Standard Unit By Laws and Insurance: A Tangled Web
“War is peace. Freedom is slavery. Ignorance is strength.” If reading the Repair, Maintenance and Insurance sections of the Ontario Condominium Act and related sections of a condo Declaration and By Law is reminiscent of the contradictions in this iconic quote from George Orwell’s dystopian novel 1984, take heart in knowing you are not alone!
While the main goal of INGSOC’s party slogan in the novel was to distort language and meaning, the authors of the Act certainly didn’t intend to doublespeak but it sure does feel like it!
I will spare you the unschooled lesson in literature; it was never my strongest subject. I, however have spent the most part of a 21 year insurance career dealing almost exclusively in Condominium Insurance and can attest to the tangled web many owners, property managers, and insurance professionals find themselves in while navigating Standard Unit Definitions and By Laws as they relate to insurance and maintenance obligations.
So, what is a Standard Unit Definition and Standard Unit By Law, and what purpose do they serve? The intent of the Standard Unit Definition is to provide owners and the corporation guidance on which components they are responsible for with respect to Repair, Maintenance, and Insurance, when damage occurs within the unit boundaries of a Standard condominium corporation. A Standard Unit By Law is one avenue a corporation can use to implement or change its Standard Unit Definition.
For day-to-day repair and maintenance obligations that are not the subject of insurance, Section 89 (1) of the Act requires the corporation to repair the units and common elements after damage. However, Section 89 (2) states that this obligation shall not include Improvements made to a unit. The corporation may, as they often do, change this obligation to make the owner responsible for day to day repair and maintenance of their unit. Similarly, for insurable damage, Section 99(1) requires the corporation to insure the units and common elements after insurable damage, however, Improvements are NOT part of this obligation. It therefore becomes necessary to clearly define what is anImprovement in this context.
Contrary to the dictionary definition, an Improvement in the context of the language used in the Ontario Condominium Act of 1998 and Declarations of corporations, is anything within the unit boundaries that falls outside the Standard Unit Definition once the corporation has included this definition in its Declaration or Standard Unit By Law. A Betterment is a change made or acquired by an owner, above and beyond the Standard Unit, for example if an owner purchases a unit and rips out hardwood flooring that the previous owner had installed and replaces it with marble floors. The unit owner has the obligation to repair, maintain, and insure the Improvements and Betterments. Note that Common Element and Vacant Land Condos do not have Standard Unit Definitions, and subsequently, no Improvements and Betterments. Repair and maintenance obligations for these units are defined in the Repair and Maintenance sections of the Declaration, and owners of these types of condos are expected to insure their units for the full replacement value, similar to a typical home insurance policy. However, as with Standard Condominium units, it is important for the insurance policies obtained by the owners to include coverage for Deductible Chargebacks, and insurable Loss Assessments ( not to be confused with special assessments for budgetary shortfalls or similar issues) that the corporation can legally pass to the owners.
Some benefits of a clearly defined Standard Unit Definition include:
- Clear guidance on what parts of the unit the corporation and unit owner are responsible for when insurable damage occurs and for daily repair and maintenance
- Makes the claims process quicker and less combative
- Creates a fair and equal approach to handling insurable losses
- Makes it easier to resolve disputes relating to insured losses
- The corporation has a clear description of what it needs to appraise and insure with respect to its obligation to insure the Standard Units
Unfortunately, many corporations especially those registered prior to 2001 when the Act formally became law, do not have a Standard Definition and often find it difficult to pass a Standard Unit By Law, given the requirement that 50% plus 1 of owners must vote in favor for it to pass. For these corporations, insurable losses can be challenging and frustrating to navigate as each party and their insurer try to figure out their respective responsibilities.
So, what can a corporation do, in the event that it doesn’t have a Standard Unit Definition, or if the one in place is unclear or does not meet the needs of the community? Section 56(1) of the Act allows the board to make, amend or repeal by-laws. Prior to doing this, it is highly beneficial to hold information sessions for owners that include a condo lawyer and an insurance professional to help owners understand the importance of a clearly defined Standard Unit Definition, and to address questions and concerns, in advance of a vote.
Please note, this blog post does not constitute legal advice. Always consult with a qualified Condominium Lawyer to help navigate all matters relating to legal obligations of your condominium corporation.
Condominium Practice Leader
Cowan Insurance Group
