ARRRGGGGHH! There s a leak in my unit. Now what?

Transcription

1 ARRRGGGGHH! There s a leak in my unit. Now what? Presented by: Veronica P. Franco Clark Wilson LLP Tony Esposito BFL Canada Insurance Services Inc. Gaelan Porter FirstService Residential Moderator: Jamie Bleay Access Law Group

2 Agenda Legal principles on the duty to repair and the duty to insure; Handling a claim from the insurance perspective; Handling a claim from a property manager s perspective; Scenarios 2

3 LEGAL PRINCIPLES 3

4 STRATA CORPORATION S DUTY TO REPAIR STRATA PROPERTY ACT Repair of property 72 (1) Subject to subsection (2), the strata corporation must repair and maintain common property and common assets. (2) The strata corporation may, by bylaw, make an owner responsible for the repair and maintenance of (a) limited common property that the owner has a right to use, or (b) common property other than limited common property only if identified in the regulations and subject to prescribed restrictions. (3) The strata corporation may, by bylaw, take responsibility for the repair and maintenance of specified portions of a strata lot. 4

5 STRATA CORPORATION S DUTY TO REPAIR "common property" means (a) that part of the land and buildings shown on a strata plan that is not part of a strata lot, and (b) pipes, wires, cables, chutes, ducts and other facilities for the passage or provision of water, sewage, drainage, gas, oil, electricity, telephone, radio, television, garbage, heating and cooling systems, or other similar services, if they are located (i) within a floor, wall or ceiling that forms a boundary (A) between a strata lot and another strata lot, (B) between a strata lot and the common property, or (C) between a strata lot or common property and another parcel of land, or (ii) wholly or partially within a strata lot, if they are capable of being and intended to be used in connection with the enjoyment of another strata lot or the common property; 5

6 BOUNDARY OF A STRATA LOT Strata lot boundaries 68 (1) Unless otherwise shown on the strata plan, if a strata lot is separated from another strata lot, the common property or another parcel of land by a wall, floor or ceiling, the boundary of the strata lot is midway between the surface of the structural portion of the wall, floor or ceiling that faces the strata lot and the surface of the structural portion of the wall, floor or ceiling that faces the other strata lot, the common property or the other parcel of land. (2) If a strata lot is not separated from another strata lot, the common property or another parcel of land by a wall, floor or ceiling, the boundary of the strata lot is as shown on the strata plan. 6

7 APPLICATION OF PRINCIPLES The starting point: 1. What requires repairs: strata lot, LCP, common property? 2. Who is responsible for repairing it? Check the bylaws. 7

8 STRATA CORPORATION S DUTY TO REPAIR STANDARD BYLAWS Repair and maintenance of property by strata corporation 8 The strata corporation must repair and maintain all of the following: (a) common assets of the strata corporation; (b) common property that has not been designated as limited common property; (c) limited common property, but the duty to repair and maintain it is restricted to (i) repair and maintenance that in the ordinary course of events occurs less often than once a year, and 8

9 STRATA CORPORATION S DUTY TO REPAIR STANDARD BYLAWS (Cont d.) Repair and maintenance of property by strata corporation (Cont d.) (ii) the following, no matter how often the repair or maintenance ordinarily occurs: (A) (B) (C) (D) (E) the structure of a building; the exterior of a building; chimneys, stairs, balconies and other things attached to the exterior of a building; doors, windows and skylights on the exterior of a building or that front on the common property; fences, railings and similar structures that enclose patios, balconies and yards 9

10 STRATA CORPORATION S DUTY TO REPAIR STANDARD BYLAWS (Cont d.) Repair and maintenance of property by strata corporation (Cont d.) (d) a strata lot in a strata plan that is not a bare land strata plan, but the duty to repair and maintain it is restricted to (i) (ii) the structure of a building, the exterior of a building, (iii) chimneys, stairs, balconies and other things attached to the exterior of a building, (iv) doors, windows and skylights on the exterior of a building or that front on the common property, and (v) fences, railings and similar structures that enclose patios, balconies and yards. 10

