By Kirti Hewamanne
It is necessary for Condominium unit owners to actively participate in running the complex through the Condominium Management Corporation. You cannot buy a Condominium and feel that this is one way to have a peaceful life without getting involved in repairs and maintenance. You have to keep an eye on how it is run by the Directors of the Condominium Corporation and the Condominium Managers. This is to protect your interest in the investment.
An informed buyer is a smart buyer. There is a need to educate a buyer that he is buying a cube of space and will be learning the basic principles of self-government.
The documentation for a condominium project will probably look like a short novel but read like a complex drama. However, no real estate practitioner, consultant should attempt the sale or resale of a condominium unit without the complete knowledge of the complexities.
It’s absolutely necessary for the unit owner to understand his or her role, the role of the Condominium Corporation and the duties of the Condominium Management Company. The owners have the right to engage them and discontinue their services if they are not performing their duties. Sometimes the Directors of the corporation can get too cozy with the management company and which will can lead to a lot of problems.
Getting back to the basics
A relatively recent phenomenon across major cities in the world, condominium has proven to be a viable, alternative ownership style for many. It can be a method of combining some of the advantages of ownership with some of the freedoms and economies associated with rental.
Condominium concept is the same whether it is in Lima-Peru, London-England, New York City-USA or Mumbai-India.
Condominium ownership is 100 percent universal, meaning it is irrelevant what country you live in or what the political situation is in that country. All condo owners want the same thing 1. make sure the corporation is being operated in accordance with the country’s legislation, for the benefit of all owners 2. assure financial stability in both ongoing operations as well as long term financial planning 3. the most important is to make sure all owners are engaged in the activities of the Condominium Corporation and the owners have the accessibility to all documents on requests having given sufficient notice to the Board.
How condominiums are run
In some ways, a condominium development is like a small town. The owners of each unit are members of the condo corporation and have the right to vote at meetings (one vote per unit).
Structure
An elected board of directors, like a town council, makes decisions on behalf of the owners, and often hires staff to carry out the work. Just as towns have a town manager; condos often have a property manager.
Condominium Corporation
The condo corporation is responsible for managing the condo property, finances, official records, reserve fund study, and all related matters. As an owner, you have a right to review these corporate records, as long as you make your request in writing and give reasonable notice.
Board of Directors
Owners elect a board of directors to manage the condo corporation’s affairs. This has to be done by secret ballot.
Directors
organize an annual meeting of the condominium unit owners, and any other owner meetings that may be required
renew the reserve fund study every three years and ensure adequate funds are invested in the reserve fund to cover major repairs
The board typically meets once a month to conduct business. Among other things, it must:
disclose conflicts of interest in writing
act honestly, in good faith and exercise due diligence in conducting board business
The board must have at least three directors. Each director must:
exercise reasonable care and skill in fulfilling his / her duties
be at least 18 years of age, of sound mind, and not in a state of bankruptcy.
ensure the building and property are properly maintained and that repairs are carried out as needed
appoint an auditor and oversee financial accountability
pass bylaws dealing with the responsibilities and powers of the board, how meetings will be run, and the collection of common expense fees
pass rules to promote the safety, security and welfare of the owners.
All voting by owners is on the basis of one vote per unit. An owner is not entitled to vote at a meeting if his or her contribution to the common expenses is in arrears for more than 30 days prior to the meeting.
The appointment of auditors has been made mandatory for all residential condominium corporations comprising 25 units or more. Provisions have been made for the appointment and the removal of auditors.
Directors are elected for a term of up to three years and may run for re-election. It’s a good idea for boards to elect directors to terms that overlap so that there will always be a board member with operational history.
Directors may be removed from office by a majority vote. (See Other Owners Meetings) Owners may then elect a replacement.
Property Manager
Boards of directors may hire a property manager (or a property management business) to oversee the day-to-day operations. This has to be for a limited time period and they can reapply when the tenders are called by the board. They must be professionally qualified personnel as they have to handle millions of rupees in the budget of the condominium complex. These managers will hire the technicians and other maintenance workers. It is absolutely necessary that they should be appointed for a period of one or two years and their contract can be renewed or terminated by the majority of the condominium owners.
A property manager / management company may:
collect common expense fees
hire and monitor service companies.
respond to owner complaints
keep operating records
maintain common elements
The property manager is accountable to the board of directors.
Meetings
Annual General Meetings
The board of directors holds annual general meetings (AGMs) where owners vote on major decisions. An AGM must be held within six months of the end of the corporation’s fiscal year so that owners can review the financial statements in a timely manner.
In advance of the AGM, the auditor must issue a report on the corporation’s financial statements. The financial statements and auditor’s report must be attached to the notice of the AGM.
Voting is based on the number of units, not the number of owners. Each unit is entitled to one vote whether it has a single owner, two owners, or more.
Other owners meetings
The board of directors may call a meeting of owners at any time. The notice of meeting must explain the purpose for which the meeting is being called.
Owners may request a meeting of owners on any topic of concern, from something found in a specific rule to the performance of a director.
If owners of 15 per cent of the units sign a written request for a special meeting, the board must call it within 35 days.
The request must include what business will be discussed. For example, some owners may wish to change the hours of access to the pool. A rule can be changed by owners of a majority of units.
If the reason for the meeting includes removing a director, the director’s name and reason for removal must be specified.
If the board fails to call the special meeting, the person(s) requesting the meeting may call and hold the meeting within 45 days.
