October 2016
It is no surprise that most Torontonians now reside in a condo. It is becoming increasingly important to ensure that condo corporations, which oversee management and operations of condo buildings, work effectively to provide a well-maintained living environment bereft of corruption.
Despite the long existence of condominiums as a form of property ownership and growth in condo real-estate, the concept of governance is still unfamiliar in the condo world. Directors and owners do not generally identify poor governance as a problem for their condo building.
Many directors and condo owners lack a basic understanding of what effective management entails. Their condo corporations are subject to problems easily resolved through good condo governance practices.
Many condo directors and owners are in need of governance education to ensure their condo corporations and buildings meet the expectations of its stakeholders.
“Condos can be hell but they don’t have to be like this and many of them are not.”
Pat Crosscombe
Governance at Home; The Wild West of Condo Boards
Problems in the Wild West of Condo Boards
Condo owners report problems that include financial management, lack of communication from their board, repairs and maintenance not being done, denied access to condo documents and an inability to contact directors.
Condo directors report that their volunteer position requires too great a time commitment and difficulty in managing expectations. Directors are unclear about their role and responsibilities, and how to find balance with other stakeholders.
What is Governance?
Governance is a process of steering and controlling the condominium corporation. It gives condo directors considerable power and authority that is moderated by a requirement for fiduciary responsibility.
This means that directors must act in the best interest of the corporation rather than in their own self-interest. This results in condo directors wearing two hats; their board hat and their personal hat. On all official business the condo director must set aside their personal owner-related concerns.
The Condo Act
The Condo Act is a minimum standard to which all condo boards should aspire. Good condo boards will exceed these minimum standards because it is in the best interest of condo owners that they do so.
The Condo Board
The condo board is expected to govern. They control the condo corporation on behalf of owners. The condo board makes all major decisions about maintenance and finances.
Good condo boards effectively address these areas:
- They have implemented effective policies relating to governance, finance and communications that allow current and future boards to deal with challenges when they arise.
- There is an agreed upon code of conduct that ensures owner interests are always a priority.
- Conflict of interest is avoided.
- Processes are in place to deal with any situations or matters that arise.
- Privacy policies exist that specify who can view or access potentially sensitive information including video surveillance and e-mail communications.
- Rules & bylaws are evenly enforced and periodically reviewed for relevancy – those that are no longer relevant or which are not being enforced are revised or eliminated.
- All meetings are conducted using a universally agreed upon set of rules such as Roberts Rules of Order.
- Director expectations are clear to all and include a general level of computer literacy and advance preparation for meetings. Expectations are identified in written job descriptions for each director position.
- Processes exist for reviewing financial statements, asking questions and getting answers.
- There are formal processes for purchases, payments and ensuring work is done properly.
- Communicate everything to owners with the exception of personal and confidential information – create a website, use electronic communications and newsletters, and invite speakers to educate on specific topics.
Stakeholders
Confusion about the role of certain stakeholders can lead to misunderstandings on how a condo corporation is to be governed.
Property managers are employed to manage and not govern. There are constraints on what they can do according to their contract with the board. Property managers provide options and implement decisions. They are not responsible for saving money.
An auditor is required by law to provide a higher level of oversight. They do not provide assurances that money was spent well nor do
they provide an opinion on adequacy of a reserve fund.
Owners have a high level of responsibility. They are expected to attend Annual General Meetings (AGMs) and other meetings. It is their responsibility to identify issues or concerns to the condo board and management. They are expected to have read and understood the condo rules, bylaws and declarations. Finally, condo owners are expected to respect the privacy of directors outside of official meetings. This means avoiding use of a director’s personal e-mail address or phone number, or knocking on their door to discuss condo-related concerns.
Raising the Bar on Governance
Better condo building management requires better governance. This can only be achieved when condo directors and owners work together in a proactive manner, and continuously strive to establish policies and procedures to effectively govern their mutual home.
In Closing
Perhaps The Conference Board of Canada provides the best explanation of governance while describing its role …
“Governance for us involves the actions, decisions and behaviours of the board, but also the interactions of the board with senior executives, stakeholders and shareholders. Our focus is on supporting boards of directors to navigate the increasingly complicated set of roles and responsibilities they have to help them focus on the areas where they will have the most impact and drive successful and long-term performance.”
This may be perceived as too difficult for condo corporations choosing to muddle through; cope more or less satisfactorily despite lack of expertise, planning, or equipment. It takes years to reverse the effects of poor governance while identifying best and proper practices for the corporation to follow. The task never ends. There must be continuous progress at reviewing established practices and revising them so that they remain best practices. This requires a conscientious condo board supported by condo owners.
This task need not be undertaken alone. The condo community includes resources to aid in effective governance that include property management companies, lawyers, accountants, mediators, bookkeepers and other consultants. These resources are available to any condo board with the courage to lead the way and ask for assistance.
Those condo corporations that strive to improve their governance are rewarded through better use of their condo fees, lower costs, nicer home, fewer problems and a more enjoyable lifestyle.
Governance at Home; The Wild West of Condo Boards, was presented by Pat Crosscombe; former board director, Treasurer and President. This Conference Board of Canada webinar was attended by condo directors, government employees, condo management and condo residents. This article is a summary of that presentation.
To obtain a recording of this webinar please visit The Conference Board of Canada’s governance website.
