Landlords in Nova Scotia Facing Skyrocketing Insurance Premiums
HALIFAX – A lot of landlords in Nova Scotia are feeling under-appreciated these days. In the past year, news headlines have shrieked of people facing massive rent increases. As low vacancy rates cause problems and heated debates break out about rent control, it’s common to see people lay the blame on “greedy” landlords.
But it’s also becoming much more expensive to build and own rental units both in Halifax, and throughout the province.
The cost of building materials has skyrocketed, value assessments of commercial properties are on the rise, and now landlords are talking about another cost that doesn’t often get enough attention: insurance for multi-unit rental buildings.
Kevin Russell, the executive director of the Investment Property Owners Association of Nova Scotia (IPOANS), estimates that landlords in Nova Scotia have faced, on average, a 45-50 per cent increase in insurance over the past year or two.
“We’ve been noticing this, for the last year or so, that insurance rates have been increasing, but it hadn’t been across the board. This year, we’ve noticed it’s getting more widespread,” says Russell. “This impacts affordability at a real crucial time in this market.”
One Halifax landlord, who asked to remain anonymous because she and other landlords feel harassed in a public debate that has become acrimonious , took a portion of her rental properties and reviewed insurance costs since 2010. During that 11-year period, her insurance costs have gone up 186 percent. The landlord says she has been hit with these increases despite not making any significant insurance claims on her buildings over the past decade.
“It doesn’t matter if a property owner has a clean slate, they’re thrown into that insurance pot,” she said.
“That is a very real threat that is placed on our shoulders to try and accept these increases…We’re not talking a couple hundred dollars; we’re talking tens of thousands of dollars.”
The Halifax landlord thinks it’s unfair to have such massive increases forced onto landlords since they are required to have insurance on their buildings.
“We need insurance to get financing,” she asks. “The bank will not give anybody money without insurance…if insurance is declined, we can be shut down.”
Many years ago, landlords in Halifax were able to get more competitive insurance premiums by switching companies. But landlords are now reporting a lack of competition, as many companies have stopped insuring rental properties.
“Up until about five years ago, we have been able to somewhat manage the costs by either switching the insurance broker,” she said.
“We’ve switched, in the past 10 years, to three different insurers to try and keep the costs down on the properties.”
Some landlords also say insurance companies are demanding certain upgrades even if a building is already up to code.
Peter Polley, a Halifax developer who owns and manages 500 rental units, went so far as to say insurance companies make things up with no apparent rhyme or reason in their demands.
“We’re facing the insurance industry basically making … demands that make no sense, that have no technical background or merit,” he says.
One example Polley uses is electrical panels and wiring, in which insurance companies demand expensive replacements and upgrades.
Russell notes that the electrical system on buildings is a big sticking point with insurers. He said one local developer had to make an electrical upgrade that tacked on an extra $40,000, in order to please the insurance company.
“They want a lot of the older buildings to upgrade their electrical systems; in some cases, they want complete rewiring of buildings,” said Russell.
“What’s happening in newer buildings…they’re asking for some components to be above code. For example, electrical panels.”
The landlord who spoke to Huddle says insurance companies have even demanded things that are nearly beyond her control: like the stipulation all her tenants have tenant insurance. This is on top of upgrades insurance companies have asked her to do to her buildings, like replacing a perfectly good oil tank.
“There was nothing wrong with the oil tank, other than the fact that it was one year older than what the insurance companies like to see,” she said. “They always find something that you should be replacing, or redoing.”
Why Are Insurance Rates Going Up For Landlords?
The reasons for these insurance rates skyrocketing vary, but there are two big factors; one close to home and the other abroad.
Amanda Dean, vice president-Atlantic for the Insurance Bureau of Canada, says Atlantic Canada has a lot of weather events that lead to a series of small claims, among other issues.
“It’s not just severe weather – it’s the sewer backups and pipes that are under the ground…built for capacity 30, 50, perhaps even 100 years ago, and we keep building more subdivisions,” says Dean.
“A lot of apartment units have dishwashers and washing machines; those items, if not properly maintained, can see water damage occur.”
But the other big factor is very much out of anyone’s control right now. The international reinsurance market (where insurance companies get their insurance), is retracting, causing a “hard” market in certain areas, including commercial building insurance.
“There certainly have been pressures within the commercial insurance market…and the answer could go back to things as complicated as what’s happening in the international reinsurance market,” says Dean.
Dean says the retraction in the international market could be a reason why landlords are finding less companies able to insure their buildings.
“There may be some insurers who do insure some of these buildings, they’re just not able to take on additional buildings at this time,” she says.
Dean says there are things landlords can do that could help bring down their rates. One is to work with an insurance broker who has access to insurance companies nationwide.
Another is for landlords to perform risk management by doing regular maintenance on their buildings, and cutting down on potential liabilities.
“A lot of these multi-tenant buildings have a lot of people coming and going. And, especially in the wintertime with snow and slush…what do the mats look like in the lobby?”
Dean is also extending an olive branch to IPOANS and landlords in Nova Scotia. She said the Insurance Bureau has a risk management service that can help building owners who are having trouble with rates.
“We are a trade association and we do work a lot with our member companies to make sure that organizations such as IPOANS have the best information available.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].