Voting by proxy
If you are unable to attend an AGM or owners meeting but still want to have a role in the decision making process, you may wish to submit a proxy form. This gives another person who plans to attend the meeting the power to vote on your behalf.
Board Meetings
Only directors have a right to attend board meetings. Directors may issue invitations on occasion for owners or others to attend and address a matter with the board.
Boards of directors must keep minutes of their meetings and these minutes must be available for review by any owner. The corporation may not make a charge for allowing an owner to examine its minutes, but it may make a reasonable charge for any copies which the owner requests.
Frequently asked questions by the owners 1 Is there a limit on how much monthly common expenses can be increased?
There is no maximum amount.
Each year, your condo corporation sets out a budget for current operating expenses and an amount to be set aside in the reserve fund. If you and other owners are concerned about the common expense increases, discuss this with your board of directors.
2 Can I withhold my common expense fees until urgent repairs are carried out in my unit?
No. As a unit owner, you are required to pay common expense fees even if you have a claim or dispute with the condo corporation. If you do not pay, the corporation automatically has a lien against your unit. This lien can be enforced, if necessary, by selling your unit.
3 My condo board wants to use the reserve fund to build a new exercise room. Can they do that?
No. The reserve fund may be used only for major repairs or replacement of common elements.
4 Our board says there’s no money in the reserve fund to complete necessary repairs. We don’t know where the money has gone. What can we do?
As a condo owner, you have the right to examine the financial records of the corporation, including the reserve fund study. This study estimates necessary repairs and establishes a minimum balance for the fund.
The Condominium Act states that an auditor elected by condo owners must prepare an annual report based on an examination of the financial records. The report must be provided to the owners along with the notice of the annual general meeting. Owners have the right to require the auditor to attend this meeting to answer questions.
5 My window has been leaking and causing damage in my unit. I signed a work order with the property manager six months ago, but nothing’s happened. What can I do?
If the property manager is not completing the repairs as agreed, you may wish to put your complaint in writing and submit it directly to the condo’s board of directors. Clearly outline the problem. Ask for a written response and a timetable for examination and repair.
6 The sink in the unit above me overflowed and damaged my unit. Who pays for the repairs?
First find out if the damage in your unit is covered under the corporation’s insurance policy. There’s a good chance it may be. Then determine who caused the damage and therefore pays the deductible. Finally, check your corporation’s declaration and bylaws to see how they may apply.
7 Can my board of directors prohibit pets in the condo building?
Yes, within reason. Check your condo’s declaration, bylaws and rules to determine whether or not pets are prohibited in your building. Prohibitions in a declaration carry more weight than prohibitions contained in bylaws or rules.
Ask the property manager or board of directors for a meeting to discuss the issue. There may be room to negotiate.
Note that service dogs, such as those trained to help people with disabilities, are exempt from pet bans.
8 There is a loud and difficult tenant across the hall from me. What can I do about this situation?
The condo board must take reasonable steps to ensure that owners and occupants comply with the Condominium Act, and with the board’s declaration, bylaws and rules.
Report the tenant to your property manager or the board and ask that they look into the matter.
9 Can the property manager enter my unit without my consent?
Yes, in some circumstances: If there is an emergency such as a fire, management may enter the unit immediately. A corporation (or its representative) may enter a unit to carry out the “objects and duties” of the corporation (such as inspecting the fan coils in the heating and cooling system), provided it gives the unit owner reasonable notice and enters at a reasonable time.
10 My condo board isn’t living up to the requirements of the Condominium Act. They never call meetings and they won’t let us see the financial statements. I’ve talked to them but they won’t do anything. Can the government help me?
The government has put in place a number of mechanisms for settling disputes between condo corporations and unit owners, and it will not interfere in these procedures.
11 My condo corporation refuses to disclose the contracts it has negotiated with the company carrying out major repairs in the building. We want to know if the contractor has liability coverage. Are we entitled to see these documents?
Condo corporations are required to keep records of all contracts and, with some exceptions (see below) owners have a right to examine these contracts. You must make a written request and allow a reasonable time for the corporation to comply. There is no charge to examine the records, but you may have to pay a reasonable fee if you want copies. If the corporation refuses to let you examine the records, you can take them to Small Claims Court. You do not have the right to inspect the personnel files of employees of the corporation, or records relating to:
insurance investigations
actual or pending law suits
specific units or owners.
12 Who is responsible for enforcing the Condominium Act if the board of directors is behaving in an unethical and ineffective manner?
Where a unit owner has a dispute with the condominium’s board of directors, the matter may be taken to mediation or arbitration or referred to court.
13 Are condominium boards allowed to impose fines?
No.
Since our condominium industry is at its infancy compared to many other countries like Canada and the United States, we can learn from them when we introduce the new act. We do not have to reinvent the wheel. It is like starting off with a clean slate – extremely interesting times for Sri Lanka.
The Condominium Act Review discussions must be done in stages. Public engagement process is a must at the beginning.
At each stage of the review, condo owners, residents, lawyers, developers, Insurance companies and other interested groups identify issues and give recommendations to help ensure the Condominium Act reflects current and future needs.
The suggestions for a new condominium act will be mentioned in the next article by the writer which will be published soon.
(Kirthi Hewamanne, a graduate of the University of Ceylon, Peradeniya, is an award-winning realtor with wide experience in all aspects of real estate, including specialized knowledge of the condominium concept. He held membership in the Canadian Real Estate Association, Ontario Real Estate Association, London St. Thomas Real Estate Board Ontario and was a member of the Realtor Political Action Committee Canada. He can becontacted at [email protected])
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By Kirti Hewamanne
