COVID-19 and the Canadian Condo Market

Need More Space

Amidst the COVID-19 pandemic, even the experts could not have predicted the strength of the Canadian real estate market – of which includes record high prices and fierce bidding wars – all in the face of double-digit unemployment across the country. “Our views are changing,” says Robert Hogue, a senior economist with Royal Bank of Canada. “The strength in the summer was quite a bit stronger than we might have thought. Clearly, there was pent-up demand from March and April, but we didn’t think it would pop that much.”

Condo Market Trends Covid
Source: https://wowa.ca/reports/canada-housing-market

WHY ARE PRICES INCREASING?

Of course, a major factor in the overall increase in home sales reflects the record-low mortgage rates we are seeing currently. The prime rate this year has gone down to 2.45%, a sharp decline from 3.95% from last year.  Canadians have been able to purchase more expensive homes with the same monthly payments as in the past. Government support programs such as CERB and CEWS have also supported household incomes.

Source: https://wowa.ca/reports/canada-housing-market

DETACHED HOMES MORE DESIREABLE

In keeping with supply and demand, the single detached or low-rise market may continue to see price increases, however the big-city condo segment is expected to be most vulnerable to post-COVID volatility. As we see a shift from physical offices to virtual/home offices – the demand for larger spaces have increased. Additional factors such as declining immigration and a softer rental market have also played a role in this trend. In June, this year there were 19,000 permanent residencies granted, a decline from 34,000 from the same time last year.

In the beginning of 2020, we witnessed condo prices outpacing that of detached homes. The first quarter of 2020 showed new condo prices in the Greater Toronto Area (GTA) up 14.6% from last year, and resale prices up 8.5%, according to data from Statistics Canada. In Ottawa, the increase was 22.6% for new condos and 15% for resales. Vancouver however, had experienced slight decreases year-over-year. According to the Real Estate Board of Greater Vancouver, apartment home sales had increased year-over-year in August (1,332 versus 1,095), however the shift to detached homes were up 55.1% in comparison to apartments – a modest 19.4%.

THE TOLL ON THE CONDO + RENTAL MARKET

Although we are seeing overall increases in pricing and sales activity, the condo market segment has been trailing behind other home-types since March. “We were seeing stronger sales on the single-detached front,” says Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB), “and we’re also seeing more listings coming on for condo apartments, so that’s moving toward a more balanced market.” The shift to suburban locations and preference for more space has also taken a toll on the condo rental market. Rent prices have been declining due to higher vacancy rates and renters are seeing more favourable rent conditions.

 

The Canadian Mortgage and Housing Corporation (CMHC) has purchased $5.8 billion of insured mortgage pools this year in preparation for COVID-19 related mortgage claims. As of July 1, the CMHC has introduced stricter underwriting criteria – which includes more rigorous credit checks and tighter down payment requirements for insured mortgages. It is safe to say, that for the time being the condo market will continue to see short term uncertainty until a COVID-19 vaccine has been introduced with proven results. The long-term effects of this emerging trend are yet to be determined.

If you are buying into the Canadian condo market, it is imperative that you adequately insure your asset. In fact, most provincial condominium bylaws mandate that all condominiums are insured to their total replacement cost value. 

The only way to determine accurate replacement cost is by obtaining an insurance appraisal by a professional 3rd part firm, like Normac. Doing so means you will always be sufficiently insured in the case of a total loss, that you can receive better terms and insurance rates, and that you fulfill your fiduciary duty set by your provincial condominium bylaws. 

The Condo Insurance Crisis, Presented by CAI Canada

Normac was excited to participate in the recent CAI Canada‘s first virtual conference, V CON(DO) 2020. We enjoyed meeting people during the virtual tradeshow and we’re pleased to sponsor the panel session, The Condo Insurance Crisis: Where do we go from here?

Watch the full presentation here:

Key take-aways:

  1. Get a current replacement cost appraisal regularly to ensure you are paying the correct premiums and have sufficient insurance coverage.

  2. Get a reserve fund study and maintain your building. This can help to prevent incidents and claims, and make you more attractive to insurers.

  3. Use your insurance for emergencies and accidents, not maintenance.

  4. Upgrade elements after a loss instead of just replacing them. Example: Frequent hail damage? Get a hail resistant roof, such as rubber shingles.

An insurance appraisal by Normac ensures that you always have a current replacement cost value for your property. This means you will always be sufficiently insured in the case of a total loss, that you can receive better terms and insurance rates, and that you fulfill your fiduciary duty set by your provincial condominium bylaws . 

Understanding Condominium Insurance

CondoTalk: Riding the Rising Insurance Wave, Pt. 1

The other week, Normac was proud to sponsor CCI Golden Horseshoe’s popular CondoTalk webinar, Riding the Rising Insurance Wave.  With an impressive panel of speakers, this educational seminar covered all things related to condominium insurance. We’ve put together some of the key take-aways for condominium insurance and have included the full webinar recording below. Enjoy!

According to the Ontario Condominium ACT (the OCA), section 99-106, property insurance is required and should cover the common elements and standard unit. It excludes betterments and improvements made by individual owners. The purpose of the subsection above is to manage the risk for the Condo Corporation, Owners, and Mortgagees. Although owner’s insurance is not mandatory, it is encouraged and some corporations might consider writing it into their bylaws.

