Governance

January 19, 2017 Published by Toronto and Area Chapter - By Brian Antman

Communication Between Owners & Directors is Vital

From the Winter 2016 issue of the CCI Toronto Condovoice Magazine.

Whether you are a new owner or have lived in a condominium for many years, you should understand how the Board of Directors governs your condominium. Condominiums, by their nature, are about communal living and how that happens is prescribed by the Condominium Act of Ontario and the Declaration, Bylaws and Rules of each corporation. It is within the parameters of these documents that the Board of Directors must operate. Directors are responsible to ensure that the requirements of these documents are complied with and in particular they are legally responsible to ensure that the common elements, assets and ultimately your investment is properly managed.

It is most important that Directors have the tools to carry out their functions effectively. The Condominium Act of Ontario sets out only basic criteria to be a Director. Currently a Director must be; at least 18 years old; not an undischarged bankrupt; and not mentally incompetent. A few condominiums have passed bylaws with additional qualifications, such as the requirement to be a unit owner. Like most other elected officials, condominium directors do not need to be educated in their duties either to be elected or to continue to hold office, though this will change when the director education provisions of the amended Condominium Act come into force in the next year or so. These programs provide the information a director needs to function effectively.

The Board of Directors have an obligation to carry out the duties of its condominium corporation, which includes, but is not limited to, the following:

• Ensure owners are complying with the Condominium Act, Declaration, Bylaws and Rules;
• Maintain and repair the common elements;
• Maintain an adequate reserve fund;
• Ensure the reserve fund study is done within one year of registration and then updated every three years;
• Develop an annual budget that will provide the goods and services necessary to maintain the quality of life within the community;
• Ensure all common element assessments are collected;
• Ensure all expenditures are authorized and have been recorded;
• Ensure all monies are accounted for, all records have been maintained and that they are reviewed on a regular (monthly) basis;
• Obtain the appropriate level of insurance, including directors' liability insurance; and
• Ensure the Annual General Meeting is held within six months after the fiscal year-end.

Whether your corporation is a small townhouse community in rural Ontario or a large high-rise in downtown Toronto, directors need to view condominium operations as a business. All new directors should read the corporation's Declaration, Bylaws and Rules immediately after they are elected to ensure they have a clear understanding of the duties of the corporation and reread these documents every few years to ensure their requirements remain current.

Directors should take an annual walk through the building with the property manager to get a good look at all the physical assets. They should review the monthly financial statements and the prior year's audited financial statements for any qualifications or other issues raised from the audit. Directors have the legal obligation, set out in the Condominium Act, to act honestly, in good faith and to exercise the care, diligence and skill that a reasonably prudent person would exercise in similar circumstances. In short, they should think through their decisions using common sense and without personal bias.

The Condominium Act states that as long as directors rely on the advice of qualified professionals, they will not be held personally liable for the results of decisions made. Experts include engineers, lawyers, public accountants, and appraisers and auditors. Directors should only hire professionals that are experts in their field and conversant with the requirements of the Condominium Act. Membership in CCI or ACMO (Association of Condominium Managers of Ontario) may indicate that these professionals have experience in condominiums. The Board should select three or four firms, check their references and when appropriate, interview them before making their selection.

Communication between owners and the directors is vital. Directors should: find out from owners what issues they might have with the operations of the corporation; keep them informed of what's happening through newsletters, emails or a website; and hold town hall and budget meetings. The Board can provide some time at each meeting when owners can bring their concerns to the board. Minutes should be kept of all meetings and made available to owners (except for matters governed by privacy legislation). Minutes are not only part of the corporate records but also a powerful tool to demonstrate that decisions of the Board are properly made.

It is most important for directors to remember that they are dealing with their neighbours who also have a vested interest in the community and that mutual respect is required for their community to operate harmoniously.

In short, directors should educate themselves on condominium matters, make decisions with care and proper due diligence, budget sufficient funds to ensure that the quality of life within the condominium is maintained, communicate with owners early and often and ensure all owners are treated fairly and with respect. Doing so will go a long way to making their condominium a great place to live.