Boards Breaking the Rules

September 2019

Condo boards are made up of people.  People make mistakes.  While most try to do their best, some condo boards or individual directors may take the path of failing in their fiduciary duty either intentionally or unintentionally.

Once a condo director crosses over to the wrong side of the track, communities failing to correct this conduct can be caught in a series of events that include infighting, loss of funds, legal issues and declining property value.

Few condo directors are a problem because of malice. Misguided directors may make mistakes due to ignorance or ill-advised behaviour.  Over time behaviours become accepted habits.  These behaviours result from a failure to read and understand the Protecting Condominium Owners Act and governing documents for the corporation.

Most improper actions are minor. There may be a failure to inform owners and residents of a meeting or change in rules.  Notices may be made available but not distributed in the prescribed manner.  These are not malicious actions.  More likely, they are actions dictated by past practice, convenience or cost considerations.

Board members should not receive special privileges. All residents and owners are expected to be treated equally when it comes to condo matters.  Rules are to be equally enforced among all.  Failure to treat everyone equally can subject the corporation to claims of unfair treatment and legal liability.

To avoid conflict, directors or management may choose not to speak personally with individuals to resolve a problem or concern.  This can be unhelpful since most problems are easily solved when there is direct communication.

Some directors can be destructive to a community. A president may make decisions without consulting other directors.  They may approve contracts without consultation or ignore board decisions they disapprove of.  These are directors that need to be handled by remaining directors or owners.

Problems do not materialize in a vacuum. Meeting minutes provide documentation of board decisions.  Lack of meeting minutes mean decisions being made may not be valid.  Either way, this information becomes the basis on how owners should act at their annual general meeting.  Lack of transparency may be a red flag indicating something is wrong.  Residents and owners can respond with greater scrutiny of financial and other documents, attending meetings and asking questions.

Condo directors manage a multi-million dollar asset.  This is serious business requiring owner participation to identify and deal with problems before they result in material financial losses.