Written by Me Clément Lucas
Bill 41 & 141
Insurance in co-ownerships, one article at a time
Table of content
SECTION IV
RIGHTS AND OBLIGATIONS OF CO-OWNERS
Art. 1064.1 | Insurance
This article is new. Since October 15, 2020, it requires that all co-owners insure their liabilities towards third parties, which includes their own syndicates, other co-owners, tenants and other occupants. The implementing regulations specify a minimum amount of coverage. Most declarations of co-ownership already imposed such a requirement. Neither Article 1064.1 nor any other section of the Act imposes any other insurance coverage on the condo owner, including for improvements in their respective condo unit. Yet again, it is the declaration of co-ownership which generally imposes such an obligation.
SECTION V
RIGHTS AND OBLIGATIONS OF THE SYNDICATE
Art. 1070 | Register
Although the co-owners are not legally (but contractually – by the declaration of co-ownership, in particular) obliged to ensure their improvements, the Law requires the Syndicate to make available (accessible upon request) to the co-owners a description of the private portions allowing them to identify the improvements. An improvement can be defined as a private element (private part excluding the common parts) added or modified with regard to the original state of the private part bringing an added value to it (the improvement corresponds to the added value).
The law does not specify any metrics to build this document other than to indicate that it is not necessary to have as many descriptions as there are units and that the same description can apply to several units. Certain documents may be useful in preparing a description, because they may contain clues as to the state of the building at a given time (the developer’s advertising documents when the project is marketed, the standard preliminary contract including the summary of the specifications, the information memorandum, addendums to the preliminary contracts, price lists, pre-purchase inspections or reception of private portions within the framework of warranty plans for new or optional residential buildings, evaluation reports for insurance purposes, photographs or videos, particularly with respect to a possible “model condo”).
Also, PL 41 (art. 200) specifies that the description must obtain the approval of the co-owners at a meeting, representing more than half of the votes of the co-owners, present or represented. This article is related to articles 1097 C.c.Q. which provides for the majority of votes required to modify the description(s) and article 1106.1 C.c.Q. which provides for the situation of a Syndicate which is still under the control of the promoter (delivery of the description by the promoter within 30 days of the transition meeting).
Bill 41 – article 200 : «The syndicate of a divided co-ownership established before 13 June 2018 that is not controlled by the promoter must submit the first description of the private portions provided for in the third paragraph of article 1070 of the Civil Code to the co-owners for approval. The description must, not later than 13 June 2020, be approved during a general meeting by co-owners representing more than half of the votes of the co-owners present or represented ».
Art. 1071.1 | Self-insurance fund | Payment of deductibles | Reparation for injury | Criteria
This section is new. Since April 15, 2022, it requires all Syndicates to establish a self-insurance fund. The purpose of the fund is to cover the payment of deductibles, subject to the Syndicate’s recourse to obtain, for example, the payment of the deductible by a co-owner or his insurer in the cases provided for in article 1074.2 C.c.Q.
It can also be used in the event of an exclusion or a ceiling of the applicable guarantee insofar as the contingency fund or an insurance indemnity cannot provide for the expenses required to repair the causes and consequences of a loss.
This article is related to article 1072 C.C.Q. which has been amended to reflect the fact that the Syndicate must now have two funds: the contingency fund and the self-insurance fund.
Art. 1072 | Contribution for common expenses | Contribution to the contingency fund | Notification to the co-owners
As of January 1, 1994, all Syndicates must establish a contingency fund. As of April 15, 2022, they must establish a second self-insurance fund (see 1071.1).
The implementing regulation specifies that a maximum of 2 years is given to constitute or reconstitute this fund so that it reaches the highest deductible on the syndicate’s insurance policy, excluding, if applicable, the deductibles applicable in case of damage caused by an earthquake or flood.
Règlement 442-2020 – article 2 : « The minimum contribution of the co-owners of an immovable held in divided co-ownership to the self-insurance fund established under article 1071.1 of the Civil Code is determined on a yearly basis when the sums to be paid into the contingency fund are determined, in the following manner:
Art. 1073 | Insurable interest | Liability insurance | Regulations
Since January 1, 1994, all Syndicates have been obliged to take out property and liability insurance. With PL 141, the contours of this mandatory insurance have been modified. The Declaration of Co-ownership may also provide for additional insurance obligations.
Property insurance
Property insurance must include a reasonable deductible. The Bill provides that the government may, by regulation, determine the cases in which a deductible is considered unreasonable. To date, there are no such regulations.
The reasonableness of a deductible depends on the particular situation. A deductible could be reasonable for a building with a history of claims or risks, and unreasonable for another building.
The law provides that property insurance excludes improvements made by a co-owner to his part when they can be identified in relation to the description of that part. It is possible to conclude from this that if the syndicate fails to make such description(s) available, it is obliged to insure the entire immovable.
The insurable value of the building, which must be included in the property insurance, must provide for the reconstruction of the building in accordance with the standards, practices, and rules of the trade applicable at the time. We thus move from new replacement cost insurance to new replacement cost insurance for reconstruction. This value must be appraised by a certified appraiser (according to the implementing regulations) at least every 5 years.
Property insurance must cover the usual risks. These risks are defined by government regulation. They are covered by law. The law enshrines a form of all-risk insurance (everything is covered, except what is expressly excluded) against limited-risk insurance (only what is specified is covered). This coverage can be reduced, provided that the risks covered by law are expressly excluded in the insurance policy or in an endorsement, and in clear (typographical) print.
