A Strata Corporation’s Responsibility To Repair & Maintain Strata Lots
We are taking this opportunity to republish one of our more popular articles, originally published October 16, 2014, as we can now include a Chinese language translation of the entire article (including the Handling Uninsured Claims within a Strata Corporation portion provided by Clark Wilson LLP).
Chinese language translation of this article can be found here.
Strata Corporations often wrestle with the question of who is responsible for repairing a Strata Lot when there is water damage as a result of a leak, drainage backup or other calamity. Included below for your benefit is advice offered by Clark Wilson LLP on the subject, which we hope will provide some guidance. Special thanks to them for offering this advice.
The content of Clark Wilson’s article covers incidents where water damage (which can be extended to fire, floods and other calamities) emanate from one area into a Strata Lot. Some basics before we get there:
– Whenever there is loss or damage to Common Property, the Strata Corporation is responsible for repairs to the common property. This includes repairing the cause of the damage whenever the “damage causing thing” is common property (e.g. a leaking pipe, a failed roof membrane, a clogged gutter, etc.) as well as the resultant damage within Common Property (e.g. a common hallway where the carpet is stained).
– When there is a property loss or damage within one or more Strata Lots and/or Common Property where the amount of damage exceeds the Strata Corporation’s insurance deductible, an insurance claim can be made on the Strata Corporation policy. This means that the repairs within the damaged Strata Lots (but not including betterments and improvements to the Strata Lots) and Common Property are paid for by the Strata Corporation and then reimbursed by the Insurers (or paid for directly by the insurers, with the Strata paying the deductible as the case may be). A “business decision” may be made by a Strata Corporation not to file a claim, for example when the amount of damage only slightly exceeds the deductible and the risk of a premium/deductible increase is high, but that doesn’t change the fact that the affected Strata Lots are entitled to the benefits of the insurance policy and therefore should have their damage to original fixtures remediated by the Strata Corporation.
– In all instances where damage emanates from a Strata Lot to another Strata Lot and/or Common Property, the Strata Corporation may assign “responsibility” for the damage to the suite from where the loss or damage originated and seek reimbursement of the Deductible from that Strata Lot owner. In practice, many Strata Corporations simply charge this back to the Strata Lot responsible, but according to the SPA [Section 158(2)] it should be pursued in the courts. For this reason, many Strata Corporations enact a “chargeback” bylaw that permits the Strata Corporation to charge back a Strata Corporation deductible to the responsible Strata Lot owner without having to go to court.
– The practical reality is that in the middle of the night, the Strata Corporation (usually through the Property Manager) will be called upon to act immediately when water is leaking into a Strata Lot. At that time it will not be readily known where the water is coming from, or who may ultimately be responsible for paying for the cost of the emergency response and the permanent repairs. Nor would it be wise to tell Owners to deal with it themselves- they expect that the Strata Corporation will respond to mitigate the damage and it is in the best interest of the Strata Corporation to arrange for the problem to be handled professionally. Accordingly, the Strata Corporation should attempt to arrange for a plumber, roofer, or whomever to halt the source of the damage and perform whatever emergency work is required to the Strata Lots and Common Property to ensure that the loss is kept as limited as possible. These trades should identify the source of the damage- a Strata Lot or Common Property- and address it.
The information below has been provided by Clark Wilson LLP and is intended to cover the various scenarios where the amount of damage is below the insurance deductible for a Strata Corporation. A Strata Council should always seek specific legal advice when dealing with the various scenarios that could arise, and the following is offered as a guide but it must be recognized that there is no “one size fits all” approach to these sorts of problems.
Handling Uninsured Claims within a Strata Corporation
One of the most common questions that we get asked as lawyers to Strata Corporations is who is responsible to pay for repair and replacement costs for damaged property when the cost to repair or replace is below the deductible on the policy of insurance taken out by the Strata Corporation under section 149 of the Act or is excluded from coverage from some other reason. The short answer is: if there is no insurance coverage, responsibility for the repair or replacement falls to the party (be it the Strata Corporation, a separate Section or an Owner) that is ordinarily responsible for the repair and maintenance of the damaged property under the Strata Corporation’s bylaws. This article will work through some common scenarios to identify responsibility for the repair or replacement. For the purposes of this article, the reader should assume that Strata Plan XYZ 007 has the standard bylaws, including Standard Bylaws 2 and 8[i], and that the Strata Corporation’s insurance policy has an insurance deductible of $5,000 for water damage claims.
