If you live in a condominium, you would have participated in electing the members of the board. While most board meetings go on behind closed doors, have you ever wondered what the responsiblities of the condo board are?
I have put together a quick infographic to illustrate a summary of the chain of communication and responsiblity of the property manager and condo Board of Directors...
What Is A Condominium?
- A method of property ownership, created solely to manage the condominiums affairs
- Regulated by the Condominium Act
- Condo board must comply with the Declaration, description, by-laws and rules of the condominium
- Condominium act provides standards regarding the keeping of records, and how business is conducted by the Condominium
- The procedures for calling and conducting meetings are outlined in these documents
- These documents also state how elections are called and held and explain how directors are elected replaced or removed.
- The owners and residents must comply with the condominium rules.
Who owns what?
- The owner’s, obviously, own their unit as defined in the Declaration
- The owner’s own a share of the “Common Elements” of the condominium as defined (surprise!) in the declaration
- The condominium corporation does not own anything.
- Some parts are “exclusive use common elements” these areas, such as balconies are not owned on title as part of the unit. This makes the condo. Corporations responsible for repairs and maintenance and allows the Corporation to dictate, to a degree, how the area may be used. Thus allowing the corporation’s by-laws to state that only seasonal furniture may be left on the balcony and that the balcony cannot be used for storage.
Board of Director’s – Responsibilities
- As defined in the Condominium Act, the board of director’s must:
- Act honestly and in good faith
- Exercise care, diligence and skill of a reasonably prudent person in similar circumstances
- Under the Condominium Act the Directors Responsibilities are (this is not complete):
- Manage the affairs of the corporation
- Shall not transact any business of the corporation except at a properly convened meeting with quorum
- Must disclose a direct or indirect interest in any contract or transaction with the corporation
Under the condominium act, director’s cannot be held liable for breach of duty if the breach arises as a result of the director relying in good faith upon the report or opinion of a lawyer, accountant, engineer, appraiser of other person who is credible in that professional area.
Officer’s have specific areas of responsibility directors must be aware of these responsibilities and ensure that these tasks are completed. This does not mean the director has to physically complete the task. The Treasurer for example does not have prepare the financial statements, but must ensure that the statements are prepared properly.
As well, of course, the directors must comply with human rights legislation, income tax law, environmental laws and all municipal regulations.
The condominium must prepare and fund a reserve fund. This is money that is collected for major repairs and replacements in the future. The amounts that are required to be placed in the reserve fund are outlined in the “Reserve Fund Study” which must be updated every three years. There are engineering firms that perform these studies and make recommendations for funding.
It is the director’s job to oversee, check-up on and ensure that the condominiums affairs are being taken care of as needed. Director’s do not interfere in the day-to-day functioning of the condominium.
Management Company – Responsibilities
- Must complete the specific jobs and tasks that allow the condominium to function
- Report back to the condo board at the condo meetings on how the operations are functioning
- Advise the board on in specific areas of condo law and suggest outside experts to consult for advice ( such as Reserve Fund Studies, Auditors, lawyers)
- Day-to-day operation, such as cleaning, staffing, regular equipment maintenance etc.
Why Direction and Management Must be Separate
- The property manager must be relied on to complete the assigned tasks, as would an employee in any company.
- Property managers cannot do their job efficiently if they are micro managed by the board of directors.
- When the property manager is micro managed, the board cannot hold the property manager responsible for inefficiencies or wasted time as the board is acting to be both manager and director
- Property management can be held responsible when the board works with property management to ensure that operations are completed.
- It is dangerous to have directors acting as managers because continuity may be lost if a director is no longer on the board
- If directors act as managers there is a real risk that directors may favour unit owners that support them for election to the board
- Directors acting as managers may coerce suppliers into providing services or items to them personally in order to get a contract for service or supply to the condo corp.