Personal Lines Insights | What are Special Loss Assessments in Condos?

Special loss assessments are one-time charges that condo corporations may levy on all unit owners, typically to cover unexpected expenses or budget shortfalls that cannot be met by the regular reserve fund or monthly fees.

what triggers a special assessment?

Special assessments are imposed when the condo corporation faces costs that exceed its available funds. Common scenarios include:

• Major repairs or replacements (e.g., roof, plumbing, or structural issues)
• Emergency events (e.g., fire, flood, or storm damage)
• Legal expenses from litigation
• Shortfalls in the reserve fund due to underfunding or mismanagement

Each owner’s share of the special assessment is calculated using the same formula as their regular condo fees, typically based on the unit’s proportionate share of ownership. Failure to pay can result in a lien against the unit, including interest and legal costs.

HOW DOES INSURANCE RESPOND TO SPECIAL ASSESSMENTS?

Standard condo insurance

Standard condo insurance policies (sometimes called unit owner or personal condo policies) generally do not cover special assessments that are imposed for:

• Routine repairs and maintenance
• Upgrades to aging infrastructure
• Reserve fund shortfalls

Owners are expected to budget for these types of assessments out-of-pocket.

LOSS assessment coverage

However, loss assessment coverage is an optional add-on to many condo insurance policies that can protect owners from certain types of special assessments. This coverage responds when:

• The condo corporation’s master insurance policy does not fully cover a loss (e.g., a claim exceeds the policy limits or the deductible is very high)
• There is property damage to common areas due to an insured peril (such as fire, windstorm, or liability claims)
• The condo corporation is held liable for an incident in a common area and their insurance is insufficient

CONDO CORPORATION DEDUCTIBLE LOSS ASSESSMENT

Condo Corporation Deductible Loss Assessment: In Alberta, if there is an insured loss under the condo
corporation’s policy, they are allowed to issue a special assessment to the unit owners to recoup their deductible, up to a maximum of $50,000. This extension ensures you are protected in such a situation.

examples of covered scenarios:

• A fire damages the building’s lobby, and the master policy deductible is $100,000, which is split among all owners. Loss assessment coverage can pay your share.
• A lawsuit against the condo corporation results in damages exceeding the master policy’s liability limit. The excess is assessed to unit owners, and loss assessment coverage may respond.

what’s not covered

Loss assessment coverage does not pay for assessments related to regular maintenance, wear and tear, or noninsured events. It is limited to losses arising from insured perils and subject to the terms and limits of your policy.

CONCLUSION

Special assessments are a real financial risk in condo ownership, especially as buildings age and reserve funds may be insufficient. Certain types of special assessments can be covered under a condo owner policy so adding this coverage can provide valuable protection against assessments arising from insured losses, high deductibles, or liability claims. It’s important to review your condo corporation’s financial health, reserve fund, and insurance policies before purchasing, and consider adding loss assessment coverage to your personal condo insurance.