Condo Rentals: Stricter Restrictions Due to Insurance Challenges

In recent years, the insurance industry has steadily increased premiums and deductibles in the condominium sector, placing a growing financial burden on syndicates when damages occur. In some cases, deductibles now reach several million dollars—amounts that must be covered collectively by all co-owners, even when the damage is caused by a tenant.

According to William Subranni, Director of Business Development at Sentinel Gestion Immobilière, “Between 15% and 20% of damages are caused by tenants, and insurers often refuse to cover them fully or partially.” In the buildings he manages, where rental rates range from 30% to 50%, this has become a significant issue.

Special assessments and limited legal recourse

When a loss occurs, the insurer typically covers the damages, but the syndicate must absorb the deductible, usually paid from the building’s self-insurance fund. However, two recent court rulings have made recovery efforts more complex: syndicates can no longer automatically seek compensation from the co-owner if the damage was caused by their tenant. They must now pursue the tenant directly.

In practice, these legal actions are time-consuming, costly, and rarely successful. “Many tenants are either uninsured or disappear before any legal action can begin,” notes Me Yves Joli-Coeur, a lawyer specializing in co-ownership law.

A troubling loss of control

Despite the requirements of Quebec’s Civil Code, many co-owners fail to report that they’ve rented out their unit, depriving the syndicate of vital information needed for proactive risk management. In some cases, tenants may purchase home insurance at the start of their lease only to cancel it midway through. Efforts by syndicates to track down and communicate with tenants often incur additional fees—costs that are passed on to all co-owners.

“In the real world, condo board administrators have lost control over what’s happening in the building,” summarizes Me Joli-Coeur. Faced with mounting damages and the inability to recover costs, many syndicates are now considering banning rentals in some units or at least implementing stricter rental conditions.

An urgent need for regulation

The Insurance Bureau of Canada is calling on syndicates to act diligently by holding co-owners accountable and ensuring compliance with building rules. The RGCQ, for its part, emphasizes the importance of:

• Mandating that all rentals be declared to the syndicate;

• Requiring proof of valid insurance for every tenant;

• Revising building bylaws to strictly regulate rentals;

• Keeping updated records of all occupants.

It is crucial that government authorities recognize the scope of this issue and establish a regulatory framework that reflects the current realities of the condo insurance market.

Based on an article from the Journal de Montréal featuring our president, Me Yves Joli-Coeur.