11 STRATA LOT S DUTY TO REPAIR STANDARD BYLAWS Repair and maintenance of property by owner 2 (1) An owner must repair and maintain the owner's strata lot, except for repair and maintenance that is the responsibility of the strata corporation under these bylaws. (2) An owner who has the use of limited common property must repair and maintain it, except for repair and maintenance that is the responsibility of the strata corporation under these bylaws. 11

12 STRATA CORPORATION S DUTY TO INSURE STRATA PROPERTY ACT Property insurance required for strata corporation 149 (1) The strata corporation must obtain and maintain property insurance on (a) common property, (b) common assets, (c) buildings shown on the strata plan, and (d) fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot. (2) For the purposes of subsection (1) (d) and section 152 (b), "fixtures" has the meaning set out in the regulations. (3) Subsection (1) (d) does not apply to a bare land strata plan. 12

13 STRATA CORPORATION S DUTY TO INSURE STRATA PROPERTY REGULATION Definitions for section 149 of the Act 9.1 (1) For the purposes of sections 149 (1) (d) and 152 (b) of the Act, "fixtures" means items attached to a building, including floor and wall coverings and electrical and plumbing fixtures, but does not include, if they can be removed without damage to the building, refrigerators, stoves, dishwashers, microwaves, washers, dryers or other items. 13

14 COMPARISON OF STRATA CORPORATION S DUTIES STRATA CORPORATION S DUTY TO REPAIR STRATA CORPORATION S DUTY TO INSURE common property common assets limited common property unless it is the owner s responsibility in the bylaws those portions of a strata lot set out in the bylaws (i.e. windows and doors) common property common assets limited common property Building on strata plan and fixtures built or installed by the owner developer as part of the original construction (i.e. floor coverings, wall coverings, built in cabinets) 14

15 STRATA CORPORATION S DEDUCTIBLE STRATA PROPERTY ACT Insurance deductible 158 (1) Subject to the regulations, the payment of an insurance deductible in respect of a claim on the strata corporation's insurance is a common expense to be contributed to by means of strata fees calculated in accordance with section 99 (2) or 100 (1). (2) Subsection (1) does not limit the capacity of the strata corporation to sue an owner in order to recover the deductible portion of an insurance claim if the owner is responsible for the loss or damage that gave rise to the claim. 15

16 John Campbell Law Corp. v. Owners, Strata Plan 1350 Mixed residential commercial strata corporation Sewer pipe became blocked by a tree root. Problem tree belonged to neighbour. Sewer back up damaged ground floor commercial strata lot. 16

17 John Campbell Law Corp. v. Owners, Strata Plan 1350 I conclude that if a strata corporation has taken all reasonable steps to inspect and maintain its common facilities, consistent with the practice of other such associations generally, they should not be held liable for damages arising as a result of any strict statutory liability nor should they be put in the position of acting as an insurer by default. 17

18 Basic v. Strata Plan LMS 304 (Court of Appeal) Alleged that Strata Corporation failed to repair and maintain a drain system in the high rise building, caused both damage to his property 1997 leak to storage locker; strata hired plumber to clear backup 1999 more water, strata plumber clears back up 2000 major water damaging contents & mold; strata caps drain 18

19 Basic v. Strata Plan LMS 304 (Court of Appeal) 2001 strata hires engineer re-route drains 2006 another flood 2007 pipe leak repaired I also find that when problems came to the attention of the strata corporation, they acted promptly. The strata corporation is not an insurer. It has an obligation to act reasonably to discharge its responsibilities. Certainly there was a flood in 2000 but that was not the result of any negligence or breach of duty of the strata corporation. 19

20 Fudge v. Owners, Strata Plan NW 2636 Water back up related to washing machine Discharge pipe services only her unit and is located in a wall that forms a boundary Blockage in discharge pipe and/or main pipe? Minutes indicate that the wastewater piping system was under designed pipes were too narrow previous back up problems Court found no blockage backup cause: the number of units engaging the wastewater system at the same time overwhelmed it. 20

21 Fudge v. Owners, Strata Plan NW 2636 Court found that pipe was common property because: 1. of the location of the pipe - boundary wall; and 2. the discharge pipe, being integrated with the wastewater piping infrastructure, is: pipe for the passage of drainage located wholly or partially within a strata lot, which is capable of being and intended to be used in connection with the enjoyment of the common property Section 72 duty to repair triggered and includes correcting the design problem. 21