99 (1) The corporation shall obtain and maintain insurance, on its own behalf and on behalf of the owners, for damage to the units and comment elements that is caused by major perils or the other perils that the declaration or the by-laws specify. 1998, c. 19, s 99 (1).

When it comes to replacement cost, the condo corporation must insure the property to its full replacement cost. The only way to ensure an accurate replacement cost valuation is to have the property appraised by a professional, third party appraiser, like Normac.

99 (7) 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. 1998, c. 19, s 99 (7).

In addition to the insurance policy, a Standard Unit Definition (SUD) is recommended and provides three main benefits:

  1. Equalization: All unit owners are governed by the same SUD and there are no discrepancies as to the standard finishing of the unit.

  2. Clarification: As older condominiums may have cycled through multiple owners, a SUD helps determine what is to be covered by the condominium’s insurance, versus what is a betterment that a previous owner may have installed and should be covered by the unit owner’s insurance.

  3. Opportunity: A good SUD will ensure that a unit will always be returned to a livable and sellable condition, regardless of what the owner’s policy is, or their level of care. It also prevents people from abusing the system.

A good SUD will clearly identify all the standard finishes and fixtures in a unit, providing a clear distinction between what is the unit owner’s responsibility and what is the condo corporation’s responsibility.

As compared to a barebones bylaw, which might offer corporations lower premiums in exchange for more risk, a clearly defined SUD can help prevent disputes between owners, the corporation, and insurance adjusters.

The OCA says the condo corporation can charge back a deductible if an owner damages their unit through an act or omission. However, the Act also allows corporations to pass their own bylaws that holds owners accountable for damage to other units or the common elements, irrespective of any act or omission within their own unit.  Having clearly defined deductible bylaws assists in determining what can be charged back to the owner and when. Here is a good explanation of why you need to have explicit bylaws regarding deductibles.

Insurers are now also offering deductible coverage as an option to owners under their personal policy to cover deductibles that the corporation might charge back to them. If you are living in a building where the deductible is very high, it is worth asking your broker if you are eligible for such coverage.

It is essential that unit owners and the condo board have a thorough understanding of the Certificate of Insurance and policies, the deductible/chargeback provisions, and the Standard Unit Definition. As a Property Manager, holding educational seminars or townhall meetings with the Insurance Broker is a great way to keep owners informed.

As condo boards turn over frequently, the Property Manager should review and explain the insurance documents annually. Board of Directors should also be encouraged to attend various education seminars (like this one!) so they can be knowledgeable about industry trends and best practices.

It is essential to share the SUD with all owners and help them understand what is covered within the condo’s insurance policy. Only when an owner is made aware of what is in fact a betterment and not a standard finishing, will they know what should be covered within their own policy.

With regards to the deductible,  the Act states that if a deductible increases or decreases upon renewal of the condo’s insurance policy it must be communicated to the owners in the form of an Information Certificate Update (ICU) and sent to them along with an updated copy of the Certificate of Insurance. It is suggested that a cover letter be attached to simplify what changes have been made to the policy.

When handling claims, it is important to take a proactive approach. Having an action plan in place before an incident happens will assist in dealing with and mitigating any loss. It is encouraged that Property Managers notify the Insurance Broker of an incident right away. This does not necessarily mean that a claim is being opened, but rather it ensures that the facts are recorded at the time of the incident in case a claim is opened later on.

The following is a list of common claims and best practices for handling them:

Water Loss

  • Determine the source of water and stop the leak, when possible (ex. shutting off a water valve versus a waiting for rain to stop when the roof is leaking)
  • Ask insurance provider for preferred contractors and immediately contact a restoration company
  • Notify Insurance Broker of the issue and have an adjuster assigned if you are opening a claim

Major Peril

  • Visit the affected site and determine the extent of damage, this can alleviate the stress that owners may be facing
  • Notify owners that restoration has been called
  • Give owners realistic expectations of a restoration timeline
  • Contact Insurance Broker and work with them to revert the unit back to the standard unit definition

Slip & Fall

  • Act immediately when incident occurs
  • When possible, head to site and take pictures and detailed notes (weather, what footwear the person was wearing, were there witnesses)
  • Contact the person injured and speak to them about the incident (never accept liability, just take notes)
  • Notify Insurance Broker as soon as incident takes place, again at least put it on record
  • Take detailed notes at the time of the incident, often these types of claims are made many months later and it can be difficult to recall the facts

There are a few compounding factors for today’s high insurance rates:

  • Market Competition – When condominiums first started gaining popularity in the 70s and 80s, lots of markets (insurers) came in thinking they could do better than everyone else and this drove rates down. Now, many insurers are pulling out of property insurance, driving rates up.
  • Aging Class of Business – 40-50 years ago, everything was brand new and the risk for insuring these condominium properties were low. Today, this is an aging class of business – the infrastructure is deteriorating and many properties have not been properly maintained.
  • More High-End Developments – New condominium development has been exploding across the country and the replacement cost values are going up as developers use premium materials to create an elevated living experience and lifestyle.
  • Catastrophic Events – Weather related events have caused significant damage around the world and the property insurance market has been hit especially hard. With the number of claims and their values rising exponentially, insurers have been operating at a loss.

