Standard Insurable Unit Descriptions 101

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WHAT IS AN SIUD?

SIUD stands for Standard Insurable Unit Description

A Standard Insurable Unit Description is an outline of all the standard finishings and fixtures of a condo unit based on original construction. It does not include any upgrades or betterments made by an individual owner.

What is the purpose of AN siud?

The purpose of the description is to provide clarity for condo boards and owners when determining the responsibility of insurance coverage in the case of a partial or total loss. All items listed in the SIUD would be the responsibility of the condo corporation’s insurance to replace; all other upgrades and betterments would be the responsibility of an individual owner’s personal property insurance.

Do we need one?

As of January 1, 2020, all condo corporations in Alberta are required to obtain an SIUD by their next insurance renewal.  This must be provided to the corporation’s insurance provider and to all the unit owners.

What about bare land condos?

The responsibilities of a bare land condominium are no different from a conventional condominium corporation, such as an apartment building or townhouse complex.  If the condominium bylaws state the corporation is responsible for insuring all standard finishes, an SIUD must be created.  If the bylaws state that the owners are responsible for reconstruction of their units, then an SIUD would not apply.  It is imperative that property mangers review the bylaws to confirm if an SIUD is needed or not. 

How do we get one?

If an SIUD has been provided by the developer, that SIUD must be used and it cannot be changed or altered.

If there was no SIUD provided by the developer, then a corporation may obtain one from a professional firm such as Normac.

Property mangers should review all disclosure documents to confirm if this has been created by the developer
or if the condo corporations needs to obtain one.

What sorts of finishes and fixtures does it include?

In their information publication, Service Alberta has determined that an SIUD must be created for each class type of a corporation and it should include all of the following fixtures and finishings:
  • floor coverings, wall coverings and ceiling coverings
  • electrical lines and fixtures, including lighting fixtures
  • plumbing lines and fixtures
  • natural gas lines and fixtures
  • fixtures with respect to air exchange and temperature control
  • walls that do not form the unit’s boundaries, and any windows and doors located in those walls
  • cabinets and counter tops
  • non-chattel appliances

what are class types?

In one condo corporation, there may be multiple class types. For example, a phased development with both townhomes and apartments would have at least two class types. An SIUD must be created for each class type and state which units fall under which class. 

How can our board adopt an SIUD into our by-laws?

According to the Government of Alberta, a corporation has three options to adopt an SIUD:
  • a board resolution
  • AN ORDINARY RESOLUTION
  • A SPECIAL RESOLUTION

If the board approves the SIUD at a board meeting, it must be presented at the following AGM to be approved or amended by ordinary resolution. From here, it must then be registered with the land titles offices.

How do we register our SIUD with the Land Titles office?

All approved SIUDs, either obtained by the corporation or provided by the developer, must be registered with the Land Titles office by using this approved Government Form.

You can find more information on the Government of Alberta website, here.

What is normac's SIUD process?

Step One
Request SIUD Proposal
You can request an SIUD proposal through our REQUEST A QUOTE portal of our website, or by contacting one of our client services administrators.
Step One
Step Two
Choose Service Type
Self directed (Condo corporation to inspect standard unit and answer questionnaire) OR Normac inspected (Normac to conduct site visit and prepare SIUD). *Please note that all interior inspections are suspended due to the COVIDD-19 pandemic until further notice. Only self directed SIUDs are being offered at this time. A Property Information Collector will consult with you to ensure we are able to gather the correct information to deliver the SIUD outline.*
Step Two
Step Three
Authorize Quote
Once you receive and review the quote, send back a signed copy to authorize and initiate the next steps.
Step Three
Step Four
Option 1 - Normac to Conduct Site Visit
One of our professional Property Information Collectors will complete a visual inspection of at least one unit to determine all standard finishes and fixtures. We will then prepare the outline and deliver the SIUD to the board. *Not being offered at this time.*
Step Four
Step Four
Option 2 - Board to Complete SIUD Questionnaire
The condo board will designate one of their own to inspect a unit and make note of all standard fixtures and finishes. Using the information collected, the board member will submit Normac's online questionnaire for review, including any necessary building plans. Normac's expert team will review the submission for completion and accuracy and deliver the outline to the board. *This is the only option being offered at this time due to the COVID-19 pandemic. Our team of professionals will assist you through this process and ensure you receive the support you need to complete your SIUD.*
Step Four
Step Five
Review and Adopt the SIUD
Once delivered, the condo corporation has the opportunity to review and amend the outline to ensure accuracy and consistency with the corporation's bylaws. The SIUD must voted in by the condo corporation at an AGM or SGM.
Step Five
Step Six
Register with Land Titles Office
Once the SIUD is approved by the corporation, the board must complete this form to register the SIUD with the Land Titles Office.
Step Six

Can I use the SIUD Outline from Normac right away?

