PREPARING AN SIUD FOR YOUR AGM: What you need to know, now.

The COVID-19 pandemic has shown us, among other things, how important it is to have a plan and be vigilant in our preparations. Not to diminish this health crisis in any way, but it has certainly taught us how to prepare for the unexpected and challenging situations in our life.

RELIANCE receives questions daily about how to navigate the SIUD (Standard Insurable Unit Description) process during the pandemic. This has prompted us to share details from some of our recent conversations, as well encourage you TO FORGE AHEAD. If you haven’t already started the SIUD process, please get started immediately. If you are not sure where or how to start, contact us and we will help you lay the right foundation.

And if the COVID-19 pandemic has slowed (or halted) your SIUD progress, it is our hope that this article will compel you pick it back up.

How detailed should an SIUD be?

The ultimate question that should always be asked is:

In the event of a fire/flood/etc., would an adjuster have sufficient information contained in the SIUD to provide a timely response? Time is of the essence so would the SIUD help in expediting the process or slowing it down? (It all depends on the level of detail between standard finishes and betterments.)

A Board elected to have RELIANCE complete a draft SIUD for their review and refinement without an inspection, so we proceeded to compile the information from our office records and online research in completing the description. Several days later, the building experienced a massive fire with significant loss. As we have assisted the Board in finalizing the SIUD, it has been a reminder of how important it is to ensure the description is as detailed as possible.

Any Board Member or Condominium Manager who has ever encountered an insurance loss will attest to this fact: the insurance claim may be processed quickly – or dreadfully slow – and the time expended is directly proportionate to the detail and information available at the time of loss. Not to mention the stress!

As the SIUD process has progressed, we have seen a diversity in terms of reporting detail. Last year, Harold Weidman – President of Reliance Asset Consulting, presented at various Alberta SIUD information sessions held by; CCI South Alberta Chapter, CCI North Alberta Chapter and numerous meetings with Board members throughout the province. There were firms offering a free SIUD at the time (or even in advance of) an insurance appraisal inspection – and in contrast, many firms that were charging as much as $1,000 or more. This is a case of ‘free, is rarely free’.

These lower offerings will result in significant omissions and errors as they are prepared as fast as possible with insufficient detail; therefore, an unsuspecting Board would potentially fall victim to not knowing or not having the full snapshot of what should be included. Unfortunately, this would only come to light when a loss occurs resulting in excessive time and conflict related to missing detail – as well as many unanswered questions.

What is RELIANCE’s approach…and how to navigate the SIUD through COVID-19 restrictions?

On the other end of the spectrum, adjusters who have been involved in the loss process are very cognizant of what is expected, and detail is paramount. The preparation in completing an SIUD takes significant time and research as there are several factors that need to be explained.

Our process at RELIANCE has moved to this end of the spectrum – we continuously research, add to, analyze our builder specification library, and evaluate actual claim information. As well, we have also reviewed and in doing so tested our SIUD’s with adjusters and this has benefited our process immensely.  

Over the past 20 years, RELIANCE completed the SIUD in a basic form by requesting the inspection of a unit at the time of the appraisal to include standard finishes. What we now know is this: unless there is additional investigation and the Board either confirms or enhances the information provided the results will not be credible.  

A prudent Condo Manager recently arranged, with the permission of the owners, an inspection of four units in a building recently. After masking up, sanitizing, and minding physical distancing, our appraiser was able to provide critical detail that would not have been available otherwise. In the event of loss, the information obtained will make the claim process quicker, with less stress.

Many of the questions we receive relate to a Board’s desire to gain confidence in explaining the SIUD process at the AGM, where final approval will be decided by the owners. The education we provide helps to bring clarity and empowers the Board to present a clear and concise SIUD, without getting bogged down with superfluous or redundant misconceptions. While COVID-19 has delayed AGMs, it is still important to work toward this goal.

Following are basic points that should be considered:

  1. PRIMARY FACTOR: The SIUD under 61.1 (2)(a) of the regulations, paraphrased, states the following: “a corporation shall, at a minimum, place and maintain the amount of insurance … for the residential units on the parcel the replacement value of the units and of the fixtures and finishing in the units, as if all units contained the features as described in the applicable standard insurable unit description.” The most common stumbling block – “as if all units contained the features” – is what we encounter. There is always a difference of opinion when actual specifications are not available. This point manifests itself when there is a massive loss and/or owner involvement. RELIANCE can provide the answers.
  2. PRIMARY FACTOR: At the time of an insurance loss, a unit owner is never left in a better state than what the unit had at the time of loss, notwithstanding betterments which are typically covered under the unit owners policy (if not covered in the Corporation’s Bylaws). Prudent Corporations are less inclined to pay more for insurance premiums on something that will not be replaced at the time of loss. An example would be a recent review of a SIUD where granite counter tops are specified but it can clearly be proven that laminate is the standard.
  3. Typically, most projects will have one Class therefore one SIUD. In many instances the varying units’ types in a building can pose issues, particularly for bathroom fixture configurations and single versus multi-level unit layouts. The detail and description are achievable but if the variances are significant, then discussion with the Board is required to ensure a concise description is agreed upon or consideration is made for creating two classes. We recommend that mixed projects such as townhouse and apartments have separate classes and/ or if they were developed at different times. Penthouse units still must be assessed on what was provided on day one as the standard finish and disseminated for betterments as many have a high degree of customization.
  4. Specifications are exceedingly useful however we still find these will not always provide clarity. These are not commonly available, particularly for older projects but our specification library is very useful.
  5. Brands and Series for built-in appliances are helpful but, if the project is older, there must be a clear understanding of what the replacement expectations are. There are several options that we discuss with the Board depending on the level of background information available.
  6. The variances we find in older buildings can be a challenge. A knowledge of typical specifications that were marketed at the time (circa 1990’s or earlier) is critical in terms of translating this into today’s finishes. Coupled with Harold’s 45 years’ experience in appraisals, RELIANCE has certainly helped to identify typical renovation or updating cycles. This experience, along with identifying specifications at the time of condo conversions, provides a good basis of understanding for the history of the building and provides the Board with reasonable and defensible component descriptions.

Can we incorporate the SIUD into the insurance appraisal?

Once the Board or owners have reviewed and finalized the SIUD, we convert the working document to a final copy to prepare the Board to submit to Land Titles. Upon final approval of the SIUD, RELIANCE will ensure that the components listed in the SIUD align with what is stated in the insurance appraisal. Essentially, an appraisal, which applies rudimentary costing analysis, must now be refined to accommodate the changes noted in the SIUD. This could be accomplished by applying a quantity takeoff analysis*, but the time and cost are prohibitive. An example of a problematic SIUD may be as simple as it is stating the kitchen counter tops are granite; however, it can be proved at the time of loss that laminate is in fact the standard. Any type of cost variance would then need to be reconciled.

*For more elaboration on this point, please refer to my recent article “Why Costing Matters” on our Blog.  

Can we apply actual dollar amounts to the various components?

The reason this is asked – it may help in assigning cost to a betterment over the standard finish. Assigning estimates to individual components has no relevancy to an appraisal, as it is based on a total loss of the improvements and combines the common property as well as unit components. While the appraiser should easily explain cost differences for individual components, these can be a moving target and if not reviewed on a constant basis may be redundant especially taking into consideration the time the components are initially costed compared to a possible future loss.  

There is however a major factor that assists the appraiser in setting the estimate and this relates to quality rating. Before you apply quality, an appraiser must know the individual variations between different type of finishes. In RELIANCE’s SIUD, we have developed an exclusive breakdown of the quality considerations that can be applied to the SIUD. This not only assists the Board and owners in understanding what they can expect in terms of the level of finish should loss occur, but what level is being applied to the appraisal estimate. Ultimately, this relates to how the Corporation will decide if the bathroom fixtures are a Victoria+Albert or Delta or Moen

Ultimately we urge Boards and Condo Corporations to begin the process of getting their SIUD”s started and completed, if they haven’t already. Legislation came into effect on January 1st, 2020 and therefore it is of utmost importance to make sure this is addressed sometime in this calendar year.

In future articles, I will be discussing frequently asked questions that RELIANCE receives daily. A small sampling:

  • A Bare Land description of the “Unit” is different than a conventional unit, so can we describe anything for the building including exterior windows and doors? 
  • Do we still need to have a SIUD if we are responsible for betterments and improvements in our bylaws?
  • Most of our units have wood burning fireplaces – is this a betterment and/or can we even get a wood burning fireplace?
  • The building has Poly B plumbing lines in the units – what description do we apply in our SIUD? 
  • We have specifications but the door detail is missing – what can we do?
  • Are we crossing the unit boundary line if we decide to include acoustical dampening?
  • Betterment forms – what good are they anyway?
  • Why register the SIUD on an interim basis by the Board and how is this reflected in the appraisal?

What questions do you have? We want to hear from you! Contact our team and let us know so we can help bring clarity to your SIUD efforts.

Calgary Tel: 403-241-2535 
Edmonton Tel: 780-702-7068

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