Protect Your Business: Condominium Managers Must Have Insurance!

by Doug Dixon, RECA Regulatory Compliance Advisor, Real Estate and Condominium Brokers

Like all professions RECA regulates, the Real Estate Act Rules (the Rules) require condominium manager brokerages to carry insurance against liability for errors and omissions when providing condominium management services. Many third-party insurance providers offer this type of insurance. Errors and omissions insurance protects you and any associates of your brokerage against claims of inadequate work or negligence.

Think of some of your common duties as a condominium manager:

• You probably keep records for the corporation and respond to owner complaints. Could there be an instance where you or an associate makes a mistake which could result in someone wanting to take legal action?
• Condominium managers are typically responsible for ensuring completion of maintenance and repairs of the property, and usually hire and monitor service companies and contractors to do this work. Your business should have adequate insurance coverage should something not go as planned.

Find the Right Coverage

The Rules specify brokerages must hold a minimum of $1 million in errors and omissions insurance. Regardless of the minimum requirement, it is important to assess the specific needs of your business and the individual coverage you require. Your business may also benefit from additional types of insurance available. Discuss your day-to-day operations with your insurance provider and ensure you adequately cover your brokerage. Include a healthy budget for insurance premiums, as not having sufficient coverage could ultimately put your brokerage out of business should a large claim arise. It is best to be prepared.

It’s a good idea to speak to the corporations you manage to ensure they are adequately covered as well. The Rules also require all condominium corporations carry adequate insurance for any liability incurred by the corporation and its elected board when carrying out their duties and responsibilities. The corporation’s insurance needs to include a fidelity bond, which ensures the corporation is protected if a board member or manager causes a loss by dishonesty or fraud.

Potential Breach of the Rules

RECA’s Practice Review Team will ensure adequate errors and omissions insurance is in place as part of their brokerage audit. If a brokerage is found to not hold the minimum requirement for errors and omissions insurance, or does not have an active policy at all, RECA may issue the brokerage an administrative penalty, and in extreme (likely repeated) instances, RECA could order your brokerage to cease operations in the public interest.

The Condominium Management Industry is NOT covered by the Consumer Protection Fund

The Consumer Protection Fund (the Fund) compensates consumers who suffer financial loss due to fraud, breach of trust, or a failure to disburse or account for money held in trust with regard to a real estate transaction by a RECA licensee. Yet only licensees in the real estate industry (which includes property management, but not condominium management) pay into the Fund when they enter the industry and obtain their licence. Consumers who suffer financial loss as a result of the business of a condominium manager are not able to make a claim from the Fund. Consumers wronged by a condominium licensee would need to seek legal action against the condominium manager and/or their brokerage, reinforcing the necessity for condominium management professionals to obtain adequate errors and omission insurance directly from the insurance market. Condominium management brokerages must hold errors and omissions insurance to protect their clients should errors or omissions occur during the work they perform on their behalf. 

While it’s not an option to decide whether your condominium brokerage should consider obtaining errors and omissions insurance (it’s a requirement to hold it under the Rules), ensuring you have the adequate amount of coverage for your specific business will help to ensure the viability of your company.

Ensure you don’t leave your business in a vulnerable position where you could breach the Rules or find yourself facing legal action by a third-party. Set an annual reminder to check-in on your insurance coverage and ensure your business is protected.

If you have questions regarding the insurance requirements for condominium managers, please contract me at ddixon@reca.ca.