In some instances, the board and condo corporation may choose to amend the standard finishes and fixtures listed in the SIUD Outline. This could be for several reasons, like if the unit inspected did not have all standard finishes, or if they would like to add further clarity.

After the outline is created, the SIUD must be voted in by the corporation and it must be registered with the Land Titles Offices in order for it to comply the Alberta Condominium Act.

What happens if a condo's insurance states it includes betterments?

A standard insurance unit description must account for the original fixtures and finishes of all units as a baseline.  If the condominium bylaws states that it includes betterments, a separate document must be created to account for all owner upgrades.

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Insurance Appraisals 101

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WHAT IS AN INSURANCE APPRAISAL?

A specialized report that provides an estimate for replacement cost value of a property. We call this Total Insurable Value (TIV). Property owners use the TIV to determine their insurance coverage in the case of a total loss. This is different from a market appraisal. 

DO I NEED ONE?

Yes, all properties should have an accurate and current replacement cost valuation provided by a professional insurance appraisal firm. 

Strata and Condo Corporations are required to obtain and maintain full replacement cost insurance on the building, the common facilities and any insurable improvements as outlined in their respective provincial Condominium or Strata Property Acts.  The adequacy of the insurance must be reviewed annually; only a professional insurance appraisal company can ensure compliance with this legal obligation.    

It is also critical for commercial and non-condo properties to obtain and maintain an adequate appraisal valuation annually to ensure that owners are insured to full replacement cost value.   Fluctuating construction costs, changing building codes and municipal bylaws, and other challenges necessitate a professional 3rd party insurance appraisal firm to determine the replacement cost value of the property.  

BOTTOM LINE:  A sufficient TIV and professional appraisal can provide confidence in the operational resiliency of buildings or assets in the event of a catastrophic loss.

WHAT ARE THE OTHER BENEFITS?

  • PEACE OF MIND

Rest assured that you have sufficient coverage if faced with a major disaster.

  • BETTER PREMIUMS + COVERAGE

An accurate replacement cost value ensures you only pay what you need to on insurance premiums. Plus, having a recent insurance appraisal may allow for more flexible terms with your insurance broker.

  • BUILDING MODERNIZATION

An accredited and professional appraiser will account for costs to bring older buildings up to current codes. This would include expenses for sprinkler systems, additional parking spaces, and handicapped access. 

HOW DO YOU DETERMINE THE TOTAL INSURABLE VALUE?

Normac uses local cost guides and our own in house costing research to determine TIV. TIV varies based on location and is broken down by:

  • Demolition and removal
  • Labour and professional fees
  • Materials to rebuild
  • Upgrade to current bylaws and building codes
  • Taxes
  • Inflation fluctuation

What kinds of properties do you appraise?

  • Lowrise and highrise apartment buildings
  • Townhouse complexes
  • Mixed use developments
  • Light industrial buildings 
  • Bareland properties
  • Home owner’s associations
  • Housing co-operatives
  • Government + senior’s housing
  • Places of worship
  • Malls and commercial developments
  • Hotels and resorts
  • And more!

What is included in the appraisal INSPECTION?

Structure

Foundation, frame, exterior + interior walls, roofing, interior finished, HVAC, electrical,
plumbing, lighting, fire protection equipments, elevators, parking, and more

Hard Landscaping

Pavement and walkways, curbs, retaining walls, fencing, lighting, patios,
underground services such as water, sewer, drainage, electrical, and more

Soft Lanscaping

Grass, shrubs, trees, irrigation systems, etc.

Common Elements

Swimming pools, jacuzzis, security systems, handicap lifts, etc

Equipment

Exercise machines, televisions, billiards tables, etc, may be included
depending on the arrangements made with your appraiser.

Typical Finishings

Flooring, ceiling, countertops, cabinets, appliances, baseboards and crown mouldings,
lighting fixtures, vaulted ceilings, plumbing fixtures, etc

What is not included in the appraisal inspection?

Unless otherwise stated in bylaws, personal belongings and contents are not included in the appraisal. This is the responsibility of the owner under their home insurance.