All of this has helped create a Hardened Insurance Market. Insurance is all about money in (premiums) and money out (claims). After decades of low rates followed by substantial losses in the realty and the condominium business across the country and globally, we are now seeing a correction. Rates are going up so that insurers can recover money, deductibles are going up to help prevent smaller claims, and the market is shrinking meaning there is less competition.

Although the values of claims have gone up significantly, higher deductibles are deterring smaller claims from being made. As a result, it is expected that premiums and deductibles will continue to go up, however at a more moderate pace than the past few years.

We are in a day and age where “best in class” reflects the best possible rate in the circumstances, as opposed to the best rate. The number one way to improve your rates is to stay on top of maintenance to help mitigate any potential losses and reduce your risk.

Secondly, inform owners to maintain their own units; upgrade their fixtures, replace aging appliances, and take care of their unit. It’s important to have a community mindset that reinforces the idea that when an incident occurs, it affects everyone. Take responsibility and respect your shared asset.

Thank you to our panel of professionals for sharing their insights. Stay tuned for Part 2 of this webinar coming soon!

Maria Durdan
Partner, SimpsonWigle LAW LLP
Chair, Condominium Practice Group

Mark Shedden
CEO, Atrens-Counsel Insurance Brokers

Michelle Joy, RCM, BA 
Director, Condominium Management, Wilson Blanchard

Richard Elia, B.Comm., LL.B., LL.M. (ADR), A.C.C.I.
Sr. Lawyer, Elia Associations

An insurance appraisal by Normac ensures that you always have a current replacement cost value for your property. This means you will always be sufficiently insured in the case of a total loss, that you can receive better terms and insurance rates, and that you fulfill your fiduciary duty set by your provincial condominium bylaws.

Trend Watch: Mass Timber Construction

Brock Commons Mass timber construction
After becoming the first province to allow mass timber towers up to 12 storeys in 2019, BC is now pledging to support the forest industry by encouraging the use of mass timber building products in its capital construction programs. This includes the future development of St. Paul’s Hospital and the Royal BC Museum. Last month, BC Premier John Horgan appointed Ravi Kahlon, Parliamentary Secretary for Forests, Lands, Natural Resource Operations and Rural Development to lead the expansion of mass timber in BC buildings.

"As our economy bounces back from the COVID-19 crisis, we want to do everything we can to support forest workers. By focusing on mass timber, we have an opportunity to transition the forestry sector to high-value over high-volume production. This will mean opportunities for local workers, strong partnerships with First Nations and greater economic opportunity while making a significant contribution to advancing CleanBC."

John Horgan, BC Premier, https://news.gov.bc.ca/releases/2020PREM0033-001076

Benefits Of Mass Timber

Premier Horgan claims that the use of mass timber is cost-effective, sustainable, and generates jobs for BC’s forest communities and workers. The increased demand from both local and global markets will help to revitalize the industry, increasing production in forest communities and creating jobs.

The use of mass timber will also offer a cost-effective solution for the construction industry. Because mass timber products are custom-made off site and assembled on-site, construction time can be reduced by up to 25%. Using this method of building, constructions sites are also cleaner and safer due to fewer hot tools and machinery.

Tall wood buildings are considered sustainable for multiple reasons.

  1. Mass timber has a lower carbon footprint than concrete or steel as it is made of a natural resource. Additionally, as it is only one-fifth the weight, mass timber panels have reduced transportation emissions and decreased congestion to and around construction sites.
  2. Mass timber generates less waste since panels are manufactured custom for each application. Scraps may be re-used by the manufacturer.
  3. Mass timber is sourced from sustainably managed forests, of which Canada is a leader.  One BC company, Structure Craft, is even engineering mass timber products from beetle-kill wood which would otherwise be waste, or worse, kindle for catastrophic wild fires.
One other benefit, specifically important to British Columbians, is that buildings using mass timber are more earthquake resistant. Structurally, mass timber weighs less than concrete and steel, and is more pliable, therefore the impact on the building is reduced.

The provincial government in Ontario is also in support of mass timber and tall wood structures, having prepared a comprehensive technical resource for engineers, architects, designers, fire service, and building officials.  This guide focused on two important topics: architectural design and fire safety.

Building Codes + Safety

In Spring of 2019, BC updated its provincial Building Code to allow the construction of wood buildings up to 12 storeys tall, doubling the previous maximum height of six storeys.  At the same time, 13 BC communities signed up as early adopters of mass timber technologies. These communities represented 35% of the province’s housing starts in 2018. To be eligible, each community was required to have the following:

  • Support from their city council and the planning, building and fire departments;
  • Level 3 certified building officials; and
  • Land use bylaws for buildings higher than six storeys.
The National Building Code 2020 will soon see the same revisions and it’s believed that UBC’s Brock Commons helped pave the way for taller wood buildings across the country and around the world.

