Insurance Red Flags in a Condo File
Insurance rarely comes up when a buyer reads a condo file. It should. A building with an insurance problem pays for it the same way as a building with a weak contingency fund: through a special assessment or a jump in condo fees, often within a year or two. The signals are in the documents your buyer is already reviewing.
How an insurance problem becomes your buyer's cost
The syndicate insures the whole building, private portions included (art. 1073). When there is a loss, the syndicate pays the deductible from its self-insurance fund (fonds d'autoassurance), which since April 15, 2022 must be built up toward the highest deductible in the policy (art. 1071.1). Whatever the fund and the insurer don't cover is shared by the co-owners according to their relative value.
That leaves three ways the cost reaches your buyer:
- A deductible the fund can't cover.
- A claim the insurer refuses, so the syndicate pays the whole repair.
- A renewal at a much higher premium or deductible, which shows up in the next budget.
Five signals in the file
1. Deductibles far above the self-insurance fund
Compare the highest deductible in the policy, often the one for water damage, with the balance of the self-insurance fund in the financial statements. A $50,000 deductible against a $10,000 fund means one claim away from a special assessment. For a unit with a relative value of 4.6%, the missing $40,000 is about $1,840.
2. Repeated water damage claims
Look for deductibles paid and repairs after a loss, in the minutes and the financial statements. One claim is bad luck. Several in a few years usually point to a building problem, such as aging plumbing, risers or a roof, and insurers respond with higher premiums and deductibles.
3. A claim that is open, disputed or refused
This is the most serious. Policies exclude wear and lack of maintenance, so a claim for water that came through a worn-out roof or a corroded pipe can be refused, and the syndicate then pays the whole repair, not just the deductible. Watch the minutes for words like refusal, dispute, adjuster, or "the insurer's position", and for repairs the board says it will fund itself.
4. Trouble renewing
A change of insurer, a sharp increase in the premium, a new or much higher water damage deductible, or minutes where the board or its insurance broker reports difficulty placing coverage. Each one tends to arrive in the next budget as higher fees, and difficulty renewing can also make lenders more cautious.
5. Postponed work and claims in the same place
A roof the minutes keep postponing, next to a water damage claim on the top floor, is the setup for signal 3. Compare the contingency fund study with the claims: when the same component appears in both, the next claim may not be covered.
What to do with each
Ask in writing. Send the syndicate, through the seller, specific questions: the current deductibles, the balance of the self-insurance fund, any claim made in the last five years and its status, any claim refused or disputed, and the renewal date and any change in premium or deductible at the last renewal. Written answers protect your buyer and you, as our article on the broker's duty of diligence shows.
Get the documents. The insurance policy or the insurer's certificate, the financial statements with the self-insurance fund, and the minutes of both the co-owners' meetings and the board. These can all be covered by the review condition in the promise to purchase, provided it lists them. Our article on the document review condition explains how.
Put a number on it. A shortfall in the self-insurance fund, or a repair the syndicate is paying without its insurer, is a cost with a dollar amount. Multiply it by the unit's relative value, as you would for any special assessment. That gives your buyer a documented reason to revisit the price, or to walk away within the condition's time period.
Don't diagnose. Whether a claim should have been covered is a question for the syndicate, its insurer and sometimes a lawyer. Your job is to find the signal, ask the question, and make sure your buyer decides with the answer in hand.
For your client
One part of this is your buyer's own insurance, and it is worth a line in your advice. If a leak starts in their unit after they move in, the syndicate can claim the deductible from them (art. 1074.2). A short note you can adapt:
The building's insurance has a deductible of [amount] for water damage. If a leak ever starts in your unit, the syndicate can ask you to pay it. Before the deed, ask your insurer to confirm that your co-owner policy covers a deductible claimed by the syndicate, up to at least that amount, along with your civil liability and any improvements to the unit.
Co-owners must carry civil liability insurance of at least $1 million, or $2 million in a building of 13 units or more (CCQ, r. 4.1). The coverage advice itself is the insurer's to give.
Checklist
- Highest deductible against the self-insurance fund.
- Claims and deductibles paid in the last few years, from the minutes and the financial statements.
- Any claim open, disputed or refused, and any repair the syndicate is paying itself.
- The last renewal: insurer, premium, deductibles, and any difficulty placing coverage.
- Postponed work on components that also show up in claims.
- Written answers from the syndicate, and a number for any cost you find.
- A note to your buyer with the building's water damage deductible.
Sources
Read the whole file, not one document.
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This article is for general information only and is not legal advice.
This article was written with the help of AI tools, then reviewed and checked against the laws, regulations and decisions it cites by the Quotepart team.