Co-ownership insurance: Overview of the new rules
Adopted on June 13, 2018, Bill 1411 introduced, among other things, several important changes to the Civil Code of Quebec concerning co-ownership insurance.2
Note that in a context where insurance companies are losing interest in co-ownership, while the new rules are placing an additional burden on the syndicates, your role as an advisor to potential buyers is becoming very important. To do this, you must fully understand the main aspects of this major reform. Here are the dates to remember.
In force:
Damage repair
The syndicate now has the option of not claiming compensation from its insurer for damage suffered. However, it must act diligently to ensure that damage to insured property is repaired in the event of a disaster.3
In this case, the syndicate cannot sue a co-owner (or a person living in a co-owner’s house) or the person for whom it is required to take out liability insurance (for example, the chair or members of the general assembly).
The sums incurred by the syndicate to pay the deductibles and make reparation for the injury caused to property in which the syndicate has an insurable interest may be recovered only through the common expenses imposed on co-owners.
However, the syndicate is entitled to claim damages from the co-owner (who could turn to his insurer) required to repair the damage caused by his fault and, in some cases, the damage caused by the act or fault of another person or by the act of the property that the co-owner has in his custody.
June 13, 2020:
Unit of reference4
One of the major amendments made to the Civil Code of Quebec (art. 1070 of the CCQ) is the obligation imposed on the syndicate to adopt a sufficiently accurate description of the privative portions (also called "unit of reference") so that the improvements made by co-owners can be identified.
On the one hand, the aim is to encourage the co-owner to cover, through his own insurance, the improvements made to his private portion and, on the other hand, to prevent these improvements from being covered by the syndicate's insurance.
Co-ownerships created before June 13, 2018 had to adopt such a description before June 13, 2020 at a meeting.5 Failing to do so, the private portions of these co-ownership properties are deemed–in the state in which they were on October 31, 2017–to include no improvements made by a co-owner.6
This could potentially be detrimental to the co-owners and result in insufficient insurance, as the syndicate's insurer will only cover original developments.
As for co-ownerships created after June 13, 2018, they must already comply with this obligation as of December 13, 2018.
October 15, 2020:
Mandatory liability insurance for the co-owner
As of this date, the co-owner will be required to take out insurance covering his civil liability towards third parties (art. 1064.1 of the C.C.Q.). The minimum amount of this insurance is set at one million dollars ($1,000,000) if the immovable contains less than 13 units and is increased to two million ($2,000,000) if it contains 13 or more.
However, if, on October 15, 2020, the co-owner already has civil liability insurance, he will be able to comply with this requirement (concerning the amount of coverage) when his contract expires, but no later than October 15, 2021.
April 15, 2021:
Mandate for a certified appraiser – Assessment of reconstruction cost for insurance purposes
The Civil Code of Quebec (art. 1073) will refer to the "cost of reconstruction" of the immovable which must be established for insurance purposes at least once every 5 years. If the last evaluation is after April 15, 2016, this requirement will begin only 5 years following the date of the last evaluation. As of April 15, 2021, the syndicate must call on a member of the Ordre des évaluateurs agréés du Québec to assess the reconstruction cost.
Syndicate property insurance – Minimally covered risks
The risks that must be minimally covered by the syndicate's property insurance policy, unless expressly excluded, are now defined: theft, fire, lightning, storm, hail, explosion, leaks and overflows of sanitary facilities and appliances connected to water distribution pipes inside the building, strike, riot or civil disturbance, the impact of an aircraft or vehicle and acts of vandalism or malicious acts. This requirement will come into force on April 15, 2021.
However, if, on that date, the syndicate already has civil liability insurance, it will be able to comply with this requirement when its contract expires, but no later than April 15, 2022.
April 15, 2022:
Contributing to the self-insurance fund
By that date, the obligation to contribute to the self-insurance fund established by the syndicate takes effect.
The self-insurance fund is used to:
- pay the deductibles for insurance taken out by the syndicate.
- compensate for the damage caused to property in which the syndicate has an insurable interest when the contingency fund or an insurance indemnity cannot provide for that.
Co-owners will be required to contribute to the self-insurance fund in proportion to the relative value of their respective fractions and according to the following criteria set out in the regulations.
If, when establishing the self-insurance fund, the syndicate is able to allocate an amount greater than or equal to the highest deductible provided for by its insurance (with the exception of the deductible for damage caused by an earthquake), no additional contribution will be required.
When the amount in the fund is less than or equal to half of the highest deductible provided for by the syndicate’s insurance, the total contribution of all co-owners during a fiscal year shall be equal to half of that deductible.
Should the capitalization of the fund be greater than half of the highest deductible provided for by the syndicate's insurance, the total contribution of co-owners during a fiscal year is equal to the amount resulting from the difference between that deductible and the capitalization of the fund .
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In a nutshell
June 13, 2020:
- Description of the reference unit.
October 15, 2020:
- Co-owners must take out liability insurance coverage of $1,000,000 (less than 13 units) or $2,000,000 (13 units or more).
April 15, 2021:
- Only a certified appraiser determines the reconstruction cost for insurance purposes.
- The syndicate must have property insurance coverage for the minimum prescribed risks.
October 15, 2021:
- A co-owner who, on October 15, 2020, already has liability insurance coverage, must take out an insurance policy with the minimum guarantee prescribed.
April 15, 2022:
- The obligation to contribute to the self-insurance fund takes effect.
- A syndicate that, on April 15, 2021, already has a property insurance policy in force must take out a policy covering the minimum risks prescribed.
1 Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutions (2018, chapter 23).
2 Regulation establishing various measures relating to divided co-ownership insurance, D. 9991-2020, 2020 G.O.Q. 2, 1328.
3 Art. 1074.2 C.C.Q.
4 Art. 1070, 1073 of C.C.Q.
5 Due to the COVID-19 pandemic, remote meetings of co-owners were allowed. The description of the private portions could also be established by the decision of the board of directors during the pandemic and is deemed valid until it is ratified or modified by the meeting of co-owners (Order 2020-029 of the Minister of Health and Social Services of April 26, 2020).
6 Art. 638, 653, 814 of Act 23 (transitional provisions).
