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Bulletin

BC Government Responds to Rising Insurance Costs for Strata Owners

Fasken
Reading Time 3 minute read
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Real Estate Bulletin

On June 23, 2020, the BC government tabled Bill 14 - Municipal Affairs and Housing Statutes Amendment Act (No. 2), 2020 (“Bill 14”), which aims to help strata owners mitigate costs associated with purchasing strata insurance. Bill 14 proposes amendments to the Strata Property Act, SBC 1998, c 43 and the Financial Institutions Act, RSBC 1996, c 141.

1. Prohibition of referral fees: Persons selling or managing insurance for strata corporations cannot receive or pay commission or compensation to anyone who is not a licenced insurance agent or licenced insurance salesperson for:

  • acting as an insurance agent or insurance sales person in British Columbia;
  • referring business in relation to the insurance of a strata corporation; or
  • any other prescribed purposes.

Bill 14 amendments will also authorize the Insurance Council of British Columbia to discipline contraveners through measures set out in section 231(1) of the Financial Institution Act, which include the suspension and cancellation of licences, and fines.

2. Information Certificates must include insurance coverage information: A strata corporation must include a summary of the strata corporation’s insurance coverage (the “Insurance Summary”) in its Information Certificate. The Insurance Summary is not binding on the strata corporation if it is obtained from the strata corporation’s insurer or insurance agent.

3. Changes to strata insurance requirements: Bill 14 amendments will require strata corporations to only obtain and maintain insurance on fixtures that are built or installed on a strata lot; this nuanced revision removes the requirement to obtain and maintain insurance on fixtures that are built or installed by the owner developer as part of the original construction on the strata lot. The Bill 14 amendments will also allow regulations to prescribe circumstances where a strata corporation’s property insurance does not need to be on the basis of full replacement value.

4. Notification requirements: Strata corporations will be required to inform owners and tenants as soon as feasible of any material change to the strata corporation’s insurance coverage, including any increase in insurance deductibles.

5. Expanded definition for what constitutes prevention of significant loss or damage: Section 98(3) of the Strata Property Act allows an expenditure to be made out of the operating fund or contingency reserve fund if there are reasonable grounds to believe that an immediate expenditure is necessary to ensure safety or prevent significant loss or damage, whether physical or otherwise. Bill 14 clarifies Section 98(3), as the prevention of significant loss or damage will include the strata corporation obtaining and maintaining the required insurance under its bylaws.

6. Limiting owner’s liability: If an owner is responsible for the loss or damage that gives rise to an insurance claim, but not as a result of the owner’s act or omission, the owner’s liability for the loss or damage will be limited to a prescribed amount.

7. Changes to depreciation report requirements: The proposed amendments strengthen depreciation reporting requirements, as strata corporations will no longer be able to use existing loopholes in the Strata Property Act to avoid completing depreciation reports. Bill 14 particularly deletes the option for a strata corporation to waive the requirement to obtain a depreciation report prior to spending from the contingency reserve fund.

8. Power to make regulations: The proposed amendments add the following regulation-making powers in respect of the following issues:

  • disclosure by insurers of their intention not to renew an insurance policy to the policy holders;
  • retroactively prescribing of circumstances where a strata corporation’s property insurance on the basis of full replacement value is not required; and
  • circumstances where a strata corporation need not obtain a depreciation report.

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