Condo Management: Condo Corporations’ Board of Directors

Landlords in the GTA often choose condominiums as their investment of choice; Condos come at a lower cost comparatively speaking, and generally hold their value/equity quite well. But with the ownership of a Condo comes rules, responsibilities and relationships to maintain. Condominium Corporations are not run by any one, single entity. A Condo Corporation has 3 governing heads that a landlord must be familiar with: the owners (you as a landlord are included in this group), board of directors and the property managers. Each governing head has their own roles and responsibilities, but the Board of Directors plays a crucial role; they essentially run the Condo Corp on behalf of the owners. They represent the owners, and are responsible for virtually all the major decisions related to the buildings finances, maintenance, upholding and enforcing the Condominium Act, the declaration, as well as rules and by-laws. Naturally, allocating the right board members is crucial.

A key factor for landlords to consider, 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, and d.) Do not have a lien registered against them that has not been discharged in 90 days prior to the elections. In reality, these are very minimal requirements. In fact, someone with a criminal record can become a director. For anybody considering ownership of a condo unit, the competence level of the board may be concerning to you. For this reason, it’s important to understand that you will have your say in determining qualified candidates.

Owners are responsible to “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, by a single board member, or multiple members).  When a vacancy occurs on the board, 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. As a landlord/condo owner, it’s crucial not to take this process lightly.

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 to ensure that rules and declaration are applied uniformly and consistently. Boards are not allowed to refuse to enforce rules, so keep this in mind when dealing with your tenants. Failing to enforce rules generally leads to a wealth of problems down the road, with financial issues being just one of the many potential outcomes. These problems can ultimately lead to diminished resale value of the owners’ units.

Evidently, the requirements put forth by the Condominium Act are minimal and vague. Sometimes, owners find themselves working with a board who don’t have the owner’s best interests in mind. In these scenarios, a condo may wish 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 wellbeing. This would be a topic to discuss with the other owners in the building.

The Board of Directors is also responsible for hiring a management company, making their role even more important. Property Managers 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.

As you can see, allocating good board members is crucial to the success of the owners. A good board will communicate clearly and openly with the owner’s, address resident complaints, follow and enforce rules, maintain an orderly building, and ensure condominium corporation’s’ fiscal health, all of which have a direct impact on owners return on investment.