Governance

November 3, 2023 Published by Toronto and Area Chapter - By Geoff Grist

Building the Right Condo Board Team

From the Fall 2023 issue of CCI Toronto Condovoice Magazine.

The Staggering Responsibilities of Condo Board Members Demand a Greater Conversation About the Quality and Competency of Board Members

Recent Ontario Consumer data suggests there are more than 11,000 condominium corporations representing approximately 900,000 units in Ontario. Across Ontario, those numbers equate to $450 billion in condominium assets. On average, a volunteer Board of Directors for a condominium is responsible for managing a $100 million dollar asset, if the average price of a condo is $500,000 and the building is potentially 200 units in size. In short, there is a staggering responsibility on Boards that demands a greater conversation about the quality and competency of Board Members who are responsible for significant decisions.

Most Boards consist of volunteers hoping to make a difference in a place they call home. It’s a noble endeavor that should always be respected and applauded. In-depth, many condo board positions are filled by volunteers lacking crucial knowledge and experience that can lead to big mistakes or potential liabilities in key areas. Acknowledging that there is a lack of professional or technical expertise is the first step. Without the proactive engagement of knowledgeable lawyers, engineers, construction maintenance, security contractors, etc. the impact of certain decisions could have negative consequences downstream, and in some cases are too late to remedy, correct, or repair.

There are many important elements to every condominium community such as structural, mechanical, and financial performance to ensure comfort, safety, and solvency. One of the more important items to monitor is the increasing demand for building condition evaluations, structural inspections, and the professionals entrusted to provide sound advice and estimates. Structural inspections are not always routine or simple. It is a complicated process by any standard and it requires the expertise and skill of experienced professionals. Assessing the integrity of concrete, steel, glass, brick, curtain walls, roofing, the building envelope, as well as electrical, plumbing, and mechanical components, is a highly specialized field. If the goal is to maintain safety and quality of life for residents, then having the wrong team in place or not enough money set aside will almost certainly lead to exterior and interior building decay. Sophisticated long-term plans and having competency on Boards or Associations is the first and most critical step in ensuring long-term success for residents, owners, and investors.

When buildings are exposed to the elements year after year, the effects of sun, wind, snow, ice, and water inevitably chip away at the exterior structure and collaterally, the quality of life of its residents. Most condo board directors are unaware of the different types of building materials that can be affected at different rates by extreme climate events and weather conditions. Glass, concrete, metal, and brick all react differently depending on the quality of materials and workmanship, lack of a regular maintenance schedule, and timely repair. If key components like these are not remedied in a timely manner or maintenance plans are neglected, small problems almost always grow in size and scope, and both subtle and catastrophic failures become easy to predict. Until we can build an indestructible building that comes with a lifetime warranty, planning for inevitable repairs should be the primary objective and mission of every condo board member and its residents.

For better or for worse, most condo Boards are set up as not-for-profits. It’s this inexperience that can lead to decisions that, while they may reduce costs in the short term, can lead to large, unimaginable expenses in the future. It’s at this point that condos run into major financial trouble. More condos are being built because of the great importance they serve in helping to solve the housing crisis. It’s only fair that these assets, both current and future, have responsible decisionmakers in a place that will guarantee their maintenance and preserve investments for decades to come.

When running a large corporation, it is important to surround yourself with a strong team. Condo Boards should be no different. Board members have an enormous responsibility that their fellow residents should respect. Feedback from numerous property managers, directors, and well-guided boards on how board members should conduct themselves or behaviors some board members may demonstrate is listed below:

1. Engaged leadership - Traditionally a Board position in a condo is a volunteer position. Attracting dedicated and committed individuals who are competent in the needs of the Board sometimes is a challenge. A creative approach is needed in how to attract and retain Board members.
2. Expertise - If you have a leaking pipe don’t hire a dentist – hire experienced professionals to manage your assets. Carefully select your property management firm, lawyers, consulting engineers, reserve fund study planners, and financial planners based on their knowledge and experience with similar buildings.
3. Personal Agendas - The greater responsibilities of governance and fiscal stewardship are sometimes neglected or abandoned altogether by Board members who choose instead to focus on their pet projects. New lobby furniture is great, but not at the expense of much larger decisions with significant risks and future impacts.
4. The Bully - Harassment and disrespectful encounters become all too common when residents of the building raise concerns and complaints aggressively or inappropriately. Strict rules of conduct need to be followed and enforced and if they can’t be, the risk of constant Board member turnover handicaps success.
5. Run the show - Some new Board members push ideas that are purely of self-interest, often neglecting the greater good of the corporation. In some circumstances, these self-interested board members exert their power over the property manager, overstep their authority and try to indirectly run the entire property.
6. Big Changes Can Lead to Wasted Time - Disgruntled residents and even a rogue Board member who doesn't get their way, pressure and lobby the building community at large to ambush the sitting Board’s building renewal program. Sometimes this results in sweeping changes in the management company which causes a domino effect with a new management team, a new engineering firm, a new building management plan, etc. Important decisions are never made, new projects transpire wasting valuable time, resources, and money.
7. Special Assessment Potential - Condo fees represent the investment needed to properly maintain a building and should accurately reflect inflationary pressures. When these fees are kept artificially low in order to placate the Board, important investments in maintenance can’t be made, reserves are drained, and repairs are delayed. Activity like this only accelerates the neglect as repairs fall further behind each year. Inevitably there will be a need for a special assessment and by that time the problems have become much worse. Additionally, when a Board realizes that they need to raise fees, the increase is no longer an inflationary one but rather a double or triple increase to catch up on real market costs and pressures.
8. A Well-Balanced Plan - Adoption of a responsible financial plan and a budget that identifies risks and opportunities is the best way to address revenue shortfall. Whether it’s a special levy, a one-time assessment or an approved borrowing plan, once a plan and a budget are adopted, stick to it, and avoid repeating the same mistakes twice.

In retrospect, a quick review of the governance of some Boards reveals weaknesses that may impact the successful implementation of short and longterm renewal strategies. Unlike most large corporations that benefit from a highly skilled executive and a strong financial position, most individuals that sit on Condo Boards, have never run a large corporation. Most are not businesspeople with the background or skill set needed to address complex engineering and construction decisions. Without specialized knowledge or experience in a specific field, many Board members are simply misled or hijacked in their important mission of bringing sound, responsible leadership to the Board.

Geoff Grist
Chairman and Founder, Brook Restoration Ltd