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Some problems faced by condo owners These matters should be addressed in the new Condo Act

07 Feb 2014 - {{hitsCtrl.values.hits}}

By Kirti Hewamanne
There are many problems have arisen with regard to condominium corporations and the management. As a result there are many unhappy buyers and they do not know where to go to get these problems satisfactorily resolved. Therefore it is necessary all condo buyers should know the role of Board of Directors, Management companies and the workers who perform duties, hired by the Managers.

The following are few suggestions which can be included in the new Condo Act.

Boards of Directors
All condos have a board of directors or an equivalent group by any other name, such as a council, depending on the country.

What are boards’ duties?
Boards of directors run condo corporations on behalf of owners: They represent owners. As an entity, they are responsible for making all major decisions regarding the maintenance of buildings and grounds, condos’ finances, and must uphold and enforce the Condo Act, the declaration, by-laws, and rules.

It is a prime board duty to ensure that rules and the declaration are applied uniformly and not just from time-to-time as suits directors or management.
Boards cannot refuse to enforce rules just because only one owner complains that a particular rule is not followed.

Failure to enforce rules fairly and consistently (and follow them) generally leads to problems down the road. These can result in a lowering of the standards of bearing & comportment in the building, degradation of civility and property, maltreatment of staff, abuse of power on the part of one or more board members, as well as financial problems—all potentially lowering the value of owners’ units on the real estate market.

It is absolutely necessary to have a Condo Act that is overseen by a special agency to better protect owners. This agency should have legal authority to implement the decisions taken at the settlements.

Boards of directors plan and oversee the fiscal health of the corporation and are responsible for hiring a management company to carry out the tasks associated with their duties and day-to-day work.

Boards have to ensure that the staff is humanely treated, is qualified, and actually works; that the management company collects all fees from owners in a timely fashion; that invoices are paid, proper records are kept, the budget is duly prepared, contracts are awarded after a tendering process, and adequate insurance is maintained. Reserve funds have to be sufficient, and annual general meetings carried out. Boards are also responsible for the reliability of status certificates.

Boards have to address residents’ legitimate complaints, make sure that their needs and rights are respected, and that they can enjoy their units peacefully, as per the Act. Boards are also responsible for communicating with residents, and particularly owners, so that owners are informed and feel empowered.

Boards should not turn into exclusive social clubs protecting directors or managers who fail in their duties. Rather, board members owe their allegiance to their condo, the Act, the rules and by-laws. Boards do not represent themselves nor the management: They represent owners and should be accountable to them.

It is the duty of boards to maintain dignity, respect for others and property, and general civility in a condo building or townhouse complex.

Even now countless letters of complaint have been received from owners by Condominium Consultants and Board Members regarding abuses on the part of various boards and particularly presidents.

As well, numerous complaints have been received about managers who refuse to help owners get in touch with their board. It is imperative that there be a special email address or mail box that allows owners to contact their board in each condo. Boards cannot refuse to be contacted. Furthermore, boards should allow owners to make reasonable complaints without threatening them with legal action.

A good board:

Communicates with owners and residents on a regular basis, explains its decisions, openly discusses problems and victories, has a policy of transparency and truthfulness. Postings on bulletin boards accessible to all residents are the key in this respect. Information meetings may take place occasionally.
Addresses residents’ legitimate complaints/concerns/requests and respects useful suggestions. Lack of communication and disregard for owners and condo assets are at the root of most condo problems. It’s the main red flag and it is reflected below in many problems in the section on what constitutes a “bad” board.

Always respects a condo’s finances, assets, and owners’ monies.
Exercises due diligence regarding contracts for repairs, maintenance, and staffing. In other words, a good board seeks tenders. When maintenance problems arise, a good board not only seeks advice from non-interested parties (to avoid conflicts of interest), but also asks if there is a better and less expensive solution than the one suggested by contractors.
Follows and enforces condo rules consistently and for everyone: Board members have to follow rules themselves if they expect others to follow them and should not show favouritism.
Is constituted of members who have no axe to grind or a vested interest or a personal agenda.
Makes certain that the premises are well maintained and that the staff is competent and hard working. In contrast, according to the letters received,

A bad board:

Mistreats, harasses, threatens, or refuses services to owners who have justifiably complained or made useful suggestions.
Or, yet, simply ignores owners’ concerns.
Rarely communicates with owners on substantive issues and prefers to inform them as little as possible. This seems to be a key ingredient in a lowered quality of life in condos and is reflected in the many other problems that seem to accompany this issue.
Responds dismissively or angrily when owners justifiably complain to them about problems (such as noise and broken rules) and lack of services (such repairs, cleanliness, garbage, recycling, and odours) or unnecessary expenditures.
Threatens owners with legal action when they complain justifiably or make suggestions; or yet when owners complain about management, staff, and contractors.
Rubberstamps decisions made by the manager, administrator, superintendent or contractors without independently studying the issue. Does not get quotes for projects or services.
Spends monies for upgrades just to suit themselves, contractors, or managers.
Refuses owners’ requests to view corporation records and documents.
Does not supervise manager and staff sufficiently. As a result, the work and services may be of lower quality or very little work may be accomplished. Or, yet, the staff is actually the power in the condo.
Forms a clique, often with management, against owners, and fails to understand that a board represents owners and not themselves nor the management/staff.

What to do about a “bad” board?
Very often, there is not much that owners can do because there is no independent institution that regulates the implementation of the Condo Act.

