In a world of offering more for less, it is becoming increasingly common for condo developments to share facilities. These range from joint parking garages to heating, ventilation and air conditioning (HVAC) systems, and even elevators and recreation centres. Frequently shared between two or more corporations and, in mixed-use sites, between residential and commercial entities, these allow facilities to offer residents better and improved amenities.

But while these arrangements offer added benefits and spread costs across more parties, they do raise questions around access, who pays for upkeep, ongoing maintenance and most importantly, how conflicts are resolved if they occur. They also create unique governance and insurance challenges. 

While Section 21.1 of the Condominium Act, 1998 has yet to be proclaimed into force, its potential introduction continues to generate discussion within the industry. There is a potential that every shared facility arrangement may soon be required to have a registered agreement in place. Informal arrangements may no longer be sufficient in the future, and corporations that do not prepare may risk leaving themselves financially and legally exposed.

At the heart of managing shared facilities is ensuring that the cooperating bodies have the rules, regulations and clearly written governance documents in place. Declarations should outline each corporation’s responsibilities and share of expenses, while reference and condominium plans show boundaries and common elements. 

The shared facilities agreement itself is meant to establish how the parties will operate, maintain, and fund the facilities. When these documents are carefully drafted and consistent, governance tends to flow smoothly. But when they are vague, incomplete, or overly rigid, disputes can arise. Some agreements fail to list all the shared assets, leaving boards unsure who should pay for maintenance. 

The structure of the arrangement also matters. In simple cases, such as two condominiums sharing a small parking lot, expenses can be tracked directly by each corporation. In larger or more complex communities, however, it may be far more effective to establish a separate shared facilities corporation. This allows for its own budget, reserve fund, and financial statements, ensuring that each party contributes fairly and can see where funds are being spent. Not every site needs this structure, but failing to set one up where complexity warrants can result in inequities, deferred maintenance, and even legal disputes.

Insurance plays a central role in protecting corporations and the individuals who serve them. Property and liability insurance are the most obvious coverages, as they protect against damage to physical assets and third-party injury or damage occurring in shared spaces. But these are only the beginning. Shared facilities may involve expensive equipment shared between corporations, such as boilers, chillers, elevators, and HVAC units. 

While property insurance may respond to fire or storm damage, the policy will not cover sudden or accidental mechanical breakdowns. This is where equipment breakdown insurance becomes important. While it is uncommon for corporations to directly share responsibility for major systems such as boilers, chillers, or elevators, it does occur in some cases. 

In those cases, equipment breakdown coverage ensures that sudden mechanical failures can be repaired or replaced without leaving corporations exposed. Ideally, if the shared facilities agreement is clear and concise, there should be no disputes over which corporation is responsible, but having proper insurance provides an added layer of protection.

Some condominium directors and officers (D&O) policies extend coverage to board members when they act on a shared facilities committee, but some may not. This is why it is always important to consult your insurance broker and confirm exactly what is and is not covered. In smaller, straightforward arrangements, an extension of the condo’s D&O policy may be sufficient in covering a board member for the condo corporation who is on the committee for the shared facilities. 

In larger multi-tower developments, serving on a shared facilities committee can carry significant financial risk. These committees often oversee high-value assets such as parking garages, HVAC systems, or amenity complexes. Decisions about funding, maintenance, or how costs are divided between corporations can be controversial, and if disputes arise, committee members may be drawn into claims. Without the protection of proper D&O liability insurance, those individuals could find themselves personally responsible for the outcomes of those decisions. 

The risks of poor planning are real. One corporation may find itself subsidizing another because cost formulas no longer reflect actual use. Mechanical systems may fail without the funds to replace them. Reserve funds may be inadequate, forcing special assessments. Uninsured gaps can leave not just corporations, but also individual directors and committee members financially exposed.

Accurate appraisals tie these insurance considerations together. They establish the replacement cost of shared facilities and form the foundation for both equitable cost-sharing and appropriate insurance limits. Without an appraisal, a corporation could risk being under-insured, leaving itself exposed, or overpaying into cost-sharing arrangements that do not reflect its true share of the risk.

Property managers are in a unique position to help boards navigate these risks. While lawyers, engineers, and brokers will often need to be involved, managers can add significant value by reviewing the governing documents early, mapping out which assets are shared, and confirming whether the insurance program extends to the shared facilities arrangement. They can also promote transparency by encouraging clear reporting at the shared facilities committee level, and by recommending professional appraisals to keep both insurance values and cost allocations precise.

Shared facilities offer tremendous benefits to condominium communities, but only if they are properly structured and protected. With Section 21.1 aiming to make agreements mandatory and enforceable, boards and managers will need to ensure not only that documents are in order but that the insurance program is comprehensive. 
Property, liability, equipment breakdown, and especially D&O coverage, must be considered together and supported by accurate appraisals. By doing so, boards can protect their corporations, safeguard their volunteers, and ensure their communities remain financially strong and well-governed for years to come. 

Brandon Murphy is a client executive at BFL CANADA Risk and Insurance Services Inc., one of the largest employee-owned and operated commercial insurance brokerage and consulting services firms in Canada. Our Realty Division, with a team of over 200 real estate professionals located in 27 cities across the country, understands the risks faced by all types of properties, from strata and condo corporations to apartments, commercial and bare land properties. To learn more about us and what we do, visit www.bflcanada.ca/realty-insurance-services
 

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