Until now, the biggest hindrance to the use of mass timber in construction was building codes, which deemed tall wooden structures a fire hazard. However, thanks to new mass timber building technologies and techniques, tall wood structures are as safe or safer than traditional steel or concrete structures.

Cross Laminated Timber (CLT), for example, holds a high level of fire resistance thanks to its cross-sectional thickness and air-tight construction, reducing a fire’s ability to spread. If a fire does ignite, the burn is slow and predictable, meeting fire resistance ratings. Fire resistance can and should be enhanced with fire-resistant lining to the flooring or walls.

For Brock Commons, Vancouver Fire and Rescue Services (VFRS) was involved in the project early on, overseeing the initial approval process and executing the fire and safety plan. The project required a site-specific regulation that included fire and seismic standards exceeding those for steel and concrete buildings. Check out VFRS video covering the specifics of Brock Commons’ fire safety measures, which included compartmentalized spaced to prevent a total loss, which is common with traditional wood structures.

Cause For Concern

The debate about safety is not a closed case, however. While building codes are changing, insurers and insurance brokers are still uncertain of the risks posed by tall wooden structures using mass timber. Canada’s condominium market is already under scrutiny in the face of a hard insurance market. New constructions using mass timber may see additional premium hikes due to existing concerns about wood structures.

A recent study conducted in the US by Boston College found builder’s risk insurance quotes for concrete buildings to be 22-72% less than quotes for wood frame buildings, and quotes for commercial property coverage was 14-65% less than wooden frame structures. It should be noted that this study was commissioned by the National Ready Mixed Concrete Association (NRMCA) and did not differentiate between dimensioned lumber and engineered lumber which has a higher fire resistance rating.

On the other hand, Vancouver based Globe Advisors conducted a similar study that suggested there were other factors for determining higher insurance costs in wooden structures than fire peril alone. This study indicated that wood buildings are less durable, cost more to maintain, and have shorter life spans, all leading to difficulty in obtaining insurance for wood frame structures.

In addition, wood structures can have major moisture management issues leading to mold. Prevalent in BC and Central Canada, mold not only creates structural issues for the building, but it can also pose significant health risks to occupants, including coughing, nasal congestion, eye, skin, and throat irritation, and can sometimes be fatal.

The study emphasizes the importance of minimizing factors that could lead to mold and water damage in wood structures and claims that much of the annual losses from lumber decay is preventable. There is no one-size-fits-all when it comes to wood structure construction across Canada – what works in Prairie provinces, may not work in the coastal region.

According to the Insurance Bureau in Canada, water damage costs insurers, on average as of 2016, more than $1.7 billion annually. This includes water damage caused by flooding, sewer back ups, and burst pipes which can all lead to expensive repair and clean up bills for insurers. Wood structures are more susceptible to excessive water damage caused by any of these man-made or natural disasters.

Time will tell if insurers will begin to favour the new technologies of mass timber over steel or concrete. Mass timber technologies will need to address all of these additional and important concerns: durability, fire safety, and moisture. For now, BC is committed to growing its mass timber industry and will continue to innovate and find long term, sustainable solutions for the construction industry.

Notable Mass Timber Projects

Check out this interactive map of mass timber projects being developed around the world.

The experts at Normac keep their finger to the pulse of the construction industry and are familiar with all construction types, materials, and techniques that might impact replacement cost. 

Property Managers’ Reopening Guide

Property Managers Reopening Guide

While most of the country is entering various phases or reopening, Ontario is heading into phase 2 of its 3-step reopening. More businesses will now be allowed to operate, public and social gathering restrictions will be loosened, and religious gatherings will now be permitted.

The government of Ontario has implemented workplace health and safety measures to guide businesses, organizations, and public spaces safely reopen. Officials have advised to continue following physical distancing measures to prevent the spread. Below are highlights from the Property Managers’ reopening guide.

What Does Phase 2 Mean For Property Managers?

As essential service providers, condominium managers have a fiduciary duty in keeping their Corporations safe amidst COVID-19. The Condominium Management Regulatory Authority of Ontario (CMRAO) conducted a survey in May on how the Ontario state of emergency had impacted property managers and identified the top three areas of concern at this time: holding meetings, entering owners’ units, and the use of common elements. According to the survey, 85% of respondents have developed plans to help their clients adapt as the government loosens restrictions and 83% of respondents have discussed these plans with their boards.

Holding Meetings

The holding of board meetings and owners’ meetings including AGMs have been temporarily amended in accordance to the changes in the Condominium Act, 1998. Condos now have an additional 90 days after the state of emergency ends to hold their AGMs. For those who had their AGMs scheduled within 30 days after the state of emergency, now have an additional 120 days. This amendment has been put in place only for those Corporations that have been affected by the pandemic, for example, if your year end fell after September 17.

The Condominium Management Regulatory Authority of Ontario (CMRAO) has suggested to hold board and owners’ meetings virtually when possible. If physical meetings are necessary, it is advised to maintain safe physical distancing measures and the use of personal protective equipment (PPE).

Entering Owners' Units

At this time, property managers are put in a difficult situation where they must respect the space of individual unit owners, while at the same time look out for the best interest of the Corporation. As unit owners may be hesitant to allow contractors into their units, there are precautionary measures that should be taken to ensure any health risk is mitigated as best as possible.

