Property owners may be liable for strata deductible

Mike Mangan
BCREA

Many strata owners do not know they may be personally liable to reimburse their strata corporation for its insurance deductible, the portion of the loss the insured must pay in an insurance claim, which can be many thousands of dollars. The British Columbia Law Institute’s formidable committee of strata experts (the “Committee”) recently recommended changes to the Strata Property Act, which would require most owners to insure themselves against this liability. The Committee observed,

Many strata corporations have seen their deductibles, particularly for damage caused by water ingress, rise significantly. An owner who isn’t adequately insured against this risk could face a crippling liability.

Background The Strata Property Act requires a strata corporation to carry property insurance over, “(a) common property, (b) common assets, (c) buildings shown on the strata plan, and (d) fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot.” A strata corporation must also carry liability insurance against claims for injury or damage to the person or property of a third party caused by an accident or negligence. Each year, a strata corporation must review its insurance needs and report on its insurance coverage at the annual general meeting.

Deductibles vary and can be large, depending on the risk insured or the strata corporation’s own claims history. If a strata corporation claims against its insurance policy for an amount exceeding the deductible, the corporation usually absorbs the deductible as a common expense to which every owner contributes through their respective strata fees or a special levy.

What if the cause of the strata corporation’s insurance claim is an owner’s mishap? Even though the deductible is a common expense, the Strata Property Act permits the strata corporation to sue that owner to recover its deductible if the, “owner is responsible for the loss or damage” in question. The Act sets a low threshold, making the owner responsible for the deductible if they are the primary cause, or answerable for, the mishap. There is no need to prove negligence, being the failure to meet a particular standard of care. In one case, an owner’s plugged toilet caused water to back-up and escape into suites below, producing approximately $50,000 in damage. The strata corporation claimed against its insurance policy for the repairs, charging back the $10,000 deductible to the owner. The court confirmed the owner’s liability for the deductible. Since the water came from a toilet in the owner’s strata lot, he was responsible; there was no need to prove him negligent.

A strata corporation can amend its bylaws to require a higher standard of liability, such as negligence. In one case, the strata corporation’s bylaws stated that any insurance deductible paid by the strata corporation arising from an owner’s, “act, omission, negligence or carelessness” will be charged to the owner. An owner’s clogged toilet over-flowed, causing $42,538 in damages to other units. To pay for the repairs, the strata corporation claimed against its insurance policy, charging back its $25,000 deductible to the owner. Even though the bylaw set a higher standard than the Strata Property Act, the court enforced the bylaw. After flushing the toilet, the owner breached the standard of care by failing to ensure the waste cleared the bowl and the water shut off. This was negligence, as required by the bylaw, and the court ordered the owner to pay the $25,000 deductible.

Recommendations The Strata Property Act’s Schedule of Standard Bylaws constitutes the default bylaws for every strata corporation, except to the extent a corporation modifies them by filing an amended bylaw at the Land Title Office. The Committee recommends adding a new standard bylaw to require every owner to have insurance to cover payment of a deductible under the strata corporation’s property insurance policy. Where an owner is responsible for the loss giving rise to the strata corporation’s insurance claim, the Committee recommends amending the Act to allow the corporation to charge back to the owner the lesser of the cost of repairing the damage or the deductible. The Committee also recommends amending the Act to require a strata corporation each year to inform owners and tenants of any material change in the corporation’s insurance coverage, including any increase in a deductible.

Pending these changes, a REALTOR® acting for a strata buyer is wise to warn the client about this liability. It’s also prudent to ask about the strata corporation’s deductibles and check the bylaws for any provision affecting this risk. A careful buyer agent will warn their client to purchase property insurance to protect the buyer against liability for the strata corporation’s deductible.

Copyright © 2019 British Columbia Real Estate Association

Montreal and Ottawa home prices up compared to April

Josh Sherman
Livabl

Peak house prices are still being reached in two of Canada’s major housing markets.

Again and again, Montreal and Ottawa have reached new heights on the Teranet–National Bank House Price Index, and May was no exception.