What is normac's insurance appraisal process?

Step One
Request Proposal
You can request a proposal through our REQUEST A QUOTE portal of our website, or by contacting one of our client services administrators
Step One
Step Two
Authorize Quote
Once you receive and review the quote, send back a signed copy to authorize and initiate the next steps.
Step Two
Step Three
Site Visit
Our client services team will arrange for a site inspection and send a property information collector to conduct the site inspection.
Step Three
Step Five
Review Property Details
Our appraisal team will review all the property details including the bylaws, strata plans, as well the property's regional and municipal building codes for updates.
Step Five
Step Six
Produce Report
Once all details have been reviewed, takeoffs completed and square footage confirmed, the appraisers will calculate the total replacement cost and finalize the report.
Step Six
Step Seven
Receive Updates
In years 2 and 3, our team will send you your updated valuation 60-90 days in advance of your insurance renewal date.
Step Seven
Final Step
Renew Your Program
You will receive an authorization form to renew your program with your final update. Sign the authorization form and we will take care of the rest. You will receive your new insurance appraisal report 60-90 days before your insurance renewal date.
Final Step

When and How Often Should an Appraisal be done?

  1. With a new construction, a replacement cost insurance appraisal should be done by the date of first occupancy.

  2. Every year. This is why Normac offers three year programs with free updates in year two and three. Having a recent appraisal completed ensures that any fluctuations to construction costs, building codes, and bylaws have been incorporated in the TIV.

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The Importance of Insuring a Condominium to its Full Replacement Cost

There is an important reason why many Canadian provinces require condo corporations to have replacement insurance on their condominiums. This is to ensure owners are protected in the case of major peril where the property is deemed a total loss. The full replacement cost, known to appraisers as the Total Insurable Value, is to include the building structure, all common facilities and assets, and any insurable improvements. Many corporations who do not comply with their provincial codes can be left at significant risk of being underinsured and responsible for any shortfall in coverage.

EXAMPLES OF PROVINCIAL CODES

Each Condominium Act/Code or Strata Property Act across Canada has a similar bylaw mandating that condo corporations insure their property adequately in the case of a total loss.

The BC Strata Property Act specifies in section 149.1 that the strata corporation must obtain and maintain property insurance for the full replacement value.i

In Ontario, the Condominium Act states that the corporation shall obtain and maintain insurance on behalf of the owners for damage caused by major peril, including fire, lightning, smoke and more, and the insurance shall cover the total replacement cost.ii

In Alberta, the condo corporation is required to insure the common property and units (not including improvements made to the units by the owners) against loss resulting from destruction or damage caused by any peril, and that this insurance must be equal to the replacement cost of the condominium as described.iii

In Quebec, the Civil Code of Quebec stipulates that the syndicate has an insurable interest in the condominium and shall take out insurance against ordinary risks in an amount that is equal to the replacement cost of the condominium.iv

ANNUAL UPDATES TO APPRAISAL AMOUNT

It is equally important to obtain annual updates on the amount to be insured. As the cost of construction and materials are constantly fluctuating, it is important to keep an up-to-date value that reflects these changes. It is therefore recommended that the corporation reviews the adequacy of the insurance annually. This not only ensures that they are always sufficiently covered, but also saves them from paying too much in premiums should there be a dip in industry costs.

It is particularly important to maintain annual updates for phased developments throughout the construction period. Ensuring Total Insurable Value is updated upon the completion of each phase is critical to protecting the development.

CASE STUDIES

To emphasize the importance of an accurate and up-to-date insurance appraisal, here are two examples of properties that experienced a fire resulting in the total loss of the structure. In the

first case, the condominium? was not adequately covered by their insurance benefit. In the second example, the business had secured sufficient insurance in the amount of the total replacement cost. The results were strikingly different.

Quebec Condominium Fire 

In 2008, a condominium was deemed a total loss after a fire destroyed the building. The condo board filed a claim for the common property and the condo owners filed for their personal portions. For the common property, there was a $454,938 shortfall. The cost of the rebuild was not completely covered due to the condo corporation’s insufficient insurance coverage and the owners were responsible for the difference, at a cost of $6,119 per unit.

While many of the owners had additional insurance in the case of a short fall, two owners did not. As a result, these owners were responsible for paying the special assessment themselves. These owners submitted a claim against the condo board and condo management, faulting them for not securing sufficient replacement cost insurance for the building. They maintained that, according to the declaration of co-ownership and section 1073 of the Civil Code of Quebec, it was the responsibility of the condo board to provide insurance coverage for an amount equal to the building’s replacement cost. As it was the condo manager’s decision to not insure the building in an amount equal to the replacement value, he was held personally liable for a portion of the deficit.

