This blog will likely get me burned in effigy outside the Record office, but I’m still writing it.
New Westminster residents who own in a strata need to take a hard look in the mirror as the reality of sky-high insurance rates hits their buildings.
During the past few months, stratas in Burnaby and the rest of B.C. have been receiving word of alarm insurance increases.
According to the Insurance Brokers Association of B.C., one real estate insurance brokerage advised its strata corporation clients that they should “budget for a 25%+ increase in insurance costs for 2019, possibly higher if the property had suffered losses. Some renewals have reportedly increased anywhere from 50% to 300% and the deductibles to cover claims have also increased substantially, from $25,000 per claim to as high as $250,000 and $500,000; at least one building has had its deductible increased to $750,000.”
Those increases will be passed on to owners, with renters also likely getting dinged to help offset the hikes.
It’s a crisis that the provincial government is scrambling to deal with as owners set their hair on fire.
So, why is this happening? Well, there’s been an apparent reduction in the number of companies insuring strata properties. According to the IBABC, other factors include an increase in global losses due to such things as climate change, as well as a rise in construction costs associated with rebuilding when a building suffers damage.
Those are all valid points, but I want to draw people’s attention to another factor listed by the IBABC: “The number of claims has increased.”
Several reasons are listed for a jump in claims, including the aging of buildings from the 1970s and 1980s, and an increase in the number of strata developments with the condo boom.
But there’s another thing: strata owners who cheap out when it comes to taking care of their buildings.
The IBABC cites the “natural reluctance of strata owners to undertake major system upgrades until problems occur with more frequency all add up to increased insurance claims and repair costs. If your building has a history of claims relating to water escape from system failures and/or resident activities, or it has an aging building system with a poor record of maintenance, its increased risk profile will also add pressure to the costs and levels of deductibles.”
I might get accused of victim blaming, but I’ve lived in enough stratas to know that many of them are poorly run, with short-sighted approaches to taking care of their buildings.
You might know what I’m talking about. Owners who refuse to spend any money because they demand monthly maintenance fees stay frozen, or rise only at a minimal level. They turn down any major system upgrades or attempts to boost a building’s reserve or contingency funds.
Anything to keep maintenance fees from going up.
I was part of one strata in an older building that knew its plumbing pipes needed to be replaced and kept putting it off year after year until the water system started malfunctioning. Then, when the strata council finally gave in, they picked the cheapest type of pipes possible – guaranteeing a much-shorter lifespan. I’ve been told by an old neighbour that just six years later, the plumbing is already given residents headaches.
I’m sure some readers have their own stories. Some buildings do think long-term and are still getting punished – I feel bad that this is happening.
But there are other stratas who have done a terrible job of building management, despite being warned by their property management advisors to take seriously such things as depreciation reports.
The IBABC offers some tips on how to limit risk:
- Be aware that being able to demonstrate long-term stability and a proactive approach to building maintenance will put your building in the best light and the best position for risk assessment. In these current market conditions, switching insurance brokerages or insurers may not be in your strata’s long-term best interests.
- Review your strata’s depreciation report to ensure your strata is meeting regulatory requirements, and that the report’s recommendations are reflected in the building’s maintenance and repair plan for items that pose a risk such as roofing, water lines, and drainage systems.
- If the strata corporation is faced with a change in insurance, dramatic increases in cost and deductibles, or the possibility of no coverage, immediately give notice to all owners regarding the changes. Early disclosure will help owners understand the situation, work together toward a solution. Provide the new summary of insurance as soon as it has been renewed so that owners can amend their unit coverage accordingly in a timely manner.
- If your building fails to obtain insurance, contact a lawyer to identify determine the potential liabilities and risks for owners and council members and what next steps you should consider.
- Repair access or building issues that may risk an injury. Address broken sidewalks, or security issues.
Ignore this advice at your own peril. Oh, and don’t blame the messenger.
Follow Chris Campbell on Twitter @shinebox44.