Montreal prices were up 5.25 percent from a year ago and 0.5 percent compared to April.

Ottawa saw prices increase 6.14 percent annually and 0.68 percent on a month-over-month basis.

The nine other major markets tracked by the index are off their respective peaks by varying degrees.

For instance, Hamilton is just 0.02 percent from its all-time high for prices, while Quebec City is off peak by 0.28 percent.

Canada’s biggest market, Toronto, is 3.42 percent away from its July 2017 peak, though prices rebounded 0.67 percent in May from April and remain up 2.63 percent over year-ago levels.

Chart: National Bank

The margin between current Vancouver home prices and peak heights continues to widen. Off 4.98 percent from July 2018, Vancouver prices fell 0.25 percent on a month-over-month basis and 4.05 percent annually.

Calgary has the largest gap between current prices and the peak, which was reached in October 2014. Prices are 7.02 percent away from that mark.

Edmonton, meantime, has had the longest slump. Prices are still 6.25 percent down from the September 2007 peak.

However, the overall composite index, which is a weighted average of the 11 markets, increased 0.47 percent between April and May, representing the first month-over-month improvement in nine months, according to National Bank.

The index is up 0.69 percent from a year ago.

However, National Bank Senior Economist Marc Pinsonneault puts the recent gains in perspective.

“One should not rejoice about the first rise in home prices in seven months as May is historically the second strongest month of the year,” Pinsonneault writes.

“[F]or a month of May it was the smallest rise in 21 years of index history,” he notes.

© 2019 BuzzBuzzHome Corp

Office building managers’ approach to homeless people has shifted

Hayley Woodin
Western Investor

There remains a lot of ground to cover in the two years left of Vancouver’s strategic plan to end street homelessness by 2021. Last year, the City of Vancouver counted 659 residents living on the city’s streets – 30 per cent of its homeless population.

“Everyone thinks it’s easy to get into a shelter. It’s not,” explains Brent Findley, senior manager of security, life and safety at Cadillac Fairview’s CF Pacific Centre.

“We’ve always sort of been in a bit of a homeless crisis, but it’s becoming a mental health and addiction crisis as well.”

While the percentage of Vancouver’s unsheltered homeless population remained relatively unchanged between the city’s 2016 and 2018 homeless counts, the number of people counted as homeless has increased by 18 per cent.

Overnight, many of them take refuge in the alcoves and doorways of Vancouver office towers.

“A lot of the commercial buildings, certainly in the downtown area, are often at the forefront of the mental health /addiction crisis that you see in Vancouver,” says Damian Stathonikos, president of the Building Owners and Managers Association of British Columbia.

“It’s not always at the forefront of people’s minds when they think of the commercial real estate industry.”

Findley manages the security of a city within a city: a downtown mall and eight office and mixed-use towers above it that together attract around 55,000 people per day. “That’s the size of BC Place during playoffs with the Lions, if they’re winning,” he says.

The size and location of Pacific Centre make it attractive to those looking for shelter outdoors, a place to warm up early in the morning or access to public washrooms. The security and cameras around the property offer some sense of protection.

When Findley started in the industry 25 years ago, he says the message to those surviving on the streets was typically to get out and off of a property.

“It’s completely flipped around now. We’re approaching it with the idea of trying to help them,” he explains.

Individuals can sleep on the property overnight, for example, and use its facilities when it opens its doors early in the morning. Night-shift employees conduct life safety checks.

Training required

Supporting this work are increased investments in high levels of first aid and mental health training for the company’s 55-person security team. Staff also learn how to de-escalate confrontations through use-of-force training, and must recertify annually.

“We’re always the first responders because it’s on our property,” says Findley.

As government and community stakeholders work on solutions that address issues of homelessness and addiction, many in the building management and security industry are finding ways to manage these issues with compassion.

“We continue to have to shift our focus in the way that we’re approaching this,” says Chad Kalyk, executive vice-president of Paladin Security, which protects more than 10 million square feet of space in downtown Vancouver.

