Insuring Unit Upgrades in an Ontario Condo: Improvements and Betterments

You renovated your unit with new flooring, custom cabinets or upgraded fixtures. Then a pipe bursts, and you wonder who pays to put it all back. Many owners assume the condo corporation's insurance covers everything inside the walls. Often it does not.

People often call these upgrades improvements and betterments. This article explains how the corporation's insurance generally works, where your own coverage fits in, and what to check in your building's documents.

What the corporation's insurance must cover

An Ontario condo corporation must carry insurance and never let it lapse. Coverage must include damage to units and common elements, liability for failing to keep common areas safe or from using machinery, and directors' and officers' liability.

That sounds broad, but the unit coverage has a boundary. The corporation's property insurance does not cover improvements or non-standard elements of units.

In plain words, the corporation's insurance is there to protect the building and the corporation. It is not designed to replace the upgrades you chose to make or the belongings you keep inside. How this applies to a particular loss depends on your building's documents and the facts, so it is worth confirming with a lawyer.

The standard unit: the line that decides who pays

Each corporation defines a standard unit in its governing documents. Fixtures, furnishings, equipment and personal property are generally not part of a standard unit.

The corporation repairs damage to the standard unit as defined in its governing documents. Owners must repair everything outside that definition, however the damage was caused.

Because the definition differs from one building to the next, a condo with a very basic standard unit leaves more to you than one with a generous definition.

Ontario condos are governed in this order: the Condo Act, then the declaration, then the by-laws, then the rules. If they conflict, the Act takes priority. Amending the declaration needs written consent from 80 to 90 per cent of owners, depending on the change. A by-law change is passed by the board, then voted on at an owners' meeting, where most changes need majority approval. The board can make or change rules after notifying owners, and a rule takes effect unless owners request a meeting to challenge it before its effective date.

Do you have to buy your own insurance?

No statute is cited as requiring unit owners to carry their own insurance. The Condominium Authority of Ontario says owners should strongly consider it, including property insurance for upgrades, fixtures, furnishings, equipment and personal property, and possibly legal expense insurance.

There is an exception. A corporation's declaration, by-laws or rules may require owners to carry insurance, and then it is mandatory for that building.

Tenants are not legally required to carry tenant insurance unless the tenancy agreement or the corporation's governing documents require it. If you rent out your unit, check both.

Deductibles and chargebacks

If damage is caused by an owner, tenant or resident, the corporation can charge the owner the lesser of the repair cost or the corporation's insurance deductible.

Some corporations have by-laws that make owners pay the deductible in more situations, including where no one is directly at fault. Owners exposed to this may need their own coverage for it, often called deductible or loss assessment coverage. Deductibles can range from a few hundred dollars to tens of thousands.

A chargeback is a cost the corporation bills to one owner, usually because of that owner's act or omission, and it is separate from regular monthly fees. If an owner cannot pay chargebacks added to their condo fees and no solution is reached, the corporation automatically has a lien against the unit for that debt. It is worth knowing your building's deductible rules before a loss happens.

Special assessments, liens and status certificates

A serious loss can lead to other costs. A condo board can levy a special assessment through common expense fees without owner approval. Reasons include unforeseen expenses, a major repair that exceeds its budget, and litigation costs. Your share uses the same percentage as your common expense share, and owners must pay it.

An unpaid special assessment gives the corporation a lien against the unit. The lien covers the unpaid amount, interest, and reasonable legal costs and expenses. How a lien like this is registered and enforced depends on your situation, so it is worth confirming with a lawyer.

If you are buying, a status certificate must be provided within 10 days. It may include a statement on the most recent reserve fund study and the state of the fund, any arrears on the unit, special assessments levied since the current budget and why, and certificates of insurance. Whatever it includes or leaves out binds the corporation.

What to do next

• Find the standard unit definition in your declaration and by-laws.
• Ask the corporation or manager what its deductible is and whether a deductible by-law exists.
• List and photograph your upgrades, and keep receipts.
• Show your insurance broker the standard unit definition and ask what personal coverage fits.
• Check whether your building requires owners to carry insurance.
• If you are buying, read the insurance certificates and special assessment details in the status certificate.
• Speak with a lawyer if a claim has been refused or a chargeback seems wrong.

Frequently asked questions