22 Wawanesa Mutual Ins. Co. v. Keiran FACTS: Pipe burst inside an internal wall, considered a strata lot pipe. No common property was damaged. Deductible - $10,000 Damage to Keiran strata lot - $3,

23 Wawanesa Mutual Ins. Co. v. Keiran As I have noted, because the damage occurred within the unit and not to common property, this is a situation where the homeowner had the duty to repair and maintain and is therefore responsible for the loss, regardless of the absence of fault or negligence on their part. In this sense, the matter may be viewed as if there were no strata corporation involved. Whether the repairs were paid as part of the deductible under the policy, or otherwise, they relate to damage for which in my view, under the Act and bylaws, the owner is responsible. 23

24 STRATA CORPORATION COMPENSATION Determine cause of leak and review bylaws for possible claims: Bylaw contravention s. 133 and 135; Responsible owner s. 158 Negligence common law 24

25 SUMMARY The cause does not determine who repairs. Who repairs based on the bylaws, subject to insurance. Typical bylaws make an owner responsible for repairing the strata lot regardless of the cause, subject to insurance. Typical bylaws make the strata corporation responsible to repair the structure of the strata lot, subject to insurance. If the strata corporation s insurance is triggered, insurance steps in to fund the repairs and the strata corporation with the approval of the strata s insurance adjuster arranges for repairs 25

26 SUMMARY An owner may be able to sue for compensation where the strata corporation or another owner has breached their duty to repair and maintain where that breach caused the damage. A strata corporation may be able to sue for the deductible or the damage below the deductible from the responsible owner or negligent owner (depending on the bylaws). 26

27 THE INSURER S PERSPECTIVE 27

28 PROPERTY INSURANCE REQUIRED FOR STRATA CORPORATIONS 149 (1) The strata corporation must obtain and maintain property insurance on (a) common property, (b) common assets, (c) buildings shown on the strata plan, and (d) fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot. (2) For the purposes of subsection (1) (d) and section 152 (b), "fixtures" has the meaning set out in the regulations. (3) Subsection (1) (d) does not apply to a bare land strata plan. (4) The property insurance must (a) be on the basis of full replacement value, and (b) insure against major perils, as set out in the regulations, and any other perils specified in the bylaws. 28

29 STRATA CORPORATION S INSURANCE A current appraisal ensures that the building is insured to full replacement value. Important to confirm the details of the appraisal (ie: does it include underground services, foundations, appliances etc) Confirm your policy covers for all perils required under the SPA and bylaws Ensure policy has owners, tenants and occupants as named insureds (s.155) 29

30 WHAT DIFFERENT POLICIES MAY RESPOND? Strata Insurance Policy Unit Owner s Policy Tenants Policy 30

31 STRATA CORPORATION INSURANCE POLICY common property common assets buildings shown on the strata plan, and fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot This includes original construction within an individual unit. 31

32 UNIT OWNER S POLICY Contents Upgrades/Betterments Deductible assessments Contingent condo property Additional living expenses / Loss of Rent 32

33 TENANT S POLICY Contents Additional living expenses 33

34 WHAT HAPPENS WHEN A LOSS OCCURS? Confirm what was damaged, and which policy covers that property. Different perils trigger different deductibles. Report the loss to all the applicable insurance providers. For a loss to a single unit, there could be 3 adjusters involved! 34

35 CLAIMS AGAINST STRATA CORPORATION S INSURANCE Strata corporation arranges for restoration crews to attend to the emergency work. Strata corporation obtains a quote for damages to confirm damage will exceed the deductible. If above deductible, claim opened. If below deductible, unit owner is responsible for repairs. 35

36 UNIT OWNER S CLAIM Mitigate damages. Report the claim to your own insurer. If upgrades/betterments involved, your adjuster will work with strata corporation s adjuster to schedule repairs. If below strata deductible, unit owner is responsible for repairs. Your personal insurance adjuster will confirm coverage and assist with repairs within unit. 36

37 TENANT S CLAIM Mitigate damages. Report the claim to your own insurer. Adjusters will work together to arrange schedule for accommodations. 37

