January 2025
Once elected, condo directors must make tough decisions that are not always popular.
According to section 27(1) of the Condominium Act (the “Act”), directors are expected to manage the affairs of the corporation. Section 17 of the Act describes this as managing, controlling, and administering the property and assets of the corporation, and ensuring compliance with the Act and the corporation’s declaration, by-laws and rules. Directors have an obligation to act honestly, in good faith and in the best interests of the condominium corporation in carrying out these duties.
Uneducated condo owners end up electing directors making promises beyond their authority or control
Nearly all decisions have a direct financial and personal impact on owners that is unappreciated and can be misconstrued by some. This causes some directors to forget or ignore their obligations. During elections for directors, a candidate may claim that maintenance fees can and will be lowered. They may promise to reduce condo fees. The unfortunate reality is that such statements sound believable to owners that fail to understand the actual obligations of directors. They believe that this promise will be honoured so a director making it will often get elected. Uneducated condo owners end up electing directors making promises beyond their authority or control.
Director obligations do not extend to making decisions that owners like or choosing the cheapest option. Neither reflect the best interests of the corporation.
Condominium corporations maintain Directors and Officers insurance coverage which protects the corporation, directors and officers from wrongful acts, errors or omissions that may result in financial loss to a third party. This only protects directors who act honestly and in good faith. Directors can be found in breach of this when failing to obtain or rely upon a report or opinion of a lawyer, public accountant, engineer or other qualified professional. This is frequently ignored by directors, and overlooked by owners, focused on lowering costs and condo fees in the short term. Following the advice of friends or owners over a professional opinion can cause loss of Directors and Officers insurance coverage should a lawsuit occur.
A board that ignores professional advice without good reason or shops around for the “opinion” they desire fails in their duty, putting themselves at risk of personal liability.
There will always be owners who disagree with board decisions and how money is spent. Directors promising to lower costs or condo fees without details and a conversation of what will be sacrificed is nothing more than an election ploy and promise unlikely to be fulfilled.