It was determined in court that it was the obligation of the condo board to ensure the building in an amount equal to the full replacement cost, including demolition, taxes, and other professional fees. In addition, the condo manager was found liable for the harm suffered by the condo owners as he had set the amount of replacement cost when he purchased the insurance coverage on behalf of the condo board.

Alberta Manufacturer Fire

In 2007, a massive fire destroyed one of the main buildings of a manufacturing plant in Alberta. A year prior to the fire, the owners of the plant had obtained an insurance appraisal from Normac for the first time. Before requesting the appraisal, the company had been estimating their replacement costs, but had not been updating them on a regular basis. Previously the property was insured for $13,000,000 less than the Normac estimate. Due to our updated appraisal, the client was able to completely replace their structure, which was a total loss. Despite this major interruption to their business, they were able to make it through and are currently thriving because their coverage was sufficient. Our appraisal meant they were properly insured for the full value and saved their business.

IMPORTANT POINTS TO REMEMBER

When considering these Quebec and Alberta examples, the value of obtaining a proper insurance appraisal is evident. A correctly performed insurance appraisal can save owners millions of dollars in repair and replacement costs and ensures a business can continue to operate after a total loss. Furthermore, working with an experienced appraiser can save owners and boards from significant conflict and protect a condo board from being held liable for a portion of replacement costs.

The most secure way to protect owners and corporations is to obtain an accurate replacement cost for the property annually. Only a professional appraiser can effectively determine the replacement value, which must include demolition and removal expenses, current building practices and technological improvements, local and national bylaw requirements, construction labour and material fluctuations, and necessary taxes.

These true-life case studies underline the importance of always obtaining a current insurance appraisal from a company that specializes in this profession. Disasters do happen, so make sure that your assets are properly appraised.

Our clients rely on us to provide the most accurate and reliable replacement cost reports. For a no-obligation proposal, please request a quote. 

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Sources 

  1. http://www.bclaws.ca/civix/document/id/complete/statreg/98043_09#part9
  2. https://ccitoronto.org/sites/default/uploads/files/condoact1998/CondoAct1998.pdf
  3. www.qp.alberta.ca/documents/Acts/c22.pdf
  4. https://ccq.lexum.com/w/ccq/en#!fragment/sec1072/KGhhc2g6KGNodW5rxIVhbsSHb3JUZXh0OnNlYzEwNzIpLG5vdGVzUXVlcnk6Jycsc2Nyb2xsQ8SIxIo6IW7ErWVhcsSHxKXEp8SpxKvEusS8xIdTxJB0QsSpUkVMRVZBTkNFLHRhYjp0b2MpKQ== 
  5. http://www.chad.ca/en/members/professional-practice/industry/condominium/427/the-importance-of-insuring-a-condominium-for-its-full-replacement-cost 

Determining Total Insurable Value and Understanding Fluctuations

There are many practical ways to measure the value of a condominium property in Canada, some being more useful than others in specific circumstances. 

For insurance purposes, the value of a condominium asset is defined by its full replacement cost, known to appraisers as the Total  Insurable Value. This total insurable value (TIV) is the single most important figure in determining the cost to fully  replace the property in the event  of a total loss and includes items such as the cost of materials, labour, bylaw and building code  revisions, as well as changes to standard materials deemed no longer appropriate. 

TIV Explained

Total insurable value is different than other common forms of property valuations such as Actual Market Value or the Income capitalization Approach. Unlike  appraising a property based on TIV, these alternative forms of valuation usually include additional considerations that would not affected the cost to construct a replicate of the property, such as the land value, which can impact the valuation drastically. The process of establishing an accurate and reliable TIV starts with a professional insurance appraisal from an experienced third party. An appraisal is the procedure of identifying, assessing, analysing, and reporting on the cost of an asset. For more information on this process,  revert to our recent publication – Insuring Your Property to Value. 

As mentioned, there  are a multitude of components that must be evaluated: building structure and systems, all common assets, applicable bylaw and building codes, landscaping, and even the cost of demolition. Once all factors have been accurately accounted for, the accredited appraiser can provide the condominium with the TIV, which enables  the owners or manager to insure the property sufficiently. If appraised too high, the condominium corporation will be paying excess amounts of money in premiums for insurance. 

