Property Management

October 16, 2024 Published by Golden Horseshoe Chapter - By Sandy Fantino

Like People, Older Buildings Need a Little Extra Care

From the Volume 21, Fall 2024 issue of the CCI GHC Condo News Magazine

It’s a fact of life that regular medical check-ups are important to stay healthy. The same is true when it comes to the wellbeing of the condos where we make our homes. And as condos are aging like the rest of us — with as many as 60% of condos in the Greater Toronto Area having been built before 1980 — this is becoming ever more important. Having a good understanding of the issues facing older buildings is essential to being prepared to meet any challenges and to avoid unforeseen surprises.

A practical approach to risk management

Ensuring the health of the condo building requires a planned, ongoing commitment based on a regular, systematic approach that proactively maps out and prepares for the challenges that older structures will invariably face. This is also essential to maintaining adequate insurance renewals for aging buildings, specifically those that are 40 years of age and older. These require renewal information from underwriters and markets on available upgrades and improvements to heating, electrical, roof and plumbing. While it doesn’t prescribe specific actions, the Condo Act provides some overall direction (see sidebar below).

By actively managing these matters, homeowners and condo associations can better protect themselves from the risks associated with aging condos and ensure a safe, well-maintained living environment.

Here are a few key areas owners and condo corporations should be focused on in managing the elder-building:

Regular Inspections and Preventative Maintenance to Ensure Structural Integrity: It is quite reasonable to expect that aging buildings may have issues like foundation problems, the need for a new roof, and may require upgrades to plumbing and electrical systems. Key parts of a building such as roofing and the heating, ventilation and air conditioning (HVAC) systems often need to be upgraded or even replaced every 20 to 30 years. Other concerns may relate to balcony repairs, replacement of windows, external cladding and the need to renovate parking garages subject to the often corrosive wear and tear of successive winters.

Regular inspections by qualified professionals can identify and address these matters before they become major problems. Routine maintenance tasks such as cleaning gutters, sealing leaks, and servicing HVAC systems can prevent more costly repairs.

Updating Systems and Components such as Electrical and Plumbing, Fire Safety: Older systems may not meet current municipal building codes or may be more prone to failure. Upgrading these systems can reduce risk and improve safety. Ensuring that fire alarms, sprinklers, water shut-off systems, and fire extinguishers are up-to-date and functioning is critical in adequately managing risk.

Association Reserve Fund: The condo association should maintain a reserve fund to cover major repairs and replacements for common areas and structural elements. An aging building may require more frequent and significant repairs, so a well-funded reserve is essential. The Condo Act also requires periodic reviews to determine if the reserve funds are adequate.

The level of funding has become more significant with the rise of inflation over the past five years and the increasing costs and shortages of building materials and skilled labour. The summer issue of Condo News (“Aging Condos and Shrinking Dollars”) provided an excellent overview of the financial pressures facing condos, not least of which is the jump in the residential construction price index produced by Statistics Canada due to the rate of inflation. This index is something that insurance professionals pay particular attention to when assessing a property.

It's also important that each condo owner take an active interest in the financial health of their condo association and engage in its daily operation. Owners need to be mindful of and alert to the potential upcoming costs and have their own financial affairs in order just in case they need to fund a special assessment.

Professional Risk Assessment: Periodic risk assessments by insurance professionals or risk management consultants can help identify vulnerabilities and suggest improvements. It is important that maintenance of older electrical, roof and plumbing components show they are being inspected semi-annually or, even more often for proper working order and wear and tear. Regularly review insurance policies to ensure adequate coverage as the building ages and its replacement cost value changes.

Communication and Policies: Keeping residents in the loop and informed is mission critical. It’s important to ensure that residents are knowledgeable about maintenance schedules, potential risks, and how to mitigate them.

Know the rules and the regulations

Unlike the approach to personal health care, the methodology behind a condo check-up is dependent on rules that govern the condo corporation. The headline is that in condos, responsibility for upgrades can vary based on the specifics of the condominium association's rules and the terms outlined in the individual ownership agreements.

Generally speaking these agreements cover:

Internal Upgrades and Approval Process: Homeowners are typically responsible for upgrades within their individual units. This includes things like kitchen remodels, flooring changes, and bathroom updates. Homeowners can usually make these improvements as long as they comply with local building codes and the condo association’s rules. Many condo associations have rules about modifications to ensure they do not affect the structural integrity or aesthetic of the building. Homeowners usually need to seek approval from the association before undertaking significant changes.

Structural and External Upgrades: The responsibility for structural changes or upgrades to the exterior of the building often falls on the condo association. This includes things like roof repairs, exterior painting, and upgrades to shared amenities such as pools and clubhouses. These are usually funded through the condo association’s budget and maintenance fees.

Shared Spaces: For common areas like lobbies, hallways, and recreational facilities such as pools and gyms, the condo association typically handles upgrades. Costs for these improvements are usually covered by the association’s budget and are shared among all unit owners through their monthly fees or special assessments if needed.

Insurance and Maintenance: The condo association often carries insurance for common areas and structural components. Homeowners are usually responsible for insurance covering their own units and any upgrades or improvements they make.

So, ensuring a healthy building is much like ensuring a healthy person. Keep things ship shape, have a secure financial base, and schedule regular check-ups to prevent or mitigate any future problems.

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Seeking guidance from the Condominium Act

While there is no legislation that mandates a regular condo health check, the Ontario Condominium Act, 1998, which governs the operation and management of condominium corporations in Ontario does offer some general guidance and good practices for older buildings.

While the Act itself doesn't provide detailed guidelines on specific upgrades or renovations, it does cover aspects related to maintenance, repairs, and upgrades through various sections. For residents and managers of older buildings, there are several key points to keep in mind to ensure you have all of your bases covered. They fall into five key areas:

1. Maintenance and Repairs: The Act requires the condominium corporation to maintain and repair the common elements of the property. This responsibility extends to ensuring that the property is in good repair, which can involve upgrading older systems and structures as needed.
2. Reserve Fund: The Act mandates that condominium corporations maintain a reserve fund to cover major repairs and replacements of common elements. For older buildings, this fund is particularly important as it helps ensure that there are financial resources available for significant upgrades and repairs.
3. Major Repairs and Replacements: For significant upgrades or replacements, such as replacing old plumbing or electrical systems, the condominium corporation typically needs to follow procedures outlined in the Act. This can include obtaining the consent of owners, particularly if the work affects the common elements or individual units. See #5 below.
4. Bylaws and Rules: Condominiums can have their own bylaws and rules, which might set specific procedures or requirements for renovations and upgrades. For older buildings, these may include provisions on how to handle significant upgrades or changes to the property.
5. Consultation and Voting: Major changes or upgrades, especially those that impact the common areas of the building, often require approval from the unit owners. The Act outlines the process for holding meetings and obtaining the necessary votes for such decisions.

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Sandy Fantino R.I.B. (Ont.) is a Vice President, Client Executive for the BFL CANADA Realty Division with over 12 years of insurance industry experience. Her focus is finding the best insurance solutions for condominium corporations and along with her team, she prides herself on professionalism and service to her clients.

About BFL CANADA BFL CANADA

Risk and Insurance Services Inc. is one of the largest employee-owned and operated commercial insurance brokerage and consulting services firms in Canada. Our Realty Division, with a team of over 200 real estate professionals located in 27 cities across the country, understands the risks faced by all types of properties from strata and condo corporations to apartments, commercial and bare land properties. To learn more about us and what we do, visit www.bflcanada.ca/realty-insurance-services