Watch: Supply Shortfall Webinar (CCI Golden Horseshoe)

Earlier this week, the Golden Horseshoe Chapter of the Canadian Condominium Institute hosted a webinar on the topic of supply shortfalls due to COVID. The webinar focused on the current construction labour and materials shortage that the condo industry has been facing. Our very own President and founder of Normac, Cameron Carter, was one of the panelists alongside John Macleod (President, Key Property Management & Consultants) and Sally-Anne Dooman (Director of Condominium Management, Wilson Blanchard Management).

The structure of the presentation was as follows:

  1. What is the material/labour supply crunch we are facing at the moment, featuring real-world examples, presented by John Macleod.
  2. Why has there been a supply shortfall, including the technicality behind the surge in building materials and the shortage in labour, presented by Cameron Carter
  3. How can property managers and boards respond to the supply shortfall, along with best practices on managing the corporation’s budget and future projects, presented by Sally-Anne Dooman.

Thank you to the panel of professionals for sharing their insights!

Watch the Webinar Below

Recap: PM Springfest and CCI-Toronto’s Twitter Chat

This past week, Normac had the pleasure of sponsoring and exhibiting at this year’s virtual PM Springfest. The 2-day event hosted educational seminars related to the property management industry with over 50 sponsors supporting the event.

PM Springfest is an educational conference specifically geared towards decision makers and influencers of the property management industry. The topics that were addressed included building envelopes, legal & regulatory issues, energy & sustainability, technology & innovation, and resiliency. Normac was proud to support this event and was delighted to connect with new and old faces within the industry.

We are optimistic that next year’s event will be hosted in person and look forward to once again supporting PM Springfest. Here is a snapshot of our virtual booth from the event:

 

Coinciding with day 1 of PM Springfest, our founder and president Cameron Carter was one of the panelists for a Twitter chat on Insurance hosted by CCI-Toronto alongside Tom Gallinger (VP, Atrens-Counsel Insurance Brokers) and Katherine Gow (RCM, Crossbridge Condominium Services). The expert panel covered topics such as condominium insurance rates & deductibles, insurance appraisals, role of the insurance broker, and the impact of COVID-19 on the insurance market.

 

Below are some highlights from the event!

On Insurance Appraisals

The event kicked off with a question about insurance appraisals and why/how often they should be obtained. The Ontario Condo Act states that “Subject to a reasonable deductible, the insurance required under this section shall cover the replacement cost of the property damaged by the perils to which the insurance applies.” The only reliable way to determine replacement cost is to have a 3rd party appraiser assess the property. The adequacy of your coverage should be reviewed on an annual basis which will ensure that your condominium is paying accurate premiums.

On Risk Mitigation

Risk mitigation, particularly water damage prevention was also addressed during the discussion. As 80% of all condo property losses are due to water damage, it is critical that your corporation take a proactive approach to minimizing any potential loss. Technological advances in leak detection now make it easier to catch unusual water levels at its source before it spreads to other units and common areas. A professional management company will be able to provide direction to the best preventative measures for your condo. Katherine Gow stated, “Your greatest tools for controlling risk will be 1. Standard unit bylaw 2. Deductible recovery bylaw 3. Inspections/programs to reduce water damage, slips and falls and risk of fire”.

On Standard Unit Bylaws (SUBL)

Standard unit bylaws (SUBL) can assist in faster claims processing by providing clarity as to what is covered when disputing a loss. Removing, adding, or modifying items in your SUBL will also have a direct correlation on your insurance premiums as it will either cause your premiums to go up or down according to the changes. When appraising a property, individual betterments and improvements are excluded from the valuation and a SUBL will help define what a condo’s standard finishes are. If a SUBL is not in place, the appraiser would make their best effort to determine the standard finishes. In an effort to save on premiums, we have seen cases of condos amending their SUBLs to a “bare-bone” to transfer some of the risk to their personal policies.

The discussion also touched on several other topics as it related to insurance such as rising lumber prices, charge backs/deductibles, and shared facilities to name a new. To catch up on the conversation, search #CondoChat on Twitter and scroll through the thread from April 21.

Thank you to the panel of professionals for sharing their insights!

