A disaster, such as water damage, fire, or sewage backup, can strike at any time in a co-ownership property. When such an event occurs, it creates responsibilities and obligations for both the homeowner association and the co-owners.
Each party must respond appropriately to manage the aftermath and ensure that repairs and compensations are properly handled. In this article, we will explore the responsibilities of each party when dealing with a disaster.
Water damage, theft, fire... What qualifies as a disaster in co-ownership?
A disaster in co-ownership refers to any event that causes damage to the building itself. When a disaster affects only the property of a homeowner, they can directly file a claim with their insurer without involving the homeowner association.
However, if the disaster causes damage to the building, whether it's a private area or a common space, the homeowner association is responsible for managing the repairs. Let’s take a closer look at how this works.
What are the 4 different scenarios in case of a disaster in co-ownership?
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The disaster is covered by the co-ownership insurance, and the association files a compensation claim.
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The disaster is not covered by the insurance or is only partially covered.
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The damage is below the deductible.
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The disaster is covered, but the association chooses not to file a claim.
In each of these scenarios, there are distinct responsibilities for both the homeowner association and the co-owners. Let’s take a closer look at them:
1. The disaster is covered by the co-ownership insurance, and the association files a compensation claim
The role of the homeowner association
When a disaster is covered under the co-ownership insurance policy, the insurer compensates the association for the necessary repairs, after deducting the deductible. The deductible represents the portion of the repair costs that the association must pay out of pocket before the insurer contributes.
To cover this deductible, the association has two options:
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Use the co-ownership's self-insurance fund.
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Distribute the amount of the deductible among all the co-owners, based on their share of ownership.
If a third party, such as a tenant, co-owner, or a service provider, is responsible for the disaster and is identified as liable, the association can attempt to recover the deductible amount directly from them.
The role of the co-owners
If improvements made by a co-owner in their condo, such as renovations or specific equipment, are damaged during the disaster, it is the co-owner's insurance that will cover the repairs for these types of damages.
Additionally, it's important to note that a co-owner may be required to contribute to the payment of the association's deductible, even if their private property was not directly damaged by the disaster. The deductible is typically the responsibility of all the co-owners, who contribute in proportion to their share in the property.
It should also be noted that the co-owner cannot request reimbursement for their share of the deductible from their own insurer. This amount is generally not covered by personal home insurance. Therefore, he will need to personally settle their financial contribution to the association, according to the rules established by the homeowner association.
2. The disaster is not covered by the insurance or is only partially covered
The role of the homeowner association
When a disaster is not covered by insurance, or if the damages exceed the compensation provided by the insurer, the association remains responsible for the repair work. In this case, the association must cover the costs of the necessary repairs to restore the building.
To finance these repairs, the association has two options:
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Use its self-insurance fund: If the fund is sufficient, the association can cover the expenses directly.
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Distribute the costs among the co-owners: If the self-insurance fund is insufficient, the association can choose to distribute the costs, including the deductible and the shortfall in coverage, among all the co-owners, based on their share in the property.
The role of the co-owners
Following a disaster, a co-owner may be required to pay an amount to cover their share of the costs, even if their condo was not directly damaged.
In this situation, the co-owner can request reimbursement from their own insurer for the repair expenses they paid to the association (but not for the deductible), provided their insurance policy covers the type of disaster that generated these costs.
It is also important to note that each co-owner is responsible for their own deductible when making a claim to their insurer, and this amount cannot be recovered from the association.
3. The damages is below the deductible
The role of the homeowner association
When a disaster causes damages that are lower than the amount of the deductible, it is generally unnecessary to file a claim with the insurer, as the insurer only covers damages exceeding the deductible.
In this case, the homeowner association must repair the damages using its self-insurance fund or choose to distribute the cost of repairs among all the co-owners, according to their respective share. This approach allows for the repairs to be handled quickly without involving the insurer, avoiding the complex and costly administrative procedures for relatively minor damages.
The role of the co-owners
When the damages are below the deductible and the association decides to cover the repairs without involving insurance, the co-owners must contribute financially to these repairs.
4. The disaster is covered, but the association chooses not to file a claim
The role of the homeowner association
Even if a disaster is covered by insurance, the association may choose not to file a claim and instead finance the repairs through other means. In this case, the association can:
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Use its self-insurance fund to cover the repair costs.
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Distribute the cost of repairs among all the co-owners, based on their share.
If a responsible party for the disaster is identified, the association can decide to seek compensation for the damages. However, the ability to recover funds depends on who is responsible:
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If the responsible party is a co-owner: The association can ask them to reimburse only the amounts not covered by insurance, such as the deductible or the amount exceeding the insurance coverage.
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If the responsible party is a third party: The association can demand reimbursement for the entire damage, i.e., the total repair costs.
Why might the homeowner association refuse to file a claim?
The association may decide not to file a claim for several reasons. For example, it may consider that the costs related to the deductible and compensation do not justify the claim process. If the repairs are minor, the association might judge that the administrative and legal steps involved in filing a claim are too complex and costly in relation to the damages and prefer to finance the repairs in a simpler manner.
In some cases, if the responsible party is a co-owner or a third party with whom the association wishes to maintain a good relationship, the association may choose not to involve the insurer and manage the disaster amicably to avoid tensions.
The role of the co-owners
Co-owners do not have the power to force the association to file a claim with the insurer, as this falls under the management and strategic decisions of the association.
However, they can exert pressure on the association to encourage it to make certain decisions. For example, they can convene a general meeting to discuss the management of the disaster and the use of the co-ownership funds.
If necessary, if a co-owner believes that the management of the disaster is inadequate or ineffective, they could consider legal action. However, this process remains complex, costly, and relatively rare.
Condo owner: the importance of the self-insurance fund
The self-insurance fund plays a central role in the management of disasters in co-ownership. It is specifically designed to cover the deductible of the homeowner association’s insurance or to directly finance the necessary repairs as quickly as possible after a disaster. This fund helps ensure the financial stability of the co-ownership and guarantees that co-owners are not systematically called upon to pay unexpected fees following a disaster.
When purchasing a unit in a divided co-ownership, it is essential for the future co-owner to closely examine the amount of the self-insurance fund, and the regular contributions made to it. This fund can vary from one co-ownership to another, and its evaluation can provide valuable information about the financial health of the co-ownership and how it manages its resources in case of unforeseen events.
Home insurance: an essential protection for a responsible co-owner
Even if the homeowner association has insurance, it is essential for each co-owner to subscribe to adequate home insurance, with a sufficient amount to cover the risks they may be exposed to in the event of a disaster.
Before subscribing to their own insurance policy, it is strongly recommended that the co-owner consult the insurance policy of the homeowner association. This will allow them to understand the risks covered by this insurance as well as the coverage limits.
By knowing the details of the association’s coverage, the co-owner can adjust their own insurance to fill in the gaps, ensure coverage for risks not covered by the association, and thus guarantee complete protection for their private unit and personal belongings in case of a disaster.
Indeed, good coordination between the association’s insurance and the owner’s insurance is essential to avoid duplication or, conversely, uncovered risks.
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