38 STRATA DEDUCTIBLE Strata deductible is a shared expense. Check your bylaws. Possible chargeback to responsible unit owner. If a unit owner is charged back the deductible, they will likely have coverage under their unit insurance policy. 38

39 COMMON MISUNDERSTANDINGS ABOUT INSURANCE Insurance generally responds to resulting damage, and not the cause of the damage. Damage within a single unit: it is not always up to that unit owner to handle directly. All unit owners as named insureds have the ability to open a claim under the strata policy. Chargebacks should be based on the source of the damage, which may not always be the affected unit. Not all policies are equal. Ask your broker! 39

40 THE PROPERTY MANAGER S PERSPECTIVE 40

41 WATER LOSS: A PROPERTY MANAGER TIMELINE The property manager is notified by an affected owner, building manager, council member or the after-hours emergency response team. The property manager contacts strata or manager s preferred emergency restoration company to start emergency repairs. Initial mitigation usually takes at least three days to properly dry. The property manager reports the loss to the strata s insurance broker or after hours claims contact (e.g. Claims Pro Adjusters) to open an incident file. Loss is not reported to the insurer(s) until it is clear damage is above deductible. After emergency repairs are complete, the restoration company will provide the property manager with an invoice along with a quote and scope of remaining repairs. For losses over a certain amount, a 2 nd quote might be required. Strata pays emergency repair invoice. If, above deductible and repair quote approved, strata corporation starts final repairs. The strata corporation pays invoice up to the deductible. If below the deductible, the property manager will give the scope to the owner(s) and/or their insurance adjuster(s). We will look at repairs more closely in the upcoming slides. ** Remember to notify the broker of any circumstances that could lead to a claim. The broker is there to help you recover from loss. Plus, this will ensure claims timeframes in accordance with policy wordings are met.

42 FOR THE PROPERTY MANAGER WHO IS RESPONSIBLE FOR REPAIRS? General Repairs Emergency Repairs Final repairs following loss and/ or water damage * Slides based on assumption that standard bylaws apply. Property Managers are required to review the building bylaws before proceeding.

43 GENERAL REPAIRS THE STRATA CORPORATION S RESPONSIBILITY The Strata Corporation must repair and maintain all of the following: A strata lot in a strata plan that is not a bare land strata plan, but the duty to repair and maintain it is restricted to: (i) the structure of a building, (ii) the exterior of a building, (iii) chimneys, stairs, balconies and other things attached to the exterior of a building, (iv) doors, windows and skylights on the exterior of a building or that front on the common property, and (v) fences, railings and similar structures that enclose patios, balconies and yards.

44 EMERGENCY REPAIRS THE STRATA CORPORATION S RESPONSIBILITY The strata corporation s responsibility to repair a strata lot is limited to the structure of the building, which includes floor joists and framing within strata lot and boundary walls Therefore, the property manager, on behalf of the council, will typically arrange for emergency repairs to stop the flow of water and dry the structure of the building. Depending on the circumstances, the strata corporation will pay for the emergency repairs or submit the invoice as part of the insurance claim. Depending on the bylaws, the strata corporation may charge back the emergency repairs to the owner responsible for the loss if they fall below the deductible.

45 THE OWNER S RESPONSIBILITY An owner must repair and maintain the owner s strata lot, except for repairs and maintenance that is the responsibility of the strata corporation under the standard bylaws Often, affected owners argue that they should not repairing their damaged strata lot because they are innocent or didn t cause the loss. However, the standard bylaws make them responsible for repairing their own strata lot. Also, there is no provision in the Strata Property Act or in the standard bylaws that changes this allocation of responsibility just because the source of the damage arises from another strata lot or from common property.

46 RECAP ON REPAIRS FOLLOWING WATER LOSS / DAMAGE The strata corporation is responsible for the emergency repairs involving the drying of the structure of the building. The affected owner is responsible for repairing the damage to their strata lot

47 SCENARIOS & ACTIONS Damage caused by common property & affecting only common property below Strata s deductible Strata Manager to instigate emergency response. Strata is responsible for the cost of repairs Damage caused by common property & affected common property and/or strata lot(s) below Strata s deductible Strata Manager to instigate emergency response to common property and strata lot & repair to common property only under standard bylaws. Again, the Strata Manager should check bylaws in place Repair to affected SL may be coordinated through owner s insurer should determine prior to proceeding. Otherwise, owner is responsible for repair and costs.