The CMRAO suggests that:

  1. The unit owner be provided with reasonable notice and given a fair opportunity to prepare themselves for when their unit will be entered.
  2. You or any service providers and the owner maintain a safe distance from one another.
  3. Proper use of personal protective equipment (PPE) be used at all times.
  4. Any and all other rules and guidelines are being followed as recommended by the government and Chief Medical Officer of Health.

It is important that managers communicate with contractors to ensure they are adhering to the safety measures put in place to protect owners. If the owner is hesitant to allow any work done inside their unit, carefully consider their concerns and accommodate them as best as possible. If the work is not time-sensitive, a reasonable effort can be made to postpone work to a later date.

Use of Amenities And Common Space

Condo managers are advised to discuss with their boards a plan in reopening amenities and common elements. The CMRAO advises collecting information on:

  • Normal capacity of amenities
  • Cleaning/disinfectant schedules
  • Ventilation systems within specific amenities
  • Reservation systems/processes
  • Hours of operations
Once this information has been gathered it is suggested that Corporations and Property Managers implement the following protocols:

  • Mandatory booking required to use amenities
  • Requiring residents to disinfect equipment before usage
  • Staggering operating hours to allow for more frequent disinfection
  • Lowering capacity to ensure appropriate physical distancing is possible
  • Changing the configuration or allowed usage of specific equipment, such as blocking specific gym equipment or barbecues on specific days so that residents maintain appropriate distancing
It is important to keep in mind current public health recommendations as well as the necessary measures to protect staff and residents when developing these plans.

Additional Recommendations

As condos differ in size, number of residents, and geographical location – All property managers are advised to take an approach that considers the unique needs of their condominiums. What works for one may not work for yours. In keeping with the evolving nature of Covid-19, it is important to stay up to date with public health recommendations and adjust protocols, when necessary.

Changes in British Columbia

As other provinces begin their reopening, these recommendations can also apply to property managers across the country. In BC, the Strata Property Act was amended to accommodate strata councils needing to meet virtually or postpone meetings all together. You can read more about this on our blog, COVID-19 Amendments to the Strata Property Act.

Other recommendations can be found on the BC’s Government website, here.

Changes in Alberta

A similar relaunch strategy is also happening in Alberta, with some variances to how much is reopening. While the Alberta Condo Act has also been amended to allow for delayed meetings, currently a Corporation’s right to enter an owner’s unit is suspended until further notice.

A complete list of amendments and recommendations can be found on the Alberta Government site here. They also have prepared a useful PDF for download, here.

Normac has also entered the second phase of our COVID-19 protocols.  With staff returning to the office and some site visits resuming, you can read more about our response, here.

 

We continue to deliver the same high standards and exceptional customer service that our clients have come to know and rely on. We have the technology and systems in place to continue delivering replacement cost valuations accurately and on time. If you are in need of an up-to-date valuation or are considering switching providers, we make the process easy. 

COVID-19: Response Update

COVID19 Normac's Response

Last updated: August 12, 2021

 

To our Normac Clients and Partners,

 

RE: COVID-19 Response Update 

 

As Canadian provinces have progressed to the next step in their phased approaches to mitigate the impacts of COVID-19 per the applicable provincial health orders, Normac continues to take a measured response in ensuring the safety of our team and our clients.

 

We continue to take extra safety precautions, maintain physical distancing measures, and remain focussed on three things:

 

1. Ensuring the safety of our employees and clients

2. Continuing to provide exceptional service to our clients

3. Supporting local efforts to limit the spread and impact of COVID-19

 

Effective August 1, 2021, Normac will resume full interior site inspections for all properties in your province.

Read more about Normac site inspections here.

 

The requirement for Personal Protective Equipment (PPE) during a site inspection is pursuant to current provincial health direction in your region at the time of inspection. For residential interior in-suite inspections, our appraisers will continue to wear masks. If site contacts accompany or interact with an appraiser during an interior in-suite inspection, they are asked to maintain a two-meter physical distance from our appraisers and wear a non-medical mask or facial covering at all times. If you prefer NOT to have an interior in-suite site inspection completed, please advise us immediately.

 

Normac has developed a comprehensive Communicable Disease Plan and COVID-19 Health & Safety Plan as required by provincial health authorities, which provide clear guidance on adjusted working practices and preventative measures to mitigate the risks posed by COVID-19 and/or other communicable diseases that may circulate in a workplace.  

Appraisers and Property Information Collectors will exercise the utmost caution and follow all hygiene protocols when on-site. As per the provincial health direction, Normac team members are well-versed and supported in the following areas:

 

  • Physical distancing measures
  • Use of Personal Protective Equipment
  • Enhanced cleaning, sanitization, & disinfection measures

We remain committed to serving our clients to the highest standards and prioritizing your health and safety at all times.  Thank you for your understanding and your continued trust in Normac.

Stay safe and keep healthy.

