Section 185(3) of the Condominium Act of Manitoba
The insurance required under this section must cover:
A) The replacement cost of the property damaged by perils to which the insurance applies; and
B) Any additional costs resulting from zoning and other legal requirements related to current construction standards, including coverage for the loss of value of any undamaged portion of the property, demolition and debris removal and any increase in the costs of construction, to the extent that the coverage is available at a reasonable cost.
Also, in section 185(9), condominium corporations must obtain, before the first unit is occupied and every five years after that, an appraisal that meets prescribed required for purpose of calculating replacement cost. Replacement cost – also known to appraisers and brokers as the Total Insurable Value (TIV) – represents the total cost to rebuild a property today, with the same utility.
In short, all condominiums in Manitoba must carry an insurance policy that covers all rebuild costs associated with building a like-for-like structure, at today’s construction cost and standards.
Construction Costs Impacting Replacement Cost Value
Since the start of the COVID-19 pandemic, the construction industry has seen strong inflationary trends that are putting upward pressure on material and labour costs – directly impacting the replacement cost values for condo corporations. The contributing factors include: shortages in labour in construction, rise in global commodity prices that include softwood lumber, steel, plastic, and lastly, extreme weather patterns. Building materials have experienced significant landing delays as poor weather conditions and lower productivity levels have led to a shortage of supply. Air, ground and sea transport have all reported delays as a result.
As seen in the chart below, we expect increases across both residential and non-residential properties in Winnipeg, Manitoba. We are seeing year-over-year increases at 16.6% and 9.7% respectively. On average, we are looking at an increase in reconstruction costs of 13% across all property types in Winnipeg.
There are many factors that can change replacement cost values including location, building shape, size, height, quality of finishes, common amenities, and HVAC systems, to name a few. If all the unique features of your property are not taken into account, it could leave your corporation exposed to being under insured.
Brandon Condo Fire
In the Fall of 2021, we witnessed a devastating fire in a condominium apartment in Brandon, Manitoba that had resulted in $11 million in insurable damages. It was reported that there was extensive fire damage on the top level of the four-storey building, while the lower levels had been subjected to water damage. All residents of the apartment were not injured and safely evacuated.
Ensure your Assets are Protected
It is impossible to know when there could be damage to your property – and as a result – having full and accurate replacement cost insurance in place fulfils the owners’ fiduciary duty to the Condo Act, while offering peace of mind to homeowners. Given the volatility of today’s construction market, it is critical to ensure your property is having an updated replacement cost value on an annual basis. At Normac, we specialize only in insurance appraisals and our 3-year programs with automated renewal reminders guarantee that your condominium will always be insured to full replacement cost.