The Association Québécoise des Gestionnaires de Copropriétés (AQGC) is calling on the Quebec government to change co-ownership rules in the condo sector, which are allowing insurers to refuse to compensate when a loss emanates from their insured units.
Since Article 1074.2 of the Civil Code of Québec came into force on December 13, 2018, the AQRC says that the community of co-owners have been paying for restoration work of affected private and common areas with “little hope” of being compensated by the insurer of the co-owner who is actually responsible for the loss.
Quebec’s Ministry of Finance recently proposed a regulation to cap the contribution to the self-insurance fund at $100,000. The AQGC says this solution will be of little use to a vast majority of condominiums in the province.
“Let us remember that this new self-insurance fund must be used by syndicates to provide sufficient liquidity to pay the amounts of insurance deductibles for all claims that the individual insurers of the co-owners refuse to assume following the legislative change put in place in December 2018,” the AQRC recently stated. “This self-insurance fund could indeed be reduced if we returned to a successful insurance plan. Until then, whether we cap the contribution to this fund at $100,000 or not, in the end it will always be the co-owners who will pay the bill.”
To resolve the situation, the AQRC suggests:
- Mandatory inspection on Quebec construction sites to limit the costly deficiencies affected by too many buildings, including many hidden defects;
- Guaranty plans be more effective to save condominium syndicates from long and costly legal proceedings;
- Correcting the wording in article 1074.2 C.c.Q. which remains poorly formulated and causes many disputes. Insurers of co-owners systematically refuse, since 2018, to compensate co-ownership claims caused by their insureds.
Meanwhile there aren’t enough insurers who want to insure buildings. As the AQRC states, “insurers have continued to withdraw from the condominium sector, further reducing choice in the market.”
Syndicate insurance premiums and deductibles, up to $500,000, also continue to rise, although risks are reduced due to these same higher deductibles and self-insurance funds. This new system is causing a “moral hazard” to the detriment of the community of co-owners, As AQRC further states, “syndicates are obliged to make reparation for the damage caused to the building, with no guarantee of compensation other than by undertaking lengthy and costly legal proceedings.
“Co-owners have limited ability to pay and are currently besieged on all sides by the significant increases in condominium fees that result from the obligations provided for in the many bills that have come into force since 2020 (Bills 16, 141, 41, etc.),” the AQRC added. “The dysfunction of the insurance sector is too much to take, and a major financial irritant that must be resolved quickly.”