 

Sincerely,

 

Cameron Carter

President

COVID-19 Amendments to the Strata Property Act

Strata Property Act

The whole country has been forced to adapt to a new way of life thanks to COVID-19. From the way restaurants operate, to how we educate and care for our children, to the adoption of virtual hangs outs and meetings; nearly all industries and social experiences have been affected. This includes the manner in which business is conducted for BC’s strata corporations. Here is a summary of the recent BC Strata Property Act (SPA) amendments made to alleviate the effects of the pandemic.

Electronic Meetings

The first amendment made to the Strata Property Act came into effect on April 17, 2020. The Minister of Public Safety and Solicitor General issued an order under the Emergency Program Act which enables all strata corporations to conduct meetings electronically, regardless of whether or not the strata has an existing bylaw allowing electronic meetings.  That includes annual general meetings (AGMs), special general meetings (SGMs), and hearings that take place during a provincial state of emergency.

With restrictions on gathering ordered by the BC Public Health Officer, electronic meetings will allow strata corporations to comply and maintain the health and well being of owners. Electronic meetings can be held either by telephone conference calls or online video conferencing applications. For those without reliable access to a computer, they may choose to attend in person or participate via proxy.

The Condominium Home Owners Association (CHOA) has further interpreted this Strata Property Act amendment and shared a helpful checklist for holding electronic meetings.

Alternative options to electronic meetings may include delaying, relocating, waiving an AGM, or using restricted proxy voting. More on this here.

Delayed Meetings

There were two amendments to the Strata Property Act made via an Order-in-Council on May 29, 2020. First, strata corporations will be allowed an additional two months to hold an AGM or SGM if there is a local or provincial state of emergency in effect during the month before the statutory deadline for the meeting.

Example: To comply with the Strata Property Act, the strata corporation must hold an AGM by April 30. There is a state of emergency in BC that ends on April 15. The new deadline to hold the AGM is June 30.

This additional time will allow the strata council to develop and implement a new meeting format and effectively communicate the changes to owners.

The regulation change will apply to all future states of emergency and will provide flexibility during other unexpected disruptions such as floods and forest fires. More on this on the Government of BC’s website.

Paying For Insurance

The second amendment made via order-in-council on May 29th is intended to clarify that strata corporations may use their contingency reserve fund to pay for increased insurance premiums, without approval from owners, if payment is required before there is time to hold a general meeting.

The change will protect strata corporations who may not be able to approve a new budget during a scheduled AGM due to gathering restrictions or other delays caused by the pandemic. The ability to pay for unanticipated expenditures, such as increased insurance premiums or COVID-19 expenses, gives the strata corporation some flexibility to meet payment deadlines. It is only permissible to do so if there are reasonable grounds to justify an immediate expenditure, such as to ensure the safety of the corporation and owners, or to prevent significant loss or damage.

Since the contingency reserve fund is intended for future repairs and replacements, it is important that the strata corporation replenish the funds used for an urgent unapproved expenditure as soon as they can. This can be done either via a special levy, or an increase in strata fees. More about strata finances and strata fees here.

Business As Usual

Property Management and the work of strata corporations are essential services, now more than ever with much of the population spending increased time at home. That includes the 32,000+ strata corporations across the province. In support of strata communities, the Ministry of Municipal Affairs and Housing, the Ministry of Finance, the Real Estate Council of BC, strata homeowner associations, and strata property managers are meeting regularly to determine best practices and share resources. 

The Government of BC has compiled a comprehensive resource, interpreting the Strata Property Act during the pandemic and to share amendments to the Strata Property Act on their website: Information for COVID-19 Strata Housing.

Other useful resources have been put together by the Vancouver Island Strata Owners Association (VISOA), including their COVID-19 Resources for Strata Corporations, and documents prepared by strata lawyers, COVID-19 and Strata Corporations and Guidance Regarding AGMs and SGMs.

CHOA also has compiled a lengthy list of bulletins and resources for managing during the COVID-19 pandemic, including specific information from BC’s Regional Health Authorities, WorksafeBC, the Real Estate Council of BC, and more.

Normac’s vision is to provide peace of mind to our clients everywhere. During the COVID-19 pandemic, we continue to deliver the same high standards and exceptional customer service that our clients have come to know and reply on. We have the technology and systems in place to continue delivering replacement cost valuations accurately and on time. If you are in need of an up-to-date valuation or are considering switching providers, we make the process easy.

Trend Watch: Ontario’s Mixed-Use Developments

Ontario Mixed-Use Developments

Recent data from the Toronto Regional Real Estate Board (TRREB) showed a steep 69% decline in home sales in early April, compared to the same time last year. Similarly, the number of new listings had also fallen 63.7%. One thing remains unchanged, however: housing prices.

Given the current economic climate caused by the pandemic, those in hopes of finding low housing prices are met with dismay as the average selling price for all home types in Toronto reached $885,371, a 3.7% decline compared to the same period last year. The Greater Toronto Area (GTA) housing market remained flat, with an increase of 0.1% to $821,392 for the same period over last year.

As housing prices in the GTA remain high, an increasing number of people are looking for alternative, affordable options outside of the city’s core. The biggest obstacle to overcome for these home buyers is how to live outside of the city without compromising their lifestyles. The answer is suburban self-sustainable mixed-use developments.