  • Katherine Gow, Crossbridge Condominium Services – Tweeting from @KGowCondo
  • Tom Gallinger, Vice President, Atrens-Counsel Insurance Brokers – Tweeting from @CondosCovered
  • Cam Carter, President, Normac Appraisals – Tweeting from @NormacOfficial

Shared Facilities Agreements: Recent Changes to the Ontario Condo Act

History of Shared Facilities Agreements

When the Ontario Condominium Act was first registered in 1968, it served one main purpose – to provide a set of rules and guidelines for owners of a single condominium to live harmoniouslyHowever, when more than one condominium corporation share assets, this creates a need for different condominiums to get along with each other and can prove to be quite challenging. The recent amendments to the Condominium Act (1998) are meant to provide clarity for these shared assets.

As written:

21.1 Subject to the regulations, if any of the following persons or any combination of them share or are proposed to share in the provision, use, maintenance, repair, insurance, operation or administration of any land, any part of a property or proposed property, any assets of a corporation or any facilities or services, they shall enter into an agreement that meets the prescribed requirements and shall ensure that it is registered in accordance with the regulations. 

This means that for any group of condominiums that share assets, a Shared Facilities Agreement (SFA) must be created. These agreements are designed to provide a framework for determining cost sharing for the assets. 

What is the Root Cause Behind this Recent Change?

Unfair cost allocations have been front and center around what once was a vague iteration of how to split the costs of shared facilities. Previously, under section 113 and 135 of the Act: 

  1. Under Section 113, which states that where a corporation has entered into a SFA prior to the turn-over meeting, then within 12 months following the election of a new board at such turn-over meeting, any party to the SFA may make an application to the courts to amend or terminate the agreement if (a) disclosure of the terms of the SFA was inadequate or (b) the agreement produces a result that is oppressive or unconscionably prejudicial to the corporation or any of the owners;

     

  2. The more general provision, Section 135, which permits an application for the oppression remedy by an owner, corporation, declarant, or mortgagee of a unit. 

Toronto Standard Condominium Corp No 2130 v York Bremner Developments Ltd, 2016 ONSC 5393[1] (“York Bremner”) brought to the forefront some of the frustrations that many condominium corporations faced when it came to Shared Facilities Agreements.

 

In this case, the Court found that York Bremner’s conduct rose to the level of oppression due to unclear disclosure of the terms of the Shared Facilities Agreement. It was determined that the declarant had used unfair terms that was self-favouring and that it was not clearly stated who the Common Facilities Manager was – who would have been solely responsible for managing and allocating the costs for the shared facilities. It is interesting to note that prior to this case, there had been no jurisprudence on the interpretation of Section 113, therefore the case had gone on the basis of first principles. The case has been appealed to the Court of Appeal by the declarant since then. 

Determining Replacement Cost for Shared Facilities

Due to the recent change in the Condo Act, we have received many requests to appraise shared facilities and we expect many more as more condominiums realize that their shared assets must have such an agreement. As insurance appraisers, we are called upon to determine a replacement cost estimate for the shared assets because insurance of those assets is one of the requirements.   

 

We have witnessed a huge variety in the scope and complexity of these Shared Facility Agreements. We have seen simple agreements where two condominiums share a recreational building and the proportionate share of maintenance, repair and so forth is determined by a simple percentage split. We have also completed appraisals on very complex shared facilities where the proportion of responsibility for specific assets such as HVAC systems, pools, amenity rooms, and elevators vary between the corporations but also vary for each asset. As appraisers this means we are tasked with relatively simple jobs in some cases but very complicated jobs in other cases, requiring specific line-item valuations for each asset. 

We have witnessed a huge variety in the scope and complexity of these Shared Facility Agreements.  In some cases, very complicated jobs require specific line-item valuations for each asset. 

The appraiser skill and experience required to do a good job therefore is quite unique for these shared facilities. Before we quote on these jobs, a thorough review of the agreements and other documents must be done to estimate the number of days that will be required. Upon approval, a property inspection takes place and an inventory along with photographs are obtained. Following that, the research into reasonable replacement costs for the assets are done and an appraisal report is created and sent to the client. 

 

Hiring a qualified insurance appraiser can help you check the insurance requirement off your list. An appraisal will help provide clarity of coverage to the different corporations and will help reduce conflicts that may arise.  

How To Deal With Coronavirus in Condos

coronavirus in condos
Last week, the World Health Organization declared Coronavirus (COVID-19) a national pandemic. Condominium corporations, directors of the board, and property managers should be on high alert, taking the necessary preventative measures to ensure their properties are safe. It is important to note that the possibility of transmission will always exist, however, can be drastically reduced with good hygiene practice and knowing how to deal with Coronavirus in condominiums.