That shift includes a heightened emphasis on mental health awareness training, and offering client services such as safe, accompanied walks for individuals leaving a building. Conducting work with compassion is critical.

“The problem’s not going away. In my opinion it just continues to get worse, so we’ve got to be able to adjust and evolve our processes and policies to support the business operations,” says Kalyk.

There are aspects of Vancouver’s homelessness and addiction crisis that create challenges.

“It’s dangerous. It’s dangerous if you go to take a full garbage bag out of a garbage receptacle,” says Neil Thomson, regional vice-president of Bee-Clean Building Maintenance Inc., explaining that the potential for contact with hypodermic needles poses a health risk to employees.

Dealing with abuse

It’s not the only risk for cleaners who face the homeless situation daily.

“We’ve had several staff accosted or struck or verbally abused for sweeping up cigarette butts or taking away garbage.”

As a result, Thomson says, the company sees significant staff turnover for certain positions. Cleaning staff working shifts in Vancouver’s downtown core get trained in biohazardous waste removal and in the proper disposal of drugs and drug paraphernalia.

“It’s really challenging from an employee management, employee safety perspective,” says Thomson. He believes continued support from the property management community and their security teams is key.

Charles Gauthier, president of the Downtown Vancouver Business Improvement Association (DVBIA), says association members have continued to express concerns about the issue and how it ought to be handled in the short term.

Members have been advised to call the non-emergency policy number in the event of a difficult confrontation. Doing so gives the city’s Carnegie Outreach Program the opportunity to connect with individuals directly and offer support.

Over the long term, the DVBIA supports increasing services such as safe injection sites and additional housing options.

The latter is a key component in the city’s homelessness strategy, which states thousands of social, supportive and rental housing units are needed to end street homelessness.

“Asking people to vacate an area is not a solution,” says Gauthier.

“It’s about getting people housed and getting them taken care of, and reconnecting them to the social services that are available for them.”

Copyright © Western Investor

Inside sales agents might not be licensed

Aiman Attar
REM

It might seem confusing that as a recruiter, I would be advising my clients and prospects not to hire an inside sales agent (ISA), when my job is to help brokerages and teams with all their real estate recruitment needs. But that’s exactly what I have been doing in the past few months.

An ISA is supposed to be a licensed, experienced sales representative that sits behind a desk calling prospects and following up on inquiries. However, most real estate teams are employing unlicensed candidates with zero sales or real estate experience, giving them robotic scripts and then having them sit eight hours a day smiling and dialing.

There was a point when I believed that an ISA position could add value to a real estate team but not with the current business models I have seen. I recently interviewed ISAs, top-performing teams and a business coach to see if this position is even worth keeping on an org chart.

To my surprise, I have yet to speak with a real estate team or ISA that has found success in this investment. Most teams that I’ve spoken to had little data collected on whether or not the ISA calls generated any real leads and couldn’t pinpoint if the ISA’s initiatives made a dent on their bottom line. Most ISAs, especially those not on a base salary, quickly realized this model is set up for failure because it takes over six months of consistent calling, door knocking, advertising and brand presence before the leads blossom into measurable sales. No one on a commission-only structure could survive that long without pay.

Here’s the skinny on the ISA formula and why it’s not working.

Most teams are paying approximately $40,000 a year as the base salary, plus bonuses on any booked appointments that turn into sales. That bonus can range anywhere between $500 per sale to 10 per cent of the GCI. There are some teams who pay commission only to their ISAs but no one lasts beyond 90 days without income, so most of these teams have a revolving door for this position with almost no results.

The teams that pay a base salary keep the ISAs marginally happy as they are still earning a pay cheque for the time they invest. The team keeps the illusion of “we have an ISA who generates leads” that helps them in attracting other salespeople to join their team but when it comes down to it, the numbers don’t lie.

