Amendments to Bill 141 of the Civil Code of Quebec imposes new obligations for co-owner syndicates.
You need to know what these obligations are and adequately prepare in order to properly protect your co-ownership in the event of an incident or disaster.
New provisions to better protect co-owners
Insurers need to differentiate between the value of a property at the time of its initial construction and the value added through improvements made by the co-owners of a unit.
In order to better protect co-owners, the government is now requiring the creation of a register of private portions that have not undergone any leasehold improvements resulting in an increase in value. These are called “reference units”. The value of a reference unit is determined according to its original or “base” condition and corresponds to the current cost of reconstruction.
The purpose of this provision is to identify improvements made by co-owners and thus determine whether a change made by a co-owner constitutes a leasehold improvement or a simple replacement of a component at the end of its useful life by a similar one.
Without this reference unit description or data sheet, the law presumes that there are no improvements to the private portions. Therefore, in the absence of the register, the insurer may not pay for improvements made by the co-owners.
In the event that leasehold improvements increase the value of the unit, the owner is required to personally purchase insurance to protect the value of the improvements. A second register or data sheet detailing the modifications to the unit is then required.
As for the reconstruction value of a reference unit, it is assumed by the insurance held by the syndicate of co-owners.
Reconstruction value of the building: a professional appraisal every five years
Another change to the law will be coming into force no later than June 13, 2022: every syndicate of co-ownership must have sufficient insurance coverage to ensure the full reconstruction value of the building. In the new version of article 1073 of the Civil Code of Quebec and according to decree 442-2020, syndicates are required to hire a member of the Ordre des évaluateurs agréés du Québec to appraise a building’s reconstruction cost.
In addition, the reconstruction value must include taxes, excavation costs and the fees of the various professionals involved in the reconstruction. The professional appraisal must be updated every five years. These updates must be sent to insurers in order to have the reconstruction cost indexed to its real value.
Get the right tools and advice
Unfortunately, all too often, co-owners’ syndicates are underinsured and bear the consequences of a disaster causing a total or partial loss. As a co-owner or representative of a syndicate of co-ownership, it is imperative to be aware of current laws and the possible repercussions.
Our real estate appraisal team is there to help you meet the new legal requirements and, of course, make sure you are adequately insured. Drawing on our skills and broad-based experience, we will produce the required reports for the reconstruction value of a building, a reference unit or leasehold improvements to a private unit.
Our professionals have extensive experience in the field of real estate valuations and are also able to assist you in other projects such as:
· Commercial, industrial and residential properties,
· Leasing properties (four units and up),
· Small farms,
· Seniors’ residences,
· Vacant land.
Whether or not your residential, commercial or industrial real estate project is a condominium, our professionals will provide you with recommendations adapted to your needs.
In addition, we are aware of the deadlines you are facing and are able to respond promptly and efficiently to your requests.
Do not hesitate to contact us for more information on your obligations under Bill 141 or any other real estate project.
This article was written with the collaboration of Daniel Bouchard, chartered appraiser.
19 Aug 2020 | Written by :