Specific Legal Issues
Annual Plan - Kudos to the Condo Authority of Ontario! They are out with a Best Practices Bulletin… See what it includes!
From the Volume 12, Spring 2022 issue of the CCI GHC Condo News Magazine
A big “Way to go”! The bulletin suggests that the best practices were developed to help condominium boards prepare for next year’s governance and operational requirements.
“Consideration should be given to the creation of an Annual Plan, an Annual Vendor and Service Review and The Regular Collection of Unit Owner Feedback.”
We will provide the co-ordinates to this information on the CAO website at the end of the article. Basically, it is a simple plan to begin with but a great start for Condo Corporations.
The balance of our article will deal with the importance of an annual plan, some suggestions from the “for-profit side” for making it operational and meaningful.
In his essay; “Five Most Important Questions,” renowned academic Peter Drucker writes the following about not-for-profits; ‘for years, most nonprofits felt that good intentions were by themselves enough. But today, we know that because we don’t have a bottom line, we have to manage better than for-profit business.’
Drucker goes on to recommend a “self-assessment” that includes the following five questions: “What is our mission? Who is the customer? What does the customer value? What are our results? What is our plan?”
Indeed today, a further consideration appears to include ESG (Environmental, Social, and Governance) aspects. We can add to that the notion of “sustainability” which includes “economic considerations” for the future.
Some of the ESG issues may not impact communities for a few years but some already are. The re-planting of trees, provision of charging stations for EVs, the managing of potential for conflict, diversifying the board and willingness to consider alternative structures are some that come to mind.
It is easy to say; “well that doesn’t apply to us.” Think of it this way. Condominium Units need to sustain their value in terms of buying/selling in future. Potential buyers will look for some of these enhancements to be available and if they are missing, buyers will move on to the next community.
In fact, it will become critical for Condo Corp Boards of the future to communicate some of these issues to their residents.
Suggestions for Formulating a Good Plan
A simple vision statement can be very helpful to planning the future of the community. We all want to know that the value of our properties is increasing, which translates to being in good repair and with long term assets being renewed. So, something simple like “people should aspire to live here”, answers a lot of those questions.
Drucker spoke about self-assessment and the best way to do this is to begin with a SWOT analysis. Here are some brief examples:
S = Strengths: Assets in good repair, reserve fund in good shape, happy residents and suppliers
W = Weaknesses: Probably the toughest for directors to enunciate but important. Examples might be roadways in disrepair, roofing failing, shortage of directors, underfunded reserve.
O = Opportunities: People stepping forward to do committee work, people volunteering to provide ideas and scrutinize safety issues, properly funded reserve with contingencies and appropriate levels of monthly fees.
T = Threats: Inflation, under-funded reserve, fast accumulating capital expenditures, failure of directors to understand and review monthly financials, and no annual long-term plan.
These can be tough considerations and to be sure, once agreed to, should be shared with residents. This is a great basis for a townhall-meeting and each point should in fact be carefully explained to residents. After all, if the outcome is the need to spend money at a quicker rate, they need to know up-front.
These are but a few example. They differ by building (community) of course, but a great way to begin the building of a plan. Brutal honesty is required in identifying the SWOT issues. The right disclosure of all four categories will dictate the quality of the ultimate plan.
Embrace Change in Building the Plan
Corporations, be they for-profit or not-for-profit need to be prepared to update their thinking. This to do with changing conditions; think inflation, ESG and sustainability.
The best example right now is current unplanned levels of inflation. In Canada we just passed through 5.1%. It means that whatever operational and capital plans a building (community) might have just increased by that amount. On a $1M project, the cost just went up by $51,000. These are not pretending cost increases. They just caused your Reserve Study to become obsolete. If interest rate increases commence in March (2022), it will take a while for inflation trends to be reversed. Directors are expected to anticipate such eventualities (it is what contingencies are for), plan for them and ensure that residents are forewarned.
Building the Plan
Using the SWOT and the Reserve Study as a starting point, strategic plans need to be identified. Let’s assume your building is coming up on window replacement. Pretending it will not be needed is not a good idea.
So, a strategic plan might be as follows: initiate annual monitoring of window conditions.
The resulting action plan could be as follows:
- Retain a company to monitor and report annually on conditions
- Update the Reserve Estimates for window replacement
- Decide on a schedule for this work to be done ie maybe not all in one year.
This is but one example. All long-term assets should be reviewed in that way. The plan should cover a five-year period. At the end of each year a new first year should be added.
This planning seems like a major task if you are not used to it. In fact, it is very straight forward. I will always recommend that the plan needs to be built by the directors or a committee reporting to. It is not fair to expect the Property Management Company to write it. Directors or committee members are owners and as such should want to get their heads around realistic cost planning. They, after all, are the ones that have “some skin in the game.”
So, in a country like Canada where hockey is a major pastime, it is a given that defense alone doesn’t win games – a good blend of defense and offense does. The same applies to buildings. The defence can be thought of as making timely repairs to avoid insurance claims, while the offence can be thought of as getting ahead of the curve. Build a plan and put the necessary funding in place to meet the needs. If you provide the necessary discussions with your residents (spelled communications), chances are they will be on your side.
The Five Most Important Questions You will Ever Ask About Your Organization, Peter F Drucker, Leader to Leader Institute, Jossey-Bass.
Condominium Authority of Ontario Website, Intoducing Annual Condominium Requirements Guide, Go to Part 3 - Best Practices.
Special Thanks to: Permal Bangaru at the Condo Authority for walking us through the objectives of the Guide.
Salt in the Wounds
Our article in the Winter Edition spoke to the concerns municipalities are expressing about the cost of salt damage. It is an environmental issue that should be considered in future planning. Claire Malcolmson, in a recent article in the Toronto Star of February 14th, 2022, agrees. She is concerned for the future of Lake Simcoe water quality which she says is “on a trajectory to reach toxic levels of salt in 37 years.”
Meaning? It is a good example of the need for future planning. Surely, in this day and age we can invent a “less-toxic” ice and snow melting system… it’s called playing offence.
Dave Williams is a graduate of York University and a retired corporate executive. Always interested in hearing from readers at email@example.com
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