October 2015
The benefits of paying one or more qualified directors to serve as an administrator working alongside the Property Manager are compelling. This could provide a better way to address three significant challenges of condominium management.
Longevity
A properly run condo building can last more than 100 years. A poorly run condo building may not survive more than a couple of decades.
During the first 10-15 years of existence a condo corporation is relatively easy to manage. New buildings have fewer financial concerns. As buildings age their condo corporations are challenged by increased financial limitations. Original infrastructure and equipment requires greater maintenance and replacement. If this infrastructure was not adequately maintained, the financial burden can be greater and beyond the financial resources of condo owners.
With so many condo buildings in Toronto being less than 20 years old, their more challenging years will commence in the next decade.
Condo Board Limitations
Condo corporations are structured to operate similar to large corporations.
The board of directors retains ultimate responsibility over issues affecting longevity. It is important that condo boards understand they are responsible for longevity of their building(s) and also the impact of their decisions. Their goal should be to preserve the value of owner properties.
The job of being an active condo director can be demanding. It involves both time and responsibility. In some condo corporations the role of a director is more time consuming than a full-time job.
Condo boards are usually volunteers who often lack business and management experience. Skilled individuals may be reluctant to take on this role because it requires so much time and often attracts abuse from condo owners. The result is that many condo boards lack qualified individuals. The implications of this are often less than desirable results due to insufficient knowledge, experience or time commitment.
Condo board members are not fairly compensated for their efforts. In contrast, large corporations do compensate their board of directors because of the responsibility and time commitment expected of them.
Property Management Companies
Property management companies fill the void created by condo corporations which do not have the employees, experience and systems to manage their corporation. While property management companies have done a relatively good job in this role, they have also made mistakes and at times neglect longer term concerns.
Property management companies are outside vendors who are not stakeholders in the corporation.
Property management companies can take advantage of weak boards. Less reputable companies may increase their fees when not warranted or recommend higher staffing levels in place of operational efficiencies.
Many condo boards assume a property manager will take on responsibility not consistent with their job description. Property managers are not stakeholders. It is not reasonable to expect them to assume responsibilities inconsistent with their job description or which may negatively affect their compensation.
A Proposed Solution
Condo corporations may be better managed by employing a stakeholder to work alongside their Property Manager.
Dan Barnabic, author of The Condo Bible for Canadians, suggests that condo corporations operate as other corporations do. He supports compensation of directors while also requiring them to commit more time to their position, accept more responsibility and more effectively manage their condo corporation.
The Condo Act does not prohibit compensation of directors. Director compensation, while not yet common, is current practice for some condo corporations in Toronto. Compensation for directors is governed by section 56(2) of the Condo Act. This requires that the board pass a bylaw relating to compensation of directors.
Mr. Barnabic feels that compensation for condo board members will eventually become a necessity.
A compensated director, or other stakeholder with a long term interest in the condo corporation, does offer advantages. Such an individual could work alongside the Property Manager to manage the affairs of the corporation.
Ontario Condominium Act Section 56(2)
Remuneration of directors
A by-law relating to the remuneration of directors shall fix the remuneration and the period not exceeding three years for which it is to be paid.1998, c. 19, s. 56 (2)
This approach could facilitate implementation of cost saving, lifestyle and communication efforts where current deficiencies exist.
This approach does present challenges. Job responsibilities and working relationship with the Property Manager would have to be determined.
The potential benefits of employing a stakeholder in the role of administrator are significant. They include financial savings in excess of compensation, improved communications and more active resident involvement in all aspects of the corporation.
Thank you to Dan Barnabic, author of The Condo Bible for Canadians. His presentation to YCCA members was the source of much of the information in this article. Visit www.condobible.com for information on The Condo Bible.