An experienced real estate sales agent, who decided to become an ISA who worked at it for six months, said, “This model doesn’t work in Canada. In the U.S.A., yes, but not in Canada. I door knocked the neighbourhoods I was going to call, then when I called them, they would recognize that I was the same person. But despite the established team I represented and despite the constant keep in touch and follow up, and despite all the great interest they showed, we didn’t close any deals in six months.”

Some teams have their ISAs on a smile and dial automated dialer where they are just calling random homeowners to see if they have any interest in buying or selling, based on a database they might have purchased. This is a complete cold call, which most homeowners not only dislike and find intrusive. Very few actually show interest in ever talking to the team lead.

Is there a business model formula that generates real leads and real money from the ISA position?

The ISA is only as good as your database. You can’t expect to purchase 1,000 internet leads, which are extremely cold and vague leads, and have your ISA call 1,000 people with only a 0.2 per cent success rate.  Salespeople thrive on the high of getting a yes!

The other major issue with the ISA position is that it is extremely repetitive and most complain of boredom and frustration, which is why they quit.

Now, I’m not suggesting throwing out the baby with the bath. There is some merit to having a dedicated ISA that handles all sign calls, web inquiries and cold calls. Once upon a time, these were the tasks that the lead Realtor did himself/herself, which later got passed on to the buyer agent and now we have removed it from the outside sales team and given it to an inside rep who’s on salary.

The question remains, how do you generate leads and who should be handling these leads?

I recently spoke with business coach and profit consultant Jennifer Jimbere at Jimbere Coaching and Consulting about the ISA position and she agreed that smiling and dialing, with a six-month lead conversion rate, is not the fastest or most productive way to grow your business. Instead, she recommended that the team have a business support manager.

First, you need to build a market-dominating strategy. Then have a dedicated person on your team who handles inquiries, sends direct messages on LinkedIn, handles follow-up calls and manages your database and new lead generation. Taking a holistic approach of sales and attraction marketing and not from mere cold calling would be a more productive and profitable approach. Simple tips and tricks with how to leverage LinkedIn will have incredible effects on growing your pipeline.

Hiring an “inside sales and marketing coordinator” or a “business support manager” might be the best option. Someone who is great at building relationships and rapport with clients. Someone who understands sales and conversion. Someone with social media savviness so they can engage inquiries online, funnel inquires through the sales process and someone who can creativity create marketing initiatives that generate more leads. This position would have a variety of tasks that not only keep the employee challenged and excited, but it would open up several lead generation tactics (not just cold calling).

© 2019 REM Real Estate Magazine

Map of sales-to-active-listings ratios shows where the housing hot spots have been this spring; some remain seller?s markets

Joannah Connolly
Western Investor

In the current slowing real estate market, it’s easy to read the headlines and imagine that sales are plummeting all over the region and it’s becoming a buyer’s market. But that’s not necessarily true of all areas – or all property types.

This infographic by our sister website REW.ca reveals where in Metro Vancouver has remained a strong market for real estate activity this spring – and some areas that have even remained a seller’s market.

The study of real estate activity from February to May 2019 looks at the sales-to-active-listings ratio (SAR) in each area, for all property types combined. A figure over 20 per cent indicates a seller’s market, while 12 to 20 per cent is a balanced market, and below 12 is a buyer’s market.

The study found 19 neighbourhoods with an SAR of 17 per cent or more, indicating solid activity. The hottest area was in Clayton, Surrey (22 per cent) followed by Central Meadows in Pitt Meadows, Fraser East in Vancouver, Citadel in Port Coquitlam and Mount Pleasant East in Vancouver – all at 20 per cent.

The study also broke out SAR by individual property type to find the strongest markets for detached house, townhome and condo sales.

Check out the infographics and see if your neighbourhood is on the list, below.

© Copyright 2019 Western Investor

Commercial real estate sales drop in Lower Mainland

Steve Randall
Canadian Real Estate Wealth

There was a sharp drop in the number of commercial real estate sales in the Lower Mainland in the first quarter of 2019.

The Real Estate Board of Greater Vancouver says there were 318 CRE sales in Q1 2019 according to data from its Commercial Edge system. That’s a drop of 42.1% from a year earlier.