Revitalizing Suburbia

Many first-time home buyers and millennials are not willing to spend a fortune on small studios in the heart of downtown Toronto. Location is no longer a top priority for home buyers, according to Point2Homes Real Estate news. Today’s buyers value affordability, ease of access to work and entertainment, enough space to meet their needs, and modern features and amenities. Developers are responding by revitalizing some of Ontario’s oldest suburbs with large mixed-use developments.

Dubbed as “Hipsturbia,” Toronto developers are presenting walkable, condensed neighbourhoods with condo towers, restaurants, bars, cafes, and retail shops which create a familiar city vibe outside of the city. They are hoping to attract millennials into these otherwise unattractive neighbourhoods by providing easy access to public transit and a robust communities.

“Downtown Toronto is going to continue to thrive, but I think subway connected, suburban-urban locations are going to see a bit of a rebound in the next three to five years,” predicts Sean Menkes, director of office and retail at Toronto-based Menkes Developments Ltd.

“It’s a huge trend in the U.S. and it’s exactly what we’ve been planning for the last few years” said Jared Menkes, executive vice president of high-rise residential for the family-owned firm. “We’re bringing what we know downtown and bringing it to the suburbs.”

Development Highlights - Vaughan, ON

Menkes is teaming up with public-pension manager British Columbia Investment Management Corp. to develop an urban pocket in Vaughan, a suburb just north of Toronto. Construction for Mobilio started in 2019. This mixed-use development is an ambitious master-planned community with 12 phases, 40 buildings, and 10,000 residences. Phase 1, called Festival, is scheduled for completion in mid-late 2022 and will showcase a four-tower development and 85,000 square feet of retail. Residents can expect lots of outdoor play areas and walking paths, restaurants, shops, entertainment activities, top of the line amenities, and direct access to facilitated transit.

A rendering of “Festival” – Phase 1 of a master-planned community in the suburbs of Vaughan, north of Toronto.

Development Highlights - Mississauga, ON

Another exciting mixed-use development to look forward to is Mississauga’s Square One District by developer Oxford Properties Group and their partner Alberta Investment Management Corp. Claimed to be the “the largest mixed-use downtown development in Canadian history,” Square One District will begin construction in the summer of this year with expected occupancy to begin in 2024.  In this plan, they will be turning 135 acres into an 18 million square foot neighbourhood for 35,000 people, a dramatic boost to Mississauga’s population which is expecting a spike over the next 20 years, according to Mississauga Mayor Bonnie Crombie. This plan will host 37 towers, more than 18,000 residential units, office and retail space making it a “high density living and working zone.”

Square One District
Aerial view of The Strand, the transit-connected and pedestrian-friendly heart of Square One District.

Development Highlights - Ottawa, ON

Further North, the board of directors for the National Capital Commission (NCC) in Ottawa has approved a preliminary version of the LeBreton Flats master plan, which will include the redevelopment of 4 districts just west of Parliament Hill. Of the 24-hectare site, the commission is looking to have 44% parks and open spaces. The remainder will feature 4,000 residential units, 116,000 square metres of office space, and 21,000 square metres of retail space. The NCC describes Lebreton Flats as, “a place that is pedestrian and cyclist friendly, surrounded by lively and active parks and plazas, including the dynamic Aquedect District, the Ottawa riverfront and a large destination park.”  City of Ottawa Mayor, Jim Watson stated, “Ideally, we need to find things that attract visitors and complement the museums and monuments that are in that vicinity and it needs to be a destination for live, work and play and not just live.”

Lebreton Flats
Urban playground in Ottawa’s ambitious master redevelopment, Lebreton Flats, just west of Parliament Hill.

The Ontario Condo Act states that all corporations should maintain insurance equivalent to total replacement cost value for their property. During construction, Course of Construction insurance is required. However, upon completion and prior to the first occupancy, either the developers or the Condo Corporations must acquire Property Insurance for full replacement cost. Normac is Canada’s leading insurance appraisal provider. We are accredited appraisers who specialize in determining replacement cost value for all types of properties, including large mixed-use developments.

 
Cover image from Cision in Canada, Oxford and AIMCo unveil Square One District, a new 130-acre 35,000-person mixed-use community in the heart of downtown Mississauga:
https://www.newswire.ca/news-releases/oxford-and-aimco-unveil-square-one-district-a-new-130-acre-35-000-person-mixed-use-community-in-the-heart-of-downtown-mississauga-818669612.html

Many Uninsured in Fort McMurray Flooding

Fort McMurray Flooding

On Sunday, April 26th, the rapidly thawing Athabasca River near the Regional Municipality of Wood Buffalo saw rising river levels escalate to full-fledged flooding in downtown Fort McMurray. By Monday, April 27th, close to 13,000 people had been evacuated from their homes.  As of May 1st, it is expected that more than 1200 building were impacted by the Fort McMurray flooding and that a boil water advisory could be in place until as late as September 2020. All of this comes after the 2016 wildfires devastated the community and amidst a global pandemic already impacting many businesses and residents.

