In a few weeks, the self-insurance fund will be mandatory in all co-ownership properties in Quebec. What is the car fund?
Quebec has approximately 30,000 condominiums. A large majority have two to six units. And most of your co-owners don’t know that in 2024 they have a new obligation: your co-ownership association must have a fully capitalized self-insurance fund.
This fund covers the amount of the deductible for the insurance coverage provided by your union. The deductible is the portion that your union pays in the event of a claim.
It may be abstract, but in the event of a disaster it can become a tragedy.
Here is an example inspired by facts shared with me by Yves Joli-Coeur, a lawyer specializing in joint ownership.
Maryse suffers water damage in her unit. The work will cost $100,000. In co-ownership, they are covered by the union and paid for by the building’s insurer, not Maryse’s home insurer.
hell
Maryse lives in a triplex. The insurer writes a check for $60,000 to the co-ownership association, which must come up with $40,000 to cover the deductible. This results in a special assessment of $13,333 for each co-owner, payable within 30 or 60 days. The problem is that Luc, who lives on the third floor, can’t afford the costs.
Maryse and Lucie, the co-owner of the ground floor, must therefore take their part and that of Luc to start the project. And they have to file for foreclosure on Luc’s condo and then sue him to get the money back. Luc may have to refinance or sell his condominium in three years.
Worse, when her neighbors have no money, Maryse must sue them and live in a damaged apartment for years before winning her case in court and after seizing their condos to force their sale in court.
She could even sue the union for negligence and seek damages.
Imagine the hell these people living under the same roof will experience.
Big numbers
Even if the law allows the self-insurance fund to be capitalized up to a maximum of $100,000, there is significant risk if that fund does not cover the deductible.
For large towers, deductibles of $300,000 or $500,000 are common. At Plexus it varies. But after a disaster, we’ve seen deductibles for a triplex go from $5,000 to $50,000.
If your co-owner doesn’t have a self-insurance fund, set it up now with the goal of covering the deductible before the end of 2025. With a $30,000 deductible for a sixplex, that works out to $5,000 per unit, or a monthly payment of $416.66. The joys of shared ownership…
Advice
• Do not confuse the self-insurance fund and the emergency fund. The latter serves as a reserve for future major work such as roof repairs, window replacement or renovation of common areas.
• As with the relief fund, it is strongly recommended (but not mandatory) that the self-insurance fund has its own bank account. It’s more transparent.
• Real estate agents are increasingly demanding information about the balance of the self-insurance fund. If it is insufficient or non-existent, a selling co-owner will have to reduce their selling price by several thousand dollars.