48 SCENARIOS & ACTIONS CONT D Damage caused by common property & affecting only common property above Strata s deductible Strata Manager to instigate emergency response. If the loss/damage is over the Strata s insurance deductible, strata will pay the deductible and insurance will cover the remaining costs for repairs Damage caused by common property & affected common property and/or strata lot(s) above Strata s deductible Strata Manager to instigate emergency response. If the loss/damage is over the Strata s insurance deductible, strata will pay the deductible and insurance will cover the remaining costs for repairs to common property and affected strata lot Affected owner(s) should also notify personal insurers (for any betterments & improvements, contents etc.)

49 SCENARIOS & ACTIONS CONT D Damage caused by Strata Lot (SL) owner or Tenant & affecting only common property below Strata s deductible Strata Manager to instigate emergency response and repair. The cost of the repairs may be charged back to or claimed against the owner if owner caused damage or was responsible. Collect evidence from contractor and people first on scene to determine how damage was caused Damage caused by Strata Lot (SL) owner & affected common property and/or strata lot(s) below Strata s deductible Strata Manager to instigate emergency response to common property and strata lot & repair to common property only under standard bylaws. Again, the Strata Manager should check bylaws in place Repair may be coordinated through owner s insurer should determine prior to proceeding. Otherwise, owner is responsible for repair and costs. Collect evidence from contractor and people first on scene to determine how damage was caused. Strata Corporation may be able to chargeback to responsible owner or sue the owner for all costs

50 SCENARIOS & ACTIONS CONT D Damage caused by Strata Lot (SL) owner or Tenant & affecting only common property above Strata s deductible Strata Manager to instigate emergency response and repair. Notify Strata insurer of potential claim Collect evidence from contractor and people first on scene to determine how damage was caused. Deductible may be charged back to the responsible owner and if no bylaw, may sue at CRT under section 158(2). If bylaw requires proof of negligence (vs. responsible) deductible may not be recoverable Damage caused by Strata Lot (SL) owner & affected common property and/or strata lot(s) above Strata s deductible Strata Manager to instigate emergency response. If the loss/damage is over the Strata s insurance deductible, strata will pay the deductible and insurance will cover the remaining costs for repairs to common property and affected strata lot Collect evidence from contractor and people first on scene to determine how damage was caused. Deductible may be charged back to the responsible owner and if no bylaw, may sue at CRT under section 158(2). If bylaw requires proof of negligence (vs. responsible) deductible may not be recoverable Affected owner(s) should also notify personal insurers (for any betterments & improvements, contents etc.)

51 NOTES: AFTER AN INSURED LOSS Insurance money must be used without delay to repair or replace the damaged property unless the strata corporation has a 3/4 vote within 60 days to decide not to replace or repair damaged property after receiving insurance proceeds paid on a claim in respect of the damaged property. The insurance proceeds are then allocated among persons with an interest. Note: section 160 of the Strata Property Act allows parties to go to court to dispute the 3/4 vote. The strata corporation can pay for a strata corporation s insurance deductible from the CRF (without requiring a vote of approval by owners) or by special levy (without requiring a vote of approval by owners). This allows the strata corporation to quickly obtain insurance payouts to repair and replace common property and other assets. A strata corporation can sue an owner to recover the strata corporation s insurance deductible, if the owner is responsible for the loss or damage that gave rise to the claim.

52 RISK MANAGEMENT View risk management and good maintenance as a way to reduce loss / damage Last year there were over 400 claims in the FirstService Residential portfolio, with 42% of these claims as a result of water loss Try to be proactive rather than reactive Invite your Strata s broker to deliver education to owners on site Follow the water damage prevention tips on the next three slides: General Water Damage Drain Stack Cleaning Washing Machine Bathroom Caulking Toilet Leaks **Paper copies are available after the presentation, or by request, can be sent electronically

53 WATER DAMAGE PREVENTION TIPS

54 WATER DAMAGE PREVENTION TIPS

55 WATER DAMAGE PREVENTION TIPS

56 STRATA CORPORATION S MAINTENANCE DUTIES Strata corporations, through the strata council, must do the following for good maintenance and repair: Have a current depreciation report as per the legal requirements. Maintain, repair and renew common property and assets such as: building envelopes, parkades, landscaping, roads, utilities and much more. Budget for repair, maintenance and renewal work.

