The Importance of a Condo Corporations’ Board of Directors
Condominium Corporations are not run by any one single entity. In actuality, a Condo Corporation has 3 governing heads: the owners, the board of directors and the Property Managers. The Board of Directors plays a crucial role in this relationship as they essentially run the Condo Corp on behalf of the owners. They represent the owners, and are responsible for virtually all of the major decisions related to the condo’s finances, the maintenance of the buildings and grounds, upholding and enforcing the Condominium Act, the declaration, as well as rules and by-laws. As a result, allocating the right board members is crucial.
What’s interesting is that there are no special skill sets, knowledge or certificates required to serve on the board. The Condominium Act simply states that the condominium corporation must be governed by a board of directors consisting of at least three directors who are –
A.) At least 18 years of age
B.) Mentally competent
C.) Cannot be bankrupt
Do not have a lien registered against them that has not been discharged in 90 days prior to the elections. What’s more interesting, and some might say downright surprising, is that someone with a criminal record can, in fact, become a director. For anybody considering ownership of a condo unit, the competence level of the board may be concerning to you. Not to worry, you will have your say in determining qualified candidates.
Only owners can “vote in” or “vote out” directors, or an entire board in rare scenarios. They would do so at the AGM (Annual General Meeting) or a requisitioned meeting (a special meeting usually called or requisitioned by owners, or by a single board member, or multiple members). When a vacancy occurs on the board, if a member were to resign for example, the remaining members may appoint a “temporary member” to take their place until the next AGM. At that point, the appointed member will become a candidate to the elections should he or she wish to remain on the board. But the owners have final say.
According to the Condominium Act, the directors of a condominium corporation are held to the standard of “the care and diligence and skill of a reasonable prudent person.” They are expected to act in the best interest of the owners and the building, and they are expected to ensure that rules and declaration are applied uniformly and consistently. Boards are not allowed to refuse to enforce rules, even in the rare case where only one owner issues a complaint. Failing to enforce rules fairly generally leads to a wealth of problems down the road, with financial problems being just one of the many potential outcomes. These problems can ultimately lead to diminished resale value of the owners’ units.
With the requirements put forth by the Condominium Act being so loose and vague, owners may find themselves working with a “bad board” who don’t seem to have the owners best interests in mind. A potential solution is for a condo to pass a by-law which would indicate specifics in terms of who can be elected to the board, provided that this by-law is within the scope of the Act. For example, it can be specified that “all directors must be owners”, as owners have an invested interest in the condos well being.
When boards fail to enforce or follow rules, the owners may issue their right under Section 134 of the Ontario Condo Act, allowing them to seek a court order which would force the board to comply. With that said, the Act unfairly permits the condo corporation to charge 100% of the legal fees incurred by the board and the owner in obtaining compliance. In turn, seeking such a court order may end up costing the owners an obscene amount of money.
Moreover, the Board of Directors is responsible for hiring a management company. Property Managers can be thought of as the Board of Directors “arms”. They carry out most of the tasks required to maintain an orderly building, including but not limited to: collecting all fees from owners in a timely fashion, ensuring that invoices are paid, keeping proper records, maintaining adequate insurance, providing recommendations related to policies and procedures, carrying out enforcement based on policies and procedures, handling tasks associated with maintenance, and much, much more.
Allocating the proper board members is absolutely crucial to the success of the owners. The board represents the owners, and as such, should be accountable to them. A good board will communicate clearly and openly with the owners, address resident complaints, follow and enforce rules, maintain an orderly building, and ensure condominium corporations’ fiscal health.