The Strata Insurance Clause, and Other Ways to Help with Strata Transactions

As a result of recent changes to the strata insurance landscape, BCREA has created a Strata Insurance Clause to help REALTORS® support their clients when entering the strata property marketplace. The clause is now available for REALTORS® to use on WEBForms®, and a guide with more details on how to use the clause is available here.

Significant increases in insurance rates and premiums for some strata title properties have resulted in higher deductibles, increases in strata fees and cost downloads to owners who are responsible for claims. There are a number of factors that have led to these increases such as provisions for insurance as outlined in the Strata Property Act; the high value of properties in BC; the nature of the claims risk for insurers; and fewer insurers in the marketplace. 

REALTORS® play an important role in protecting their clients.  When it comes to strata title insurance, here are three ways how REALTORS® can help ensure clients are able to make informed decisions when entering the strata property marketplace.

How can REALTORS® best protect their buyers?

1. Discuss Insurance With Your Buyer

It is important to discuss the insurance with a buyer from the outset, in order to equip them with the most information possible when making a decision. BCREA has some great resources to help inform your discussions with clients on the importance of understanding strata insurance.

These resources include:

• Legally Speaking: Liability for Strata Insurance Deductibles – This article, written by Mike Mangan in 2019, help REALTORS® and their clients understand the nuances of who’s on the hook for strata deductibles and when
• Open House by BCREA – On this month’s episode of the Open House by BCREA podcast, Shawn Fehr, Chair of the Board of the Insurance Brokers Association of British Columbia will be the featured guest and will discuss the current strata insurance landscape. The podcast will be released on February 27, and will be available here. 

2. Review and Ask for Strata Corporation Insurance Documents

REALTORS® should insist on obtaining a copy of the strata corporation insurance policy or policies.  These documents contain valuable information to help inform buyers, including but not limited to premium amounts, deductible amounts, coverage limits and date of expiration of the policy or policies.

Seller’s agents can assist in ensuring the documents are available by requesting them from the Seller at time of listing.

Where these documents may not be available for review in advance of an offer, and to ensure buyers ability to receive satisfactory insurance including any owner’s portion of deductibles payable, the following clause may be added to the contract:

Strata Insurance Clause

Subject to: (A) the Buyer reviewing and approving the terms and rates of the strata corporation’s insurance, including the premium amounts, deductible amounts, and coverage limits thereunder and the date of expiration of such policy or policies; and (B) the Buyer confirming the Buyer’s ability to obtain personal strata owner insurance on terms satisfactory to the Buyer, including coverage for any owner’s portions of deductibles payable under the strata corporation’s insurance, in each case on or before ________________. These conditions are for the sole benefit of the Buyer. 

Immediately upon execution and delivery of this Contract of Purchase and Sale by all parties, the Seller or the Seller’s agent, will obtain copies of the strata corporation insurance policy or policies, or a summary of coverages, a cover note or a binder in respect of same, and will immediately, upon receipt, deliver such document(s) or cause such document(s) to be delivered to the Buyer or the Buyer’s agent. 

This strata clause is available to REALTORS® through WEBForms® and can be added to transaction kits, and contracts. For more details on how to use the clause, click here.

Remember strata fees only cover the strata corporation’s insurance, therefore strata owners may want to purchase additional insurance to cover their specific needs.  Buyers should consult with their insurance providers to ensure their coverage meets their needs which may include coverage for any owner’s portions of deductibles payable under the strata corporation’s insurance,  personal property, personal liability, additional living expenses, additional coverages where Strata insurance is inadequate for fixtures installed by the owner/developer, losses to common property, etc.  

3. Seek Professional Advice

REALTORS® should always advise buyers to consult with insurance companies and agents who are knowledgeable about strata insurance and other insurance needs that a client may wish to consider when entering the strata marketplace.

An informed buyer is a protected buyer!

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