Condo owners need to take in to consideration additional coverage for the building on their condominium association’s master insurance and coverage.

9th September 2013

CTV News, reported that a growing population and a modest job growth will prevent condo markets in Canada’s major cities from crashing, a report from Conference Board of Canada said. Sales are expected to fall this year, with eight percent drops anticipated in Toronto and Vancouver, but an all out crash is unlikely in Toronto, Montreal and Vancouver where markets are being watched with concern.

International Finance Magazine explains the difference between a condominium and an apartment, duties and responsibilities of a condominium association, different approaches of condo insurance and how to determine the additional amount of coverage you need for your unit.

What is a Condominium?

A condominium is one of a group of housing units where each homeowner owns their individual unit space and all the dwelling share ownership of areas commonly used. The individual units normally share walls, but that is not a requirement. The main difference between condos and individual homes are there is no individual ownership of a plot of land. All the land owned in the condominium project is owned in common by all the shareholders. All condominium buildings have associations that govern the policies of the condominium project, allocate expenses for maintenance and collect the monthly, quarterly or annual association fees that each owner pays for buildings, insurance and community maintenance. All owners of the condominium are members of the association.

Difference between Condominium and Apartments

An apartment building carries a single deed of trust that encompasses the property as a whole. A condominium carries an individual deed of trust for each unit, it is possible for a single purchaser to own every unit in a condominium development and operate in the same manners as an apartment.( i.e, he can rent out the other units)

A Real Estate developer may purchase an apartment building and convert the individual units into condominiums by bringing them up to city code and offering them for sale.

The main point of difference between a condo and an apartment is in case of  a condo you will not own a specific area of land, instead, you will own a percentage of land as a whole. For example .52 percent of the total land area plus .52 percent of all improvements and areas considered as common areas such as club house, swimming pool that are available to all owners and their guests.

Condominium Association

All condominiums have homeowner associations, the associations are legal entities that have enforcement powers to collect fees, enforce rules and regulations, put liens on homes or even initiate foreclosures if the owners fail to pay the fees for maintenance. The condominium association shall also have a board of directors, whose members are owners of units in a building, the members of the association elect a board of directors who enforce rules, maintain the complex and handle disputes.

Condominium Insurance

The Insurance Information Network of California explains condo insurance as a special insurance designed to fit the specific needs of condo owners. Condo owners need to take in to consideration additional coverage for the building on their condominium association’s master insurance and coverage, the condominium association will insure the building and its common elements based on two approaches

  1. Bare Walls
  2. Single entity

“Bare walls” means the association will insure only the building including walls, roof, floors, elevators and is not responsible for the interiors of your home including cabinets, interior partitions, plumbing, wiring, bathroom fixtures among others. Therefore the condo owner would be responsible for repairing and maintaining everything in his or her unit.

“Single entity” means that the association will insure the building as well as “certain” fixtures including cabinets and other appliances. The condo owner is only responsible for his/her personal property inside the unit or for any other additions made to the original structure, these approaches will spell out exactly what the condo association is responsible for and what the owner is responsible for. Condo owners should first review their association’s master policy to figure out how much of the unit they will be responsible for insuring. Make sure you understand who insures things like garages, sidewalks, swimming pools and other common areas, once you have determined how much of the building you are responsible for insuring, you can figure out the additional amount of coverage you need for your unit. Your policy should cover all items not covered by the association’s master policy, and any improvements you have made to the property.

For example: If your association’s master policy is a single entity policy, it will cover a certain amount of dollar amount for your carpet. If you upgrade your carpet, you are responsible to insure the difference between the master policy’s coverage and the value of your new carpet.