Loss Assessment Coverage for Condo Owners in Ontario

Your condo corporation has insurance, so why would you ever be asked for extra money after a loss? Owners often worry about this, especially when they hear about a large uninsured repair or a high deductible.

This article explains how special assessments work in Ontario and what loss assessment coverage is meant to address. It also explains where that coverage's limits are likely to be, so you know what to ask your insurer.

When an owner can be asked for extra money

If a corporation's yearly budget falls short, it may levy a one-time special assessment to cover the shortfall. The CAO says the board can do this without owners' permission. A shortfall can come from an unforeseen repair or a lost court case.

Special assessments are shared by owners in the same percentages used for common expenses, and owners must pay their portion. Each unit's percentage share is fixed by the declaration and is based on unit size, parking space and locker.

Why the reserve fund is not a quick fix

A reserve fund must be used solely for major repair and replacement of the common elements and assets of the corporation. No part of it may be used except for that purpose, so routine operating costs cannot be paid from it.

If the operating budget falls short, a corporation may levy a one-time special assessment to cover the shortfall. A board that is unsure whether an expense can come from the reserve fund should check the component inventory in the reserve fund study and get professional advice.

What loss assessment coverage is meant to do

Whether your own policy includes this kind of coverage, and how it works, depends on the wording of that policy, so it is worth confirming with your insurer or broker.

Because the wording is set by each insurer and policy, you cannot assume it covers every special assessment. Assessments can arise for different reasons, and a given policy may not respond to all of them. Ask your insurer for the exact wording.

Deductibles, chargebacks and liens

Deductibles can range from a few hundred dollars to tens of thousands. Owners are generally responsible for their own deductibles unless they or their guests damage common elements through direct action or negligence. By-laws can extend owner responsibility for the corporation's deductible, including where no one is at fault.

Not paying can have serious consequences. A condo corporation automatically has a lien on a unit if the owner does not pay common expenses, covering the unpaid amount plus interest and reasonable legal costs of collecting. A special assessment that goes unpaid can lead to that lien.

• Owners can pay at any point until the unit is sold, and payment requires the corporation to discharge the lien.
• The CAO advises contacting the corporation promptly because a payment plan may be possible.
• The lien amount can include arrears, later common expenses, interest, legal fees and the cost of preparing the certificate of lien.

What to do next

• Read your policy's loss assessment section, including limits, exclusions and any deductible.
• Ask your broker whether it applies to special assessments for the kinds of losses you worry about.
• Read your by-laws to see whether you could be responsible for the corporation's deductible.
• Ask for the status certificate when buying; it shows the budget, a statement on the reserve fund and any legal issues.
• If you receive an assessment you cannot pay, contact the corporation early about a payment plan.

If you are unsure whether a charge is valid, a lawyer can review your declaration and by-laws. Insurance disputes depend on policy wording, so your broker or insurer should confirm what applies to you.

Frequently asked questions