57 STRATA CORPORATION S MAINTENANCE DUTIES Strata corporations, through the strata council, should do the following for good maintenance and repair: Have regular physical inspections of buildings and assets. Ensure that maintenance and repair work is completed, inspected and documented. Gather, update and secure maintenance documents including handover material from the developer. It is important to have a good system in place as strata council members and strata management companies change. Communicate regularly with owners about maintenance and repairs. Develop a maintenance plan. Decide what process will be used to obtain a depreciation report. Some strata corporation may have bylaws that specify how contracts are awarded or what process is used. Assign responsibility for maintenance and repair. Have clearly defined roles and responsibilities for maintenance, repairs and renewal work. The work will need to be assigned, coordinated, monitored, documented and evaluated. Communicate to owners who is responsible for the repair and maintenance of limited common property

58 STRATA LOT OWNER MAINTENANCE DUTIES Strata lot owners must do the following for good maintenance and repair: Know what parts of the strata lot that strata lots owners are responsible to maintain or repair, or what parts of limited common property they are responsible to maintain or repair (for example, annual maintenance of patios in some strata corporations). Approve payment of repairs and maintenance from the annual operating fund, the contingency reserve fund or special levies to allow the strata corporation to meet its duties. In accordance with the Strata Property Act or where required in the bylaws, owners and/or tenants must provide access to their homes so that maintenance personnel can carry out their tasks.

59 STRATA LOT OWNER MAINTENANCE DUTIES Strata lot owners should do the following for good maintenance and repair: Read the depreciation report and understand the projected costs to maintain, repair and renew buildings and assets over a 30 year time span and how these will be funded and start saving if the strata corporation s primary funding model is through special levies. Know the common property, buildings and assets for which the strata corporation is responsible. Notify the appropriate person (often a strata council member and/or the strata property manager) if there is a maintenance problem with the common property, adjoining decks and balconies or within the strata lot to proactively address any emerging problems. Contribute to preventive maintenance and saving for future expenses. A wellmaintained property with a healthy contingency reserve fund is worth more when the time comes to sell and is less expensive to maintain over the long run.

60 SCENARIOS 60

61 SCENARIO #1 Water supply line to a refrigerator leaks. Damage to original flooring, and lower cabinets in kitchen in source unit only. Unit owner calls property manager in a panic. It turns out that the owner is uninsured. The total damage is below the strata corporation s deductible. Who repairs? The total damage is above the strata corporation s insurance deductible. Who repairs Who fixes the supply line? Does the one who fixes the supply line or undertakes any restoration or repairs have a claim for compensation? 61

62 SCENARIO #2 Unit 205 calls the property manager to report that her bathroom ceiling is wet though water is not dripping. The only damage is to the ceiling. The property manager sends in a plumber to investigate, who concludes that there is slow leak in the drain pipe for the unit above. The total damage is below the strata corporation s deductible. Who fixes the drain pipe? Who fixes the ceiling drywall? Does anyone have a claim for compensation for the expenses paid to repair? 62

63 SCENARIO #3 Unit 405 owner turns on the tap to fill his kitchen sink to wash a few dishes. His phone rings and he goes to answer the call. After he hangs up, he realizes he left the tap on and water is overflowing. Damage to: 405: original cabinets 305: ceiling, newly installed cabinets and flooring 205: drywall ceiling in unit 205 The total damage is above the strata corporation s deductible. 63

64 SCENARIO #4 Heavy rain overwhelms roof drains which overflow into the building. This has happened before. Six months ago, the strata corporation s consultant recommended that additional roof drains be installed. The strata corporation decided that this recommended work would be done in the next fiscal year as they do not have the funds to pay for it now. Damage: ceiling and original oak floors in PH1 ceiling and owner installed cork flooring in PH3. PH 3 owner does have unit insurance. PH1 does not. The total damage is below the strata corporation s deductible. Who fixes the roof drains? Who repair the damage to PH1 and PH2? Does anyone have a claim for compensation for the expenses they paid? 64

65 QUESTIONS AND COMMENTS? 65