What Is Coronavirus?

The coronavirus (also known as “COVID-19”) is a virus which symptoms include fever, cough, shortness of breath, and breathing difficulties. In more severe cases, infection can cause pneumonia, severe acute respiratory syndrome, kidney failure, and even death.

As of March 16, Canada has 324 confirmed cases of coronavirus. At the time of writing this, Ontario has the highest number with 145 confirmed, and British Columbia and Alberta are close behind with 73 and 56 reported cases respectively. The contagious nature of this virus means that this number will continue to grow exponentially.

The transmissibility of this virus is much like the common cold. The virus can be passed on from person-to person or through contact with contaminated surfaces or objects. This is why officials are recommending social distancing to prevent the spread.

Travellers, particularly those who are returning home from Europe, Middle East, and Asia are at the highest risk. Anyone coming into Canada is being told to self-isolate for 14 days and monitor symptoms.

How Does Coronavirus Affect My Condo?

Condominiums house a high number of people living in close proximity to one another with shared common spaces. These shared spaces include elevators, fitness rooms, condo lobbies, etc. The traffic in these areas pose a high risk for contamination, especially when it comes to door handles and elevator buttons.

If you are feeling sick, are returning from travel, or are other wise high risk of infection, it is imperative to self-quarantine as per the Canadian government’s recommendations. As a condo owner, this means remaining within your unit and having people bring necessities to you, or only leaving for medical care.

What Are My Legal Obligations On Behalf Of The Condo Board?

Quite frankly, condo corporations are not fully equipped to combat the spread of the coronavirus. The jurisdiction of this surpasses property management – into the domain of public health and communicable diseases. Rod Escayola writes in Condo Advisor last week that, Condo corporations have a duty to “control, manage and administer the common elements and the assets of the corporation.”  Similarly, boards of directors have a duty to manage the affairs of the corporation. Simply put, condos are there to manage the property, not pandemics.

The corporation can make rules on “the safety, security or welfare of the owners”, however this does not specify how to go about a contagion like coronavirus. In section 117 of the Ontario Condo Act, any activity that is likely to cause bodily harm (in units or common areas) is prohibited. Does this legislation give the authority to quarantine someone in their unit? Not likely, but that does not absolve the board from their social responsibility as leaders for their community.

Josee Deslongchamps, an Ottawa condo manager, provided this very informative notice to owners on the coronavirus. Condo boards could share a notice similar to this, which requests those who are at risk to self-quarantine and refrain from using common property, in a respectful and factual manner. It also communicates what precautions are being taken by the condo corporation to protect owners.

How To Deal With Coronavirus in Condominiums?

It is not expected for condo corporations to have foolproof measures against coronavirus. However, property managers and directors of the board can fulfil their fiduciary duty by taking these basic precautions:
  • Ensure that commonly used common element areas (sanitary facilities, fitness rooms, lobby/garage entrance door handles and elevator call buttons) are kept clean and disinfected with industry appropriate products;
  • Install hand sanitizers in common areas, by the main doors or by the elevators;
  • Post signs reminding owners to be extra diligent when wiping fitness equipment;
  • Remind owners not to use the fitness room, the pool or the amenities if feeling sick;
  • Encourage occupants having travelled to high risk-zones to consider avoiding using the common amenities for 14 days;
  • Encourage occupants/employees to self-quarantine if required;
  • Encourage occupants/employees to report to the corporation should they have been infected by the virus. This could allow the corporation to take early measures;
  • In certain circumstances, it may be worth considering postponing some of your social events… and perhaps even the AGM depending on how things evolve in your areas.  You may want to consult with your legal counsel before you do so.
Taken from Condo Advisor: http://condoadviser.ca/2020/03/coronavirus-in-condos/condo-law-blog-Ontario

Condo boards could also take note of how Italian condo dwellers are keeping their spirits up with music, or how other residents are working out together from their balconies in Seville, Spain.

The Bottom Line

Good hygienic practices go a long way in combatting airborne viruses. Taking proper precautionary measures in your condominium will drastically reduce the spread of coronavirus. In keeping with your community’s policy on Discrimination and Inclusiveness, residents are reminded that acts of racism, xenophobia and other discriminatory behaviours should never be tolerated. A collaborative community effort is vital in effectively managing a pandemic as such.

