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Dear Condo Smarts: I’m an investor who owns three strata lots in an apartment building in south Okanagan. On a number of occasions, the strata corporation has tried unsuccessfully to prohibit rentals. This year, the council decided to increase our insurance deductible to $25,000 rather than face an increase in our insurance costs.
On the surface, this all seems well except for this: One of my tenants has caused a flood in the building by changing faucets without approval, resulting in a pipe break and over $65,000 damages and the resulting insurance claim.
My dilemma is, it looks like I’m stuck paying for the deductible because my tenant has left without a trace and the strata is holding me responsible.
I have two questions: Can the strata increase the deductible without our approval, even though it increases our personal risks? And why should I have to pay the deductible, as I didn’t cause the claim or damages?
Dear Daniel: As we approach the new year, I recommend that everyone who owns a strata lot give themselves a gift they will never regret — a condominium homeowner, landlord or tenants insurance policy.
These policies can add protection for liability, damages and coverage in the event the strata-lot owner is left paying the recoverable costs of a deductible or damages claim. Landlords can be held liable for the costs of damages, insurance deductibles and fines and penalties, if their tenants choose not to pay.
If you have a well-covered landlord insurance policy, it will likely cover your cost of the $25,000 deductible for a small deductible of your own.
Do the math. How many years of insurance would the $25,000 you’re paying have covered?
Strata-lot owners also need to remember they are responsible for their residents, tenants, trades they hire to work in their unit and even their guests. It is not uncommon to see an insurance deductible of $25,000 to $100,000 for water damage.
Every time a building reports another claim or failure, your risks increase. Earthquake insurance is a good example of the costs. Take an average 100-unit apartment that is insured for $12 million in replacement value. The earthquake insurance is likely at a 10 per cent deductible. That amount is commonly calculated on the replacement value. If we were to experience a major earthquake, the deductible for that building would be $1.2 million. If the damages were that high or greater, each unit’s assessment would be $12,000.
Ask yourself: Will your condo owner’s insurance policy cover that claim?
Tony Gioventu is the executive director of the Condominium Home Owners Association (CHOA). Contact CHOA at 604-584-2462 or tollfree at 1-877-353-2462, fax 604-5159643 or e-mail [email protected].