Living On A Flood Plain

Much of Fort McMurray is built in a floodplain and while a flood of this measure hasn’t been recorded in 100 years, there have been 15 notable floods since the 1830’s. In 2019, plans were finally underway to improve flood defences in the area. The Regional Municipality of Wood Buffalo had started work on raising a road adjacent to the Clearwater River; it’s purpose to act as both a dike and a major arterial road. To date, $6.5 million of a planned $136.5 million had already been spent on flood mitigation, including building flood walls and berms.  Intentions to make Fort McMurray a walled city have now been thwarted.

This begs the question, why would perfectly rational people continue to build in an at-risk area. Based on extensive research conducted by the Globe and Mail, approximately 40% of the structures in the Lower Townsite and Waterways are directly in harm’s way.

Merwarn Saher, Alberta’s former Auditor General claims that politics are too blame. Despite Alberta Environment mapping out 48 flood hazard areas, including the low lying Downtown in Fort McMurray, the province leaves floodplain regulation to municipalities.  The hazard areas remain undesignated as off-limits to development due to a lack of community support. The problem is compounded by local officials who wish to revitalize the communities and can’t resist the income incentives generated by property development fees and annual property taxes. This is a common problem which can be seen in other parts of Canada, including Fredericton and Ottawa. “Meanwhile, it’s the provinces and the feds who get stuck with most of the tab for helping flooded communities recover.”

The Mayor of the Regional Municipality of Wood Buffalo, Don Scott, says, “More work needs to be done to keep the lower townsite as protected as we can make it. Council is going to have some pretty serious decisions to make about what steps we’re going to be taking.”

Most Uninsured For Floods

Mayor Scott claims that most of the community does not have any flood coverage or were vastly underinsured. The Insurance Bureau of Canada explains that overland flood coverage is not included in standard policies and typically not available to those in flood hazard areas at all. This means that not only will funds for repairs to buildings be unavailable, but there will be no payouts for any additional living costs associated with displacement, unemployment, or other consequences of the flood.

Monica Ningen, Swiss Re’s president and CEO of Canada & English Caribbean, told Canadian Underwriter, “If flood insurance is available to these properties, it is prohibitively expensive, reflecting the high probability for damage. For these high-risk properties, a mechanism to subsidize part of the premium would be required to make it affordable. This could be achieved through a partnership between the industry and the government.”

Mayor Scott is quoted in the Fort McMurray Today, “There’s a lot of damage and not a lot of coverage…Without federal and provincial help in this situation, there are going to be people facing financial ruin.” The Alberta Premier, Jason Kennedy, believes that the Northern Alberta flooding disaster will meet eligibility criteria for a Disaster Recovery Program, as a one-in-100-year flood event. Mayor Scott estimated on May 4th, that there was more than $100 million in damage.

Insurance Repercussions of 2016 Fires

The evacuation order from the floods ended on May 3rd, the four-year anniversary of the evacuation caused by the 2016 wildfires. 80,000 people were ordered to leave Fort McMurray as flames engulfed almost 2400 structures. The 2016 Fort McMurray wildfires are the largest insured catastrophe in Canadian history, estimated at nearly $4 billion.

Despite the fact that many were able to rebuild after the fires, there are others who are still in ongoing battles with insurance providers. For the condominium community, difficulty to obtain coverage has been exasperated by a nationwide hard insurance market. While condominium corporations are required to insure all units and common property to replacement cost value, according the Alberta Condominium Property Act, this hasn’t been possible for all condo boards and people are losing their homes because of it.

The Cedarwoods condo corporation saw their insurance premiums increase in 2019 by 650% following claims related to the 2016 wildfires. The policy they secured cost $925,000 and only covered one sixth of the total appraised value. The Winchester Greens condo corporation is in a similar situation where 2019 quotes jumped 800% over their 2018 premiums and for only one third of the coverage. Kathy Bowers, owner of property management firm, Fort Management, claims that in light of insurance premium increases and declining property values, many owners have no other choice but to hand over their homes to the banks.

A Perfect Storm

Between the 2016 wildfires, record low oil prices, COVID-19, and now the flooding, the devastation for this community is unfathomable. In neighbourhoods like Waterway, residents are looking at a second or third rebuild after the 2016 fires and summer floods of 2013. “Few have had the misfortune of being hit more than once by natural catastrophes, but that’s the case for many of the residents in Fort McMurray,” Ningen told Canadian Underwriter. 

The road to recovery for the Fort McMurray community is long and uncertain. There is no simple solution given the risks of living in the boreal forest and a flood zone. Rob de Pruis of the Insurance Bureau of Canada explains, “There’s some really big global economic factors that are also coming into play here as well that we may not have as much control over.” The municipal government of Wood Buffalo is calling on Provincial and Federal governments to step in and find a solution.  Alberta Finance Minister, Travis Toews, confirms that the government is working with insurance providers and has requested that they “work to find solutions for condominium owners in the region.”

Cover image from Fort McMurray Today, Volunteer efforts save Heritage Village from flooding, Heritage Shipyard sees significant damage:

https://www.fortmcmurraytoday.com/news/local-news/volunteer-efforts-save-heritage-village-from-flooding-heritage-shipyard-sees-significant-damage

At Normac, we are expert insurance appraisals and can assist you in determining your total replacement cost value. Have peace of mind that you are sufficiently covered during a catastrophe.