The bathtub in Strata Lot 10 overflows when left running and unattended by a resident, resulting in water damage to the Strata Lot below. The cost of repairing the damage to the Strata Lot below, Strata Lot 5 (which has not had any alterations), is $4,000. The damage to Strata Lot 5 consists of water-soaked carpets and ceiling drywall. It is irrelevant whether or not these damaged items are original fixtures or improvements.
As the cost to repair Strata Lot 5 does not exceed the insurance deductible, this is not an insured claim on the Strata Corporation policy. As a result, we look to the bylaws to determine who is responsible for addressing the carpets and drywall. Standard Bylaw 2(1) provides that an Owner is responsible for the repair and maintenance of their Strata Lot, other than repair and maintenance that is the responsibility of the Strata Corporation under the bylaws. The items that the Strata Corporation is responsible to repair within a Strata Lot are identified in Standard Bylaw 8(d) – these items do not include the carpets or the ceiling drywall.
As a result, it is the “innocent” Owner of Strata Lot 5 who is responsible for carrying out and paying for the work necessary to address the water-soaked carpets and ceiling drywall, or if they have a personal homeowner policy on their contents and improvements they can file a claim on that policy which may provide coverage for repairing the damage subject to the owner of Strata Lot 5 paying a deductible on that policy. The owner of Strata Lot 5 may then try to recover from the owner of Strata Lot 10 the insurance deductible that the Strata Lot 5 owner paid. If the Strata Lot 10 Owner refuses to reimburse the amount of the deductible to the owner of Strata Lot 5, the owner of Strata Lot 5 may choose to sue the Owner of Strata Lot 10 in Small Claims Court. In any event, the Strata Corporation has no legal obligation or authority to get involved in the potential dispute between the owners of Strata Lots 5 and 10.
A water supply pipe that is located in the ceiling above Strata Lot 107 suddenly breaks, causing water damage to the Strata Lot. The cost of repairing the damage to Strata Lot 107 (which has not had any alterations) is $4,000. The damage to Strata Lot 107 consists of water-soaked carpets and ceiling drywall.
As the water supply line forms part of the Common Property of the Strata Corporation (see section 1(1)(b)(i)(A) of the definition)[ii], the Strata Corporation is responsible for the repair and maintenance of the water supply line.
However, as with Scenario 1, the water-damaged property does not fall within the Strata Corporation’s repair and maintenance responsibilities under Standard Bylaw 8(d). As a result, it is the owner of Strata Lot 107 (or their insurer, as explained above) who is responsible for carrying out and paying for the work necessary to address the water-soaked carpets and ceiling drywall.
A Common Property water supply pipe that is located in the ceiling above Strata Lot 42 has pinholes and slowly leaks, causing water damage to the Strata Lot. The cost of repairing the damage to Strata Lot 42 (which has not had any alterations) is $4,000. The damage to Strata Lot 42 consists of water-soaked carpets and ceiling drywall. The strata council was not aware of a pinhole leak problem in any of the water supply pipes in the building prior to the leaks into Strata Lot 42.
The fact that the water damage was caused by a slow water leak, instead of a sudden break, does not change the allocation of responsibility for the necessary repair work: the Strata Corporation is responsible for repairing the water supply line while the owner (or their insurer) is responsible for repair of the water-damaged property in their Strata Lot.
A water supply pipe that is located in the ceiling above Strata Lot 52 has pinholes and slowly leaks, causing water damage to the Strata Lot. The cost of repairing the damage to Strata Lot 52 (which has not had any alterations) is $4,000. The damage to Strata Lot 52 consists of water-soaked carpets and ceiling drywall. This is the fourth Strata Lot in the building damaged by pinhole leaks. The Strata Corporation received a report from a consultant two years ago, advising that the plumbing in the building needs to be replaced because of a systemic problem with pinholes. The owners have been asked to approve a special levy for the plumbing replacement work but two attempts to pass the necessary ¾ vote resolution have failed.
