More Than Just Condos: All About Bare Land Stratas

Strata Corporations and Bare Land Strata Corporations – What’s the Difference?

In British Columbia, a conventional strata corporation subdivides a building into separate units, commonly known as strata lots. This allows for individual ownership of a strata lot as defined by a strata plan, with the strata lot usually ending at the center of walls, floors, and ceilings. Any part of the building that, according to the strata plan, is not part of the strata lot is referred to as the common property. These typically include hallways, elevators, recreational amenities, and building exteriors. Together, all the strata lot owners own the common property as a strata corporation and share the fees and responsibilities associated with maintaining it.

 

Stratas that divide a larger piece of land into several strata lots are called Bare Land Stratas (or Bare Land Condominiums in Alberta and Common Elements Condominium Corporations in Ontario). As the name suggests, the purchase of a Bare Land Strata lot means exactly that: a bare lot, with no buildings on the strata lot. The key difference between a Bare Land Strata and a conventional strata corporation is that any building constructed on each bare land lot becomes the responsibility of each strata lot owner for maintenance costs and insurance. The strata corporation has no interest in each strata lot owner’s buildings unless these are referenced to in the strata plan or the bylaws.

 

However, beyond the individual strata lots, there is still common property that the Bare Land Strata Corporation continues to be responsible for. This can include amenity buildings, roadways, walkways, grass, shrubs, trees, septic fields, sewage treatment plans, underground systems services, and more. In most cases of bare land developments you will find single-family dwellings, but this ownership structure can also be utilized for mobile parks, recreational sites, and other property types.

Insuring Bare Land Strata Corporations

At the end of the day, a Bare Land Strata is still a strata corporation, and compliance with the Strata Property Act is expected. The Strata Property Act requires all strata corporations—including Bare Land Corporations—to obtain and maintain property insurance for common property, assets, and buildings shown on the strata plan. Property insurance must be current and cover full replacement cost in the case of a total loss. An annual insurance appraisal determines an appropriate insurable cost for the common assets. 

 

In our over 20 years of experience, we frequently encounter instances of Bare Land Corporations not carrying sufficient coverage for a total loss. A common omission are the underground site services, such as plumbing and electrical. Other common assets such as retaining walls and fencing are often missed. Determining which elements are common property and which are the responsibility of the homeowners is a complicated process and requires extensive research on the part of the insurance appraiser. It involves reviewing all pertinent documents, then taking a careful inventory of the assets to be included and conducting research to determine specific replacement costs. Following this, a consolidated total is then created for the Total Insurable Value.

 

Given the high–level of detail required in both the analysis and reporting for these appraisals, it is not unusual for a bare land appraisal to take longer than a standard appraisal. This is due to the fact that the appraiser must analyze and estimate costs individually for certain components that would have been otherwise included as part of the building or site improvements.

Ignorance is (Not) Bliss

When it comes to bare land developments, it is vital that no common element is missed. In this reported case, a bare land gated complex in the Fraser Valley found themselves ill-prepared for a number of water and sewer-system failures that occurred following a heavy winter season. The strata owners were oblivious, believing that the single-family homes they lived in within a Bare Land Strata were no different than owning a single-family home on a standard city lot. The assumption was made that the city would be responsible for maintaining these services. In the end, the corporation found themselves underinsured and owed $250,000 – around $5,000 per home.  

Looks can be deceiving. Avoid the guesswork and review the filed strata plan in the Land Title Registry. Strata plans for Bare Land Strata Corporations should be clearly labelled as a “Bare Land” and will not usually show the outlines of houses located on individual strata lots.

 

For your own peace of mind, continue to educate yourselves and leave the insurance appraising to the experts. 