Liability insurance
The Syndicate must not only insure its own liability (since January 1, 1994), but also that of the individuals who operate the Syndicate on a day-to-day basis.
The syndicate can be held liable on a number of occasions. In particular, the syndicate is: ” […] liable for damage caused to the co-owners or third persons by faulty design, construction defects or lack of maintenance of the common portions, without prejudice to any recursory action” (art. 1077 C.C.Q.).
Special rules
It is possible to provide, by bylaw, for rules governing the syndicate’s insurance coverage that vary according to the different categories of buildings, notably in terms of size, value and geographic location. For the moment, the implementing regulations do not contain any special rules for small condominiums, for example. All condominiums are subject to the same obligations.
Art. 1074.1 | Loss | Immunity
This article is new. It provides that the Syndicate (i.e. the Board of Directors) may decide not to make a claim against its insurer, even in the event of a loss likely to trigger the cover provided under the policy. There is a distinction to be made here between declaring a claim and claiming the application of the cover that may result from it.
Furthermore, while the Syndicate has a choice here, as provided for in paragraph 1, the consequences are set out in paragraph 2. The Syndicate must see to any post-loss work that would normally have been covered by the insurer. Furthermore, the Syndicate cannot impose the consequences of its choice on the co-owners or any other persons in its home (young children, for example). It has no recourse, even in the event of fault on their part, for amounts that would normally have been covered by the Syndicate’s insurer.
Art. 1074.2 | Recovery | Nullity
This article is new. It was amended on March 17, 2020 to add the underlined section. It determines the fate of sums paid or advanced by the Syndicate, not covered by its insurer.
Common expenses
In principle, the Syndicate must distribute these sums among all co-owners. Where they relate to restricted-use common portions of the immovable, such as work on them, the possibly different apportionment provided for in the Declaration of Co-ownership must be applied (ref. art. 1064, para. 2 C.C.Q.).
Damages
As an exception, the Bill provides for the Syndicate’s right of recourse in the event of :
- fault of the co-owner;
- the act of a person for whom he is responsible (added March 17, 2020);
- an act involving property in the co-owner’s custody (added March 17, 2020).
Any stipulation to the contrary is deemed unwritten. However, it must be contrary. Thus, a clause in a declaration of co-ownership or by-law defining when a co-owner is at fault would not, in our opinion, be contrary to this article.
Art. 1075 | Payment of the insurance indemnity | Use of insurance indemnity | Criteria
Since January 1, 1994, in the event of a major loss, the Syndicate or its insurer must pay the indemnity due to a trustee.
Since January 10, 2020, the law has been slightly amended to provide that this designation must be made without delay if it has not already been made. There is no legal requirement to be an insurance trustee. Most declarations of co-ownership require that the trustee be a member of a professional order that ensures the protection of sums held in trust by its members. This is the case for members of the Quebec Bar or the Chambre des notaires du Québec. It is also advisable to do business with a professional with expertise in the field, particularly in co-ownership law.
The law also stipulates that a government regulation may specify the criteria for qualifying a loss as significant. For the time being, the implementing regulations are silent in this regard.
Art. 1075.1 | Subrogation | Exception
This article is new. It deals with the subrogatory recourse of an insurer in co-ownership.
Prohibition of recourse
It prohibits subrogated recourse by an insurer who has paid compensation. The insurers concerned are those of the persons listed, and the recourse in question is against those same persons. For example, the insurer of a syndicate wishing to take recourse against a contractor totally unrelated to the co-ownership would not be restricted by this article. On the other hand, it would be against a co-owner at fault.
Exception
The principle of non-subrogation does not apply in cases of bodily or moral injury. This is an important exception. There is also an exception in the case of intentional or gross negligence.
Art. 1078 | Judgment against the syndicate | Execution
Just like the contingency fund, the self-insurance fund, which is the property of the Syndicate, is granted a certain degree of protection. It would not be possible to have it seized for the purpose of enforcing a judgment unrelated to a sum to which this fund is assigned.
On the other hand, a co-owner who has been unjustly charged with the payment of an expense that should normally have been paid from this fund could probably, and by virtue of a judgment to that effect, proceed to have it seized in order to be reimbursed in the event that the Syndicate does not voluntarily comply with the said judgment.
Art. 1097 | Double majority
Article 1097 deals with decisions taken by the general meeting of co-owners by a more demanding majority than those provided for in article 1096 C.c.Q. Since March 17, 2020, modifications to the description(s) of private portions must not only be approved by the meeting, but also by the majority provided for in article 1097.
Art. 1106.1 | Duty and liability of the developer
This article is new. It sets out the documents that must be submitted by the developer within 30 days of the transition meeting provided for in article 1104. These documents include a description of the private portions.
In the event of failure to do so, the developer may be required to compensate the syndicate for any loss suffered. The consequence provided for in article 1073 (see our comments) also applies in this situation.
The Syndicat must insure the entire building as if there were no improvement, until such time as this description is made available to the co-owners. Any resulting prejudice to the Syndicat would also be compensable by the developer, who therefore has every interest in providing this documentation as soon as possible, and even well before the transitional meeting.
1106.1. « Within 30 days of the special meeting, the developer shall provide the following to the syndicate:
(1) the maintenance log kept for the immovable and the contingency fund study;
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