In this scenario, there is a reasonable likelihood that a court would find the Strata Corporation negligent in discharging its duty to repair and maintain common property as a result of the failure of the owners to approve the ¾ vote resolution to raise the special levy funds. However, the fact that the Strata Corporation may have been negligent does not mean that the Strata Corporation must repair the owner’s Strata Lot – only that the owner is entitled to advance a claim against the Strata Corporation for indemnity of the costs that the owner incurs repairing their Strata Lot as a result of the Strata Corporation’s negligence.
It is important to note in this advice that it is not a Strata Corporation, Property Manager or an angry Owner who would define “negligence”. It is a Judge who would do so. Unless there is an insurance claim and the Strata policy is activated, the duty to Repair & Maintain a Strata Lot under the standard bylaw wording is the Owner’s. While there will be some practical difficulties in dealing with angry Owners who may have expected that the Strata Corporation would repair the resultant damage from a leak (whether it is from a dishwasher above or a common property pipe) there is no legal obligation to do so. An important point to make is that the deductible for a typical homeowner policy is far lower than a Strata deductible. From a dollars and cents perspective, while individual owners may be slightly worse off by having to file an insurance claim for repairs to their Strata Lot and thereby triggering a deductible on their policy, this advice actually shifts a greater burden onto the insurers who have typically not been required to get involved in claims where the Strata Corporation’s policy was not activated (because most Strata Corporations in the past have been under the impression that they are responsible for repairs resulting from a failure of Common Property and have been arranging and paying for repairs to Strata Lots that they are not responsible for). In this sense, Strata Corporations actually face a lessened burden on smaller losses- shifting more of the responsibility onto Strata Lot owners and/or their personal home insurers. No doubt those insurers will adjust their pricing accordingly as Strata Corporations begin to understand that they are not responsible for repairs to Strata Lots unless negligence is assigned in court.
[i] Standard Bylaws 2 and 8 of the Strata Property Act state:
(1) An owner must repair and maintain the owner’s Strata Lot, except for repair and maintenance that is the responsibility of the Strata Corporation under these bylaws.
(2) An owner who has the use of limited common property must repair and maintain it, except for repair and maintenance that is the responsibility of the Strata Corporation under these bylaws.
8 The Strata Corporation must repair and maintain all of the following:
(a) common assets of the Strata Corporation;
(b) common property that has not been designated as limited common property;
(c) limited common property, but the duty to repair and maintain it is restricted to
(i) repair and maintenance that in the ordinary course of events occurs less often than once a year, and
(ii) the following, no matter how often the repair or maintenance ordinarily occurs:
(A) the structure of a building;
(B) the exterior of a building;
(C) chimneys, stairs, balconies and other things attached to the exterior of a building;
(D) doors, windows and skylights on the exterior of a building or that front on the common property;
(E) fences, railings and similar structures that enclose patios, balconies and yards;
(d) a Strata Lot in a strata plan that is not a bare land strata plan, but the duty to repair and maintain it is restricted to
(i) the structure of a building,
(ii) the exterior of a building,
(iii) chimneys, stairs, balconies and other things attached to the exterior of a building,
(iv) doors, windows and skylights on the exterior of a building or that front on the common property, and
(v) fences, railings and similar structures that enclose patios, balconies and yards.
[ii] Section 1(1) of the Act defines “Common Property” as follows:
“Common Property” means
(a) that part of the land and buildings shown on a strata plan that is not part of a Strata Lot, and
(b) pipes, wires, cables, chutes, ducts and other facilities for the passage or provision of water, sewage, drainage, gas, oil, electricity, telephone, radio, television, garbage, heating and cooling systems, or other similar services, if they are located
(i) within a floor, wall or ceiling that forms a boundary
(A) between a Strata Lot and another Strata Lot,
(B) between a Strata Lot and the common property, or
(C) between a Strata Lot or common property and another parcel of land, or
(ii) wholly or partially within a Strata Lot, if they are capable of being and intended to be used in connection with the enjoyment of another Strata Lot or the common property;