If this fails, they may requisition a meeting to replace the board--a more difficult step because of the difficulties in getting votes, especially in condos that have a high percentage of owners who live elsewhere.
Owners can try to requisition a meeting to discuss the issues.
When a board fails in many of its functions, especially in terms of not following the Act and misusing monies, owners can attempt to get a court order of compliance, this is mandatory this should be specified in the new Condo Act. The problem resides in finding a condo lawyer who will be willing to take the owners’ case; owners will not be able to count on the corporation’s lawyer because he or she will likely side with the board.

How are directors elected and how many?
The number of directors generally ranges from three in smaller condos to whatever a condo’s declaration specifies. A common and functional number is five and a quorum would consist of three directors present at a board meeting.

When a vacancy occurs on a board because a director resigns, the remaining directors may appoint a temporary director to serve on the board until the next annual general meeting or AGM. At that point, the director has to become a candidate to the elections if he or she is interested in remaining on the board.

Directors are always eventually elected by a condo’s owners at the AGM or at a requisitioned meeting. A board cannot “eject” or get rid of one of its members and neither can the corporation lawyer, unless a specific by-law exists on this issue--and such by-laws can be dangerous in terms of freedom of speech and can prevent honest directors from trying to fight a corrupt board. Only owners can “vote out” directors or an entire board at a special requisitioned meeting.

In many countries, condos have one director who can be elected for three years by resident owners only (although the candidate does not need to be a resident owner). This is called “the owner-occupied position.” It should be more clearly named “position voted on by resident owners only.” This position is more and more important in view of the large number of non-resident owners who often have little interest in the condo because, for them, this is just an investment.

What are directors’ qualifications?
In a nutshell, very few qualifications are required, except for willingness to learn and honesty.

The new Condo Act must specify that directors have to be 18 years or older, not in bankruptcy, and do not have a lien registered against them that has not been discharged 90 days prior to the elections. The other surprising aspect is that someone with a criminal record can in theory become a director.

However, a condo can pass a by-law that will be more specific in terms of who can be elected to the board, provided that this by-law is within the purview of the Act. For instance, a by-law may require that:

all directors be residents;
all directors be owners. This makes sense because owners are more interested in a condo’s welfare than non-owners would be;
or all directors be either owners or the spouse of an owner, or the adult child of an owner, or the parent of an owner (many adults buy condos for their parents or grown children);
no director shall be an employee of the corporation, such as a superintendent, a manager, a security personnel, in order to avoid conflicts of interest and problems in the line of authority;
no two members of a same family be on the board.

However, in deciding to restrict who can be a board member, a board should be concerned that, in so doing, there will remain a sufficient number of interested owners. For instance, if, in a condo, most owners are non-resident, the third option above may present a huge problem.

It is generally very difficult for condos to find good candidates for boards.

In fact, often there is only one candidate for each vacancy on the board. In such a case, the candidate is “acclaimed” at the AGM, not actually elected. These are elections by default! This also makes it easy for a bad board to bring in its own candidate and perpetuate itself, to owners’ dismay and feelings of powerlessness.
Perhaps a more relevant question to ask is, what is a good board?

Officers’ duties
The difference between directors and officers is this: Directors are board members elected by owners. Officers are persons appointed by the board to fulfill certain functions--they generally are directors. Hence, usually all officers are directors, that is, they are appointed from within the board elected by owners.

A director who is an officer can be removed as officer by the board; he or she can then decide whether or not to remain on the board as a director. However, boards cannot remove directors unless they requisition a meeting of owners for this purpose.

A condo corporation must have three officers: a president, treasurer, and secretary. This is the minimum. Many also have one or more vice presidents. Out of these officers, only the president may be a board member elected by owners.

A board member can combine two functions. For instance, a president can also be the treasurer, as these two functions complement each other. Or the secretary can also be the treasurer.

A board can appoint officers who are not on the board when directors do not have the time or the willingness to be treasurer or secretary. It is preferable that all officers also be directors: External positions can present problems of confidentiality.

The President’s role resides in the general supervision of the business and affairs of a condo corporation. Efficient presidents are “movers” who present issues and projects to their board, develop policies for board approval, communicate with residents and owner, are faithful to the declaration and rules, and inspire boards to move ahead with projects and solve difficult issues.

In other words, efficient presidents are leaders on behalf of their boards and owners. They inspire trust among owners and board members. They also try to establish links with various organizations in their neighbourhoods. Presidents oversee managers’ duties and activities. As well, they chair board meetings and owners’ meetings. Therefore it is mandatory to have an elected chairman ( by the owners ) in the board.

One aspect of the potential duties of a president that is little known is that he or she can become the condo’s manager when a board decides not to hire a manager or when a condo is too small to afford one.

The developer has no right to force an outside condominium Manager on the Condo Corporation without 100 percent approval by the unit owners as he may have vested interests and be loyal to the developer even after the residents take over the management of the condominium complex.
However, a president or a director who becomes the manager may want to hold only the position of manager in order to avoid conflicts that could arise in being both the employer and the employee.

The Vice President may perform some of the president’s duties if they so agree and replace him or her when absent. Similarly, the vice president may chair meetings during the president’s absence.

The Treasurer is responsible for the finances of the condo, including making sure that the financial statements are accurate, the budget is done in a timely fashion, and the reserve fund is sufficient. The treasurer may also be responsible to present to the board a plan for the investment of funds.

The Secretary is generally the custodian of the corporation’s records. The secretary is responsible for minutes taken at meetings (although he may not be the one who takes them), and for notices sent to residents for the annual general meeting. In actual practice, this role of secretary is often partly carried out by a president or a manager.

(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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Some problems faced by condo owners These matters should be addressed in the new Condo Act

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