If appraised too low, the asset is at high risk in the unfortunate event  of a total loss. This issue is more complex when considering the many external factors that can cause fluctuations of the TIV of an asset after its appraisal. 

TIV - FACTORS AND CONSIDERATIONS

STRUCTURAL, MATERIAL, AND LABOUR CONSIDERATIONS

Normac relies on local cost guides  as well as in-house databases and algorithms to assist our Professionals in determining the replacement cost for a given  property. These guides, along with our collection of data, give us accurate estimations of current construction costs, which are comprised of structural, material, and labour costs  within a given region. As economic conditions fluctuate, so do these variables. Changes  to supply and demand, workforce composition, even international trade can all contribute to a rapid, profound TIV fluctuation. 

LOCATION

While  the TIV has nothing to do with the cost of the land or market value, location can have a substantial impact on the replacement cost. Many contractors charge more  for their services in rural areas than in cities. As demand is typically lower in rural areas, transportation cost is factored into contractor pricing to send material and labour to these areas. Demolition is another significant contributor to the total replacement value. 

Demolitions  in urban  areas will cost more  due to space limitations, traffic considerations, and permits that may be required. Although many  condo units in downtown apartments are smaller  than what you would find elsewhere, smaller square  footage does not necessarily entail small price per square  foot. A small apartment still requires all the same amenities (plumbing, utilities, etc.). In larger units, those  expenses are stretched across more space, thus the price per square foot can be lower.

BYLAW AND BUILDING CODES, BUILDING PRACTICES

Bylaws and building codes are an important consideration when  appraising condominium assets. Due to variations between municipalities and provinces, bylaws and building codes  must be assessed in detail on a case-by-case basis as discrepancies between current standards and older  structures can reflect large portions of a Building’s full replacement value. Experienced Normac appraisers have seen cases wherein new building codes  and bylaws represented up to 30% of an asset’s TIV. Examples include updates to fire protection standards, elevator codes,  and parking requirements that would entail large amounts of capital to rebuild to current day requirements. 

CURRENT FLUCTUATIONS EXPLAINED

The aggregate of all Previous factors results in total insurable value fluctuations which, when  shifting above the insured value of a condominium property, pose a serious  concern for owners and managers. During Normac’s 20-year involvement in industry, we have had vast amounts of experience in monitoring, analyzing, and sharing our understanding of these major  fluctuations with our clients to keep them updated and protected. Currently, certain economic conditions have had a great impact on TIV, including: 

SUPPLY AND DEMAND OF RAW MATERIALS

Supply and demand of materials such as steel, concrete, and softwood lumber has been transitioning through a period of major imbalance, causing extreme price  increases (1).  With an overall decline in steel production, global increases  in demand for steel have drastically affected pricing. According to the World Steel Association, the cost of steel has been increasing since July 2017 and is expected to rise again by 8% through 2018 (2).  Canadian softwood lumber production has been stifled by recent, record- level forest fires, beetle infestations, and by climate change (3).  In 2017 alone, building and construction costs  saw an increase of 10% – 40% due to BC’s wildfires. This reduction in supply has lead to sawmill closures in Canada, further contributing to record level pricing (4). 

INTERNATIONAL TRADE

Trade relations between Canada  and the USA has further affected increases  in material costs. NAFTA is a key issue with an impact on trade relations between both countries which,  if it fails, may lead to a 5% overall decrease in the Canadian Dollar (5). Tariffs on raw materials are another main  consideration regarding fluctuating prices. It is expected that steel tariffs alone could raise condominium prices by $10,000 CAD (6). 

LABOUR AND MARKET SHORTAGES

Lack of skilled  labour equates to higher charges by contractors and construction companies as wage  increases are made to attract workers. As of December 2017, Canada was reported to have a national shortage of 38,000 construction jobs, third on the list of industries experiencing labour shortages (7). By March of 2018, the construction industry had jumped to the number two spot (8). This year, overall labor  costs are expected to raise an additional 2-3%, influencing overall construction costs as well as expenses such as demolition and debris removal, both major components of a condominium’s TIV. 

As insurance appraisal experts, Normac is always  aware of current events that may have bearing on a property’s Total  Insurable Value.

Our professional team consistently monitors construction costs  and we are attuned to industry developments and trends. As a result, we ensure that your  insurance Appraisals are accurate, and that your  properties are protected and appropriately insured to full replacement value. 

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SOURCES

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