Building insurance

The Law and the overwhelming majority of declarations of co-ownership require that syndicates of co-owners insure their building. This may seem surprising at first glance as the syndicate does not own the private portions nor the common portions. However, its main object is to ensure the preservation and the longevity of the building and to manage and administer it diligently following rules of the trade. This is why the legislator has given to the syndicate an insurable interest and has made it compulsory that it subscribe building insurance.

The Risks Covered

The insurance must cover the common portions, the private portions (excluding the improvements carried therein), and the syndicate’s movable property. The insurance should be taken in the name of the Syndicate who will appear therein as the named insured. You must keep in mind that neither the co-owners nor their hypothecary creditors are the insured in this case. As for the improvements made to the private portions, it is the duty of each co-owner to protect them, by the means of their own insurance, including those that he or a previous owner may have made.

Reference unit

In addition, article 1070 of the Civil Code of Québec was amended in June 2018. Henceforth,it has a third sub-paragraph providing that "In addition, the syndicate keeps at the disposal of the co-owners a description of the private portions that is sufficiently precise to allow any improvements made by co-owners to be identified. The same description may be valid for two or more portions having the same characteristics.” This description, will serve as the reference unit. It must be filed in the register of the co-ownership, so that the co-owners requesting it may consult it. Remember that this new paragraph is directly related to the obligation to insure the entire immovable, including the private portions, to the exclusion of any improvements that would have been made therein (pursuant to article 1073 of the Civil Code of Quebec).

This new provision came into force on December 13, 2018, for co-ownerships established as of June 13, 2018. Those created before that date are not governed by it yet. They will be so governed on June 13, 2020.

For co-owners' syndicates that have neglected to produce this description, it is in their interest to do so now, because in the event of a disaster, there can be serious consequences. Section 1073 C.C.Q. (which comes into force on April 15, 2021) has been amended to indicate, among other things, that improvements made by a co-owner are excluded from syndicate insurance, " where they can be identified in relation to the description of that portion." 

Risks covered

Since 1994, article 1073 C.c.Q. provided that the union must take out insurance " against ordinary risks, such as fire and theft ", without specifying all the risks to be covered by this insurance. This problem was generally solved by taking out "all-risk" insurance, but the legislator saw fit to specify which risks must be minimally covered, as well as how to exclude some of them.

Section 1073 C.c.Q. was therefore amended by removing, in the first paragraph, the words "such as theft and fire" and by adding, in the last paragraph: " an insurance contract entered into by a syndicate covers, by operation of law, at least the risks prescribed by government regulation, unless the policy or a rider sets out, expressly and in clearly legible characters, which of those risks are excluded..."  »

This amendment adds a formal obligation for insurers to cover a certain number of risks, unless they are excluded by clearly identifying them with the syndicate, in a rider in clear (typographical) characters, in the insurance policy or in an amendment.

Section 4 of the Regulation provides that the risks that a property insurance contract taken out by the syndicate must cover are: "theft, fire, lightning, storms, hail, explosions, water leak damage, sewer backup and overflows from appliances connected to water distribution piping within the building, strikes, riots or civil disturbances, the impact of an aircraft or vehicle, and vandalism or malicious acts"

This article took effect on April 15, 2021. However, for syndicates that have already taken out property insurance in force on April 15, 2021, the obligation will only apply from the renewal of the insurance policy if the renewal takes place within 12 months following April 15, 2021. If the expiry of the insurance policy occurs after April 15, 2022, the requirements of section 4 of the Regulation will apply as of the latter date.

In addition, only accidental claims will be covered. This protects against the damaging consequences of unpredictable, sudden and random events. Non-accidental damages are not usually covered by the insurer. Nor does it cover losses resulting from a defect inherent in the property, such as a latent defect or a defect in workmanship of the building. The same is true for damages resulting from a chronic lack of maintenance of the common areas by the syndicate. The syndicate must therefore ensure that they are rigorously maintained, since the insurer will not do so in its place.

Replacement (Reconstruction) Value

Since the reform of the Civil Code of Quebec in 1994, the law required the syndicate to take out insurance covering the "replacement value" of the building. In order to avoid ambiguity, the legislator now requires the syndicate, since April 15^th, 2021, (or subsequently if insurance coverage expires after that date), to take out insurance covering the "reconstruction cost" of the building. This corresponds to the amount that would have to be paid to rebuild the entire building, in the event of a total loss, regardless of its state of disrepair. This reconstruction value must consider the cost of demolition, professional fees, such as those of the engineer or architect, the cost of retrofitting the building up to standard, usage and best practices, as well as applicable taxes (GST and QST). When taking out a policy, the damage insurance broker or agent will ask the Board of Directors for insurance required to ensure adequate coverage.

Required amount of coverage

To benefit from lower premiums, Boards of directors sometime have the tendency to underestimate voluntarily or involuntarily the value of their building. Failing to insure the immovable for its replacement value (of reconstruction) the amount paid out from the insurance may not be sufficient to cover rebuilding costs in the event of a total or partial loss. If a total loss occurs, the insurer is released by the payment of the amount of the insurance subscribed. If there is a partial loss, the indemnity will be calculated in accordance with the proportional rule. The directors of the syndicate could then engage the liability of the syndicate, and even be held personally liable. 

To counteract this, the law provides that from now on, all syndicates must have the reconstruction value assessed for insurance purposes by a professional. The reconstruction value must be assessed at least every five years by a Chartered Appraiser, member in good standing of the “Ordre des évaluateurs agréés du Québec (OEAQ)” (the Québec Order of Chartered Appraisers). This obligation took effect on April 15, 2021. Thus, with respect to a co-ownership for which the evaluation was carried out in the four years preceding April 15^th, 2020, by a chartered appraiser, the syndicate will have five years following the date of this evaluation to have a new one carried out (Section 3 of the regulation).

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WHAT YOU SHOULD KNOW! The Government of Quebec published in the Gazette officielle du Québec, on April 15, 2020, a regulation on divided co-ownership insurance, which specifies the terms and dates of entry into force of some of the provisions introduced by the bill. 141, in June 2018.

WHAT TO KEEP IN MIND: The Syndicate's insurance policy must provide, in all circumstances, for a waiver of any prospective recourse in subrogation against the co-owners, the persons who are a member of a co-owner’s household, the directors, the manager, the president and the secretary of the meeting of co-owners and the other persons responsible for its efficient progress. Since December 13, 2018, such subrogatory recourse of the Syndicate's insurer is legally excluded, except for bodily injury or moral damage or prejudice due to intentional fault or gross fault.

WARNING! While purchasing the syndicate’s insurance coverage, the Board of Directors must declare any and all information likely to influence an insurer in determining the insurance premium, the appraisal of the risk or the decision to cover. If he fails to provide all relevant information to the insurer, the syndicate may be held liable for a denial of coverage or a reduced indemnity following a claim.

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