In total dollar volume terms, the drop was even steeper with a 57.3% decrease to $1.531 billion in Q1 2019, from $3.587 billion in Q1 2018.

“Much like we’ve seen in the residential market, there’s been reduced demand in the commercial real estate market through the first quarter of the year,” Ashley Smith, REBGV president said. “With housing inventory at a five-year high and more supply on the way, the development community appears to be taking a more cautious approach.”

How activity has changed Land: There were 87 commercial land sales in Q1 2019, which is a 63.1% decrease from the 236 land sales in Q1 2018. The dollar value of land sales was $709 million in Q1 2019, a 61.3% decrease from $1.832 billion in Q1 2018.

Office and Retail: There were 131 office and retail sales in the Lower Mainland in Q1 2019, which is down 26.8% from the 179 sales in Q1 2018. The dollar value of office and retail sales was $367 million in Q1 2019, a 72.6% decrease from $1.339 billion in Q1 2018.

Industrial: There were 92 industrial land sales in the Lower Mainland in Q1 2019, which is down 20.7% from the 116 sales in Q1 2018. The dollar value of industrial sales was $392 million in Q1 2019, a 35.1% increase over $290 million in Q1 2018.

Multi-Family: There were eight multi-family land sales in the Lower Mainland in Q1 2019, which is down 55.6% over the 18 sales in Q1 2018. The dollar value of multi-family sales was $62 million in Q1 2019, a 50.2% decrease from $125 million in Q1 2018.

Copyright © 2019 Key Media Pty Ltd

BCREA forcasts a 14% jump in 2020

Steve Randall
Canadian Real Estate Wealth

As we approach the halfway point of 2019, analysts are applying some 2020 vision to their forecasts.

For the British Columbia housing market, which has been dogged by lower sales over the past year, there appears to be better times ahead according to the province’s real estate association.

While sales for 2019 are expected to decline 9% year-over-year to 71,400 units, the British Columbia Real Estate Association is forecasting a 14% jump to 81,700 in 2020.

That would move the year’s sales total closer to the 10-year average of 84,300 units.

“The shock to affordability from restrictive mortgage policies, especially the B20 stress test, will continue to limit housing demand in the province this year,” said Cameron Muir, BCREA Chief Economist. “However, a relatively strong economy and favourable demographics are likely creating pent-up demand in the housing market.”

The market is more balanced now although some parts of the province are a buyers’ market.

Prices to gain in 2020
Current market conditions are expected to provide little upward pressure on home prices this year, with the average annual residential price forecast to slip 2% to $697,000.

Modest improvement in consumer demand is expected to unfold though 2020, pushing the average residential price up 4% to $726,000.

Copyright © 2019 Key Media Pty Ltd

May sales of 8,221 units was an increase from April

Steve Randall
Canadian Real Estate Wealth

Tighter mortgage lending restrictions continue to constrain the British Columbia housing market although last month did see a rise from the previous month.

May sales through the MLS of 8,221 units was an increase from April but was still 7% below those of May 2018 according to the British Columbia Real Estate Association.

“BC home sales increased 9% in May compared to April, on a seasonally adjusted basis,” said BCREA Chief Economist Cameron Muir. “However, consumers continue to struggle with the negative shock to affordability that stringent mortgage lending policies have created.”

Inventory gained 23.2% to 41,519 units compared to the same month last year but total active listings were down 2% from April, on a seasonally adjusted basis. This was the first monthly decline since the B20 Stress test was introduced in January 2018.

The average MLS residential price in the province was $707,829, a decline of 4.3% from May 2018. Total sales dollar volume was $5.8 billion, down 11% from the same month last year.

Year-to-date, BC residential sales dollar volume was down 25.1% to $19.8 billion, compared with the same period in 2018. Residential unit sales decreased 20.2% to 28,711 units, while the average MLS residential price was down 6.2% to $688,339.

Copyright © 2019 Key Media Pty Ltd