May 5, 2020

Authors: Michael Bokhaut and Mihai Beschea

Here’s a common event in Alberta condominiums: A water pipe bursts in one unit, causing water to leak into several other units. Each unit suffers significant damage and the Condominium Board becomes involved with the repairs. The Board makes an insurance claim and pays the insurance deductible, which may be tens of thousands of dollars. 

This leads to an important question: Who is responsible for the deductible? The condominium as a whole or the owner of the unit where the damage originated?

Impact of Condominium Property Regulations on Insurance Deductible

As of January 1, 2020 an Owner may be automatically responsible to pay the insurance deductible if the damage originated in their unit (See s. 62.4 of the Condominium Property Regulation). It no longer matters how careful or how negligent the Owner was in maintaining their unit. 

There are limits to this liability: 

• The Condominium Corporation cannot charge back more than $50,000 to the Owner for the insurance deductible. 
• An Owner will not be liable if the claim arises from: 
  • normal deterioration of the common property;
  • an act or omission of the condo corporation or their employee/agent; and
  • “a defect in the construction of the unit or exclusive possession area assigned to the owner.” 

The meaning of “defect” in the context of these relatively new Regulations is an open question.  

Deficiency Issues with Condominiums

Traditionally, deficiency issues with condominium units have been classified into two categories: “patent defects” and “latent defects.” 

• Patent defects are apparent, visible and can be discovered through inspection and ordinary vigilance.  
• Latent defects are those that are not visible or discoverable through an inspection and reasonable inquiry.

We anticipate the Court would find it unfair to make a unit owner responsible for the insurance deductible if the “defect” was a Latent defect (meaning it was not visible or discoverable by the unit owner, even if they made reasonable inspections). Therefore, we anticipate the term “defect” in the Regulations will likely be interpreted as a latent defect (or something similar).  However, we cannot say for certain how the Court will rule on this issue because this term has not yet been defined in Alberta. 

Property Insurance Deductibles

Condominium Unit Owners should make sure their property insurance covers insurance deductibles up to $50,000. Further, Owners must be aware that taking steps to maintain their unit may not be a reliable defence, if the damage originated from their unit. 

Condominium Corporations have another tool to combat increasing condominium fees and insurance costs because it is now far easier to recover the insurance deductible from individual Owners. 

If you have questions about managing a loss or damage to a condominium unit please contact any of our Condominium Law Lawyers.