Additional Resources

CHOA – Preventing Coronavirus: https://www.choa.bc.ca/wp-content/uploads/600-014-Preventing-coronavirus.pdf

PAMA – What Do We Know and What Can We Do about COVID-19?: https://www.pama.ca/common/Uploaded%20files/pdfs/Almanac/COVID_19.pdf

ACMO – ACMO Coronavirus Advisory: https://acmo.org/acmo-coronavirus-statement

Normac is also taking precautionary measures to protect our staff, clients, and to do our part in preventing the further spread of COVID-19. Read more about our efforts here.

Hard Insurance Market Persists Through 2020

Toronto Construction Street View

As insurance companies experience significant losses, adjustments must be made for them to remain profitable. Whereas in the past, insurance companies offered competitive rates with lenient underwriting guidelines, the cyclical nature of insurance has turned this around. Canada is experiencing a hard insurance market where premiums are on the rise and policies are much more difficult to obtain. While some carriers are taking on preferred risks, others have completely stopped writing insurance at this time.

Hard Vs. Soft Markets

Insurance has a life cycle which is characterized by two periods – soft and hard. A soft insurance market reflects lower premiums, broader coverage, relaxed underwriting criteria, more policies, as well as healthy competition among carriers. On the other hand, a hard insurance market reflects higher premiums, strict underwriting criteria, less policies, as well as less competition among carriers. We are currently facing a hard market.

Rise in Premiums + Deductibles

Since the start of the hard insurance market, premiums have been skyrocketing nationwide. British Columbia strata corporations are facing premium hikes between 50% and 300%. Tony Gioventu, Executive Director of the Condominium Homeowners Association, (CHOA), adds that, “deductibles are going from the conventional $10,000 or $25,000 to $100,000, $250,000 or $500,000.”

Subsequently, some condominium boards in Alberta are seeing condo insurance increases up to a 700%. Ryan Chernesky sits on the condo board of a building he owns two units in. In 2018, the premium on the condo building was approximately $51,000. Last year, the insurer declined renewal and only two other companies were prepared to take the risk. The lowest quote was approximately $402,000 – an increase of 690 percent.

“We’ve been told by the insurance companies that it’s to do with the 2016 wildfire and there is an increased risk associated now and various other reasons on a more global scale,” Chernesky said in this article.

Why Now?

Current underwriting standards have been shaped in response to a series of global and local catastrophic events, a lawsuit-first approach, and an increase in construction costs.

In Canada, we have seen an increase year over year in property claims caused by severe weather. It is not just one single event that causes higher claims, but rather a series of events happening across the country.

  • There are approximately 5000 earthquakes that are recorded in Canada every year, with the majority in British Columbia. The risk also exists in eastern Canada, along the St. Lawrence and Ottawa River valleys.

  • In 2016, the Fort McMurray wildfires that swept through Alberta estimated a total loss (direct and indirect costs) of $9.9 billion dollars, with an estimated $3.7 billion in claims.

  • The 2019 spring floods in Ontario, Quebec and New Brunswick have also contributed to the increase in premiums. About, one in three Canadian homeowners are insured for overland flood risk, the Insurance Bureau of Canada said in this article released June 18.
Top Insured Damage Severe Weather Events in 2019 - Insurance Bureau of Canada
Catastrophic events like these have resulted in billions of dollars in losses for insurance companies. According to the Insurance Bureau of Canada, eight out of the top ten highest loss years on record are between 2010 and 2019.
Top-10 Highest Loss Years on Record - Insurance Bureau of Canada
In addition, the cost of building materials such as brick, wood, and cement has increased. As reported in this article, Rider Levett Bucknail (RLB), an international property and consultancy firm, stated that construction costs in Toronto has been increasing faster than any of the 14 North American markets, which include Boston, Los Angeles, New York, San Francisco, Washington DC, and Calgary.
Indicative Construction Costs - Rider Levett Bucknall

Cause + Effect

Insurance companies are taking a closer look at what the actual replacement cost of a building is and are finding that many buildings are underinsured. This may have been acceptable in the past, as a total loss was unlikely, but as natural disasters are more prevalent and building costs on the rise, insurance companies are now requiring buildings to be insured to their full replacement value.

As insurance appraisal experts, Normac stays on top of current construction costs and is aware of industry developments and trends. As a result, we deliver the most accurate and reliable insurance appraisals, and ensure that your properties are protected and always adequately insured to full replacement value.

For a no-obligation proposal, click here.