Reviewing Canada’s Catastrophic 2020

As the hard insurance market ensues into 2021, we take a look at some of the severe weather catastrophes in 2020 that marked Canada’s fourth highest year in insured losses since 1983. On top of the global Covid-19 pandemic, Canada had experienced insured losses to the extent of nearly $2.5 billion. The cyclical nature of the insurance industry means that after a period of severe loss, insurers must increase premiums and impose stricter underwriting guidelines to take on less risk and recoup for losses. The condominium and strata industry in all parts of Canada are at the tail end of it all, with premiums and deductibles on the rise at escalating rates. 

Rain and Snowstorms in Southern Ontario, Quebec, and British Columbia

On January 10, overnight temperatures in Ontario rose to new highs of 10 to 15 degrees Celsius prior to the rainstorm. During the two-day storm, Windsor and London had experienced up to 70 mm of rain and Toronto had recorded 78 mm of rainfall. The Ottawa airport had also experienced 34 mm of rain along with 12 cm of both snow and ice. In Montreal, the rain had begun on January 11, where the city recorded 40 mm of rainfall and 13 cm of ice pellets. On January 31, parts of southern British Columbia had experienced up to 140 mm of rainfall that forced the evacuation of dozens of people. The excessive rain and snowfall had led to overland flooding, seepage, and sewer backups with insured losses totalling nearly $140 million across all three provinces.

Fort McMurray Flooding

On April 26, the Athabasca River saw an alarming escalation in water levels due to a 25-kilometre ice jam, which resulted in major flooding of the downtown Fort McMurray area causing $562 million in insured damage. According to the Regional Municipality of Wood Buffalo, the flooding had damaged more than 1,200 properties and displaced 13,000 residents by May 3.  At the time of this incident, overland flood coverage had still been relatively new in Canada and was extremely hard to obtain in flood-prone areas. As a result, many homeowners either lacked sufficient coverage or did not have any at all.

Calgary Hailstorm and Central and Southern Alberta Storms
A month after the Fort McMurray flooding, Calgary was now at the center of the fourth–largest insured loss in Canadian history. On June 13, northeast Calgary had experienced hailstones the size of tennis balls at a speed of 80 to 100 kilometres per hour. Over 70,000 properties and vehicles were destroyed by the hailstorm and many are having to deal with high out-of-pocket deductibles to cover for the damage. Between the months of July and August, Central and Southern Alberta had also faced a series of severe weather patterns totalling an additional $221 million. Condominium insurance premiums in Alberta increased by 20% between Q4 2019 and Q4 2020 marking the highest increase across the country. 
Ontario Windstorm
On November 15, a tornado reaching speeds of 135 kilometres per hour had hit Southern and Central Ontario, particularly the Greater Toronto and Hamilton Area, Niagara region, Muskoka region, and the Lake Erie and Lake Ontario shorelines. Pair with heavy downpours that caused lakeside flooding, 540,000 homes reported power outages with debris scattered over cars and buildings. The total insured damage was reported at $87 million, most of which was to personal property. 
Condo and Strata Premiums Remain on the Rise
As local and international catastrophes contribute to the hard market, efforts have been made across the country to make market conditions more attractive for insurers to return to this market, including relief to unit owners themselves. BC’s Finance minister, Selina Robinson, stated that the NDP (New Democratic Party) has started “to chip away at the various component pieces that would help bring insurance rates down … We’ve made a number of changes. There’s more changes coming.” According to the latest “Home Insurance Price Index” released by Lowestrates.ca, from Q4 2019 to Q4 2020, British Columbia had a year-over-year increase of 18%:  

Alberta had a year-over-year increase of 20%: 

Ontario had a year-over-year increase of 8%:

Having Sufficient Coverage and Paying Accurate Premiums

Given the current market conditions, it is critical that your condo or strata corporation is adequately covered in the event of a total loss. We have seen cases where properties have been underinsured, exposing themselves to unnecessary financial risk and liability. At the same time, we have seen properties carrying excessive replacement costs and, as a result, paying too much for insurance. Having an insurance appraisal done by experts trained in local construction costs ensures that you not only have sufficient coverage on your property, but that your premiums are accurate and in line with the market.