the number of passengers allowed per elevator ride much-needed elevator repairs may not be possible. In the case of an outage, the costs can get hefty because the building may need to get someone out immediately, regardless of time of day or if its on the weekends. The building could pay large sums in overtime costs.
This could be a great grievance for many Owners and tenants. Imagine now, another elevator being shut down for repair! It is crucial that everyone knows ahead of time regarding such arrangements, so they know what to expect and can plan their movements accordingly.
What can I do to support at-risk groups in my community?
At Tribe, our Condo Boards and owners use our Tribe Home platform to stay connected. One of the features of this Property Management tool is Messages.
Using the Messages section in Tribe Home, you can communicate with neighbours and members of your community. This secure and easy-to-use feature helps give your community an efficient way to send private messages and reach out to your neighbours to talk about what matters most.
While COVID may require your community to make additional considerations, building maintenance and repairs must continue as usual. At Tribe, we too, have continued our service delivery during this time – establishing additional protocols to keep our clients and staff safe.
In fact, we recently conducted a Client Survey with our communities, and we are happy to share that 80% of our Condo Board members agreed that their needs have been fully met during the period of COVID. Additionally, 83% of our clients said they were satisfied with the current service levels from Tribe.
We love hearing that!
3. Understanding the financial position of the Condo Corporation
Financials serve as the backbone to 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 relay include:
- Does my Property Manager meet with the accounting team regularly to discuss our financials?
- Do I know to whom I should turn to address my financial concerns?
- Have I run through my financials with the Property Management company to check that I understand them?
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 that you should make sure your Property Manager follows as well.
Reviewing financial information.
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.
Encouraging clients to ask questions early.
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.
Promoting financial transparency.
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.
Keeping everything in a safe place.
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 meetings minutes. You can adjust the privacy settings on each folder – making it safe, secure and all in one place.
Like 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 maintain 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.
Conclusion: We’re here to help!
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.
Being a part of the Board comes with a lot of responsibility but know that 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.
4. Hosting remote Board meetings
Due to COVID-19, the world has taken a closer step towards going digital. Many businesses and educational institutions have moved online, and the condo world is no exception.
While we continue to monitor the situation, 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 Council.
Although our team at Tribe is slowly working towards returning to in-person Board meetings, it may take a while until we can make the full transition. For us, it’s all about keeping our communities safe – meaning that both our clients and Community Managers feel protected and comfortable.
We’re flexible with our method of remote meeting delivery and prefer to find a medium where everyone feels comfortable! We love to hear how open our communities are with exploring online meetings – in fact, during a recent survey of our clients, 60% of them said they would consider virtual meetings even after the pandemic.