Property Management Issues
Transition in Management
From the Volume 14, Winter 2023 issue of the CCI GHC Condo News Magazine
Based on the Coverages, Clauses and Clawbacks panel session at the September 16, 2022 CCI-GHC Annual Conference given by Tom Gallinger –Atrens-Counsel Insurance Brokers; Karen King – King Condominium Management; Matthew Atkin - GSA Property Management; and Richard Elia – Elia Associates PC
“Quality is generally transparent when present, but easily recognized in its absence.”
Alan Gillies, author
An unfortunate reality of working within the condominium sector relates to price-sensitivity and the number of decisions made purely on the basis of cost – the best is always the cheapest…until it’s not. In the time that passes until the honeymoon is over, a lot can happen – and a lot can be overlooked.
Below are some (certainly not all) items that should be on your (or your new property manager’s) checklist when transitioning between management.
1. Review and understand your Insurance Policy. This should be done with a reputable broker who is knowledgeable in the needs of condominium corporations. For example:
- When does it renew? Has that date passed?
- What are the limits in coverage?
- Are there any restrictions, exclusions, or sub-limits?
- Do you have a NO-coinsurance clause?
- What is your proper insurance to value?
- Is there any additional coverage that might be beneficial? Cyber fraud?
2. Be confident in relation to your existing (Condo) Governing Documents:
- Don’t accept what you have been given by the outgoing manager as their file may not be complete or up to date. Remember that the incoming manager relies on these documents, both in the performance of his/her work, as well as when they are attached to status certificates.
- Speak with legal counsel and obtain a complete set of your corporation’s Governing Documents directly from the Land Registry Office.
- Understand what type of condominium you are involved in, as well as the community around the condominium. For example, a ‘Standard Condominium’ has different insurance requirements than a ‘Vacant Land Condominium’. Are there Shared Facilities? Also, what if your condominium corporation is nested within another condominium?
3. Know and understand your Standard Unit Definition (do you even have one?):
- Is your Standard Unit definition set out in a by-law or a schedule…or not at all?
- Does it reflect the interests of all interested parties in managing (not eliminating) insurance risk – the condominium, the owner of the damaged unit, the other owners, and the mortgagee?
4. Know and understand your Insurance Deductible Recovery Policy:
- Don’t blindly assume that you can charge back every cost that might relate to an owner. Find and understand that authority in the Condominium Act, 1998 (the “Act”), in the Declaration, and, for insurance deductible recovery, perhaps the by-laws.
- If you have an insurance deductible clause in a by-law, don’t assume that it provides any additional authority than would be found under section 105(2) of the Act. If you have a provision in your by-laws, does it move beyond the requirement to show an act or omission? Consider the merit in establishing a provision that permis recovery from the Owner of the unit from where the damage originated (strict liability).
- In view of possible changes to the Act, consider proactively establishing a Strict Liability Insurance Deductible Recovery provision in your condominium’s Declaration (along with augmenting your other indemnity provisions).
- If your corporation has a very high deductible, should payment of this amount be factored into the corporation’s budget (as recovery from an owner is not always possible)?
5. Know and understand the Corporation’s Contracts:
- Make a detailed list of all contracts that should be in place then and then cross reference that list with the actual contracts turned. Identify any missing or redundant contracts.
- Advise the various contract vendors: (1) of the change in management so that they can update their records; and (2) that you require “their” documents - these include but are not limited to WSIB clearance, insurance certificate, Working at Height Certificate, Business license for the applicable municipality, ESA, etc.
- If there are missing or unsigned contracts (and there usually are), immediately contact the former management company and the vendor in question in writing to both document and inform them of the missing/unsinged con-tract(s) and request they look for them and reply in writing with what they find (or don’t find). This information should be communicated to the Board of Directors, options discussed at a properly called Board meeting, and instructions minuted on how to move forward.
6. Review and understand the Reserve Fund Study:
- Ensure that you receive a copy of the most current, full Reserve Fund Study update and Board-signed Form 15.
- Advise the Reserve Fund planner of the change in management.
- Determine when the next update is required and diarize same in your Annual Plan.
- Thoroughly review the Reserve Fund Study with the Board, and:
i. Compare it with the work that has been completed since it was issued and the amount of money spent compared to the plan. Depending of the variance between these two, a study update may be recommended a headed of schedule; and
ii. Review the areas making up the common elements listed in the study to ensure they match the “reality” of your condominium corporation. Often items are included which should not be or excluded that should be in the study.
7. Review and understand the Audit:
- Ensure that you receive a signed copy of the most current audit. If the audit for the immediately preceding financial year is not available, find out why.
- Call the auditing firm and speak with the Partner assigned to the corporation. These conversations tend to be very informative; often, you can quickly get up to speed on the history of the corporation’s financials (both positive and negative) from the auditor.
- Review the last 3-5 audits with a view to identifying expenditure trends (which in turn can assist in budgeting and discussions with the Board and Reserve Fund planner about capital projects).
8. Review and understand the Preventative Maintenance Policy:
- Review past policies relating to inspections and preventative maintenance, as well as records evidencing compliance with same.
- With approval of the Board, develop and implement such policies.
In addition to these eight (8) points, every condominium corporation should operate with an Annual Plan in place. This Plan is a month by month listing of all critical dates and related actions Management needs to undertake to ensure the professional operation of the property.
Many incoming managers and management companies have the skills and experience to draw on that likely already encompass the points above; however, with the current supply shortage in general licensed site managers, and the strain that this shortage has placed on even the most reputable management company, this can’t be assumed.
We can all agree that transitioning management and learning the complexities of a new condominium community is no simple task. While the foregoing points are by no means an exhaustive list, addressing the above elements will help equip you with a foundation to ease your transition and address the challenges of your new condominium organization.
CPM, RCM, CMOC, ARM
GSA Property Management
Richard Elia, B.Comm., LL.B., LL.M.(ADR), ACCI
Elia Associates PC
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