Test your Knowledge – Conflict of Interest and Governance

April 2023

The condo board president and relatives have investment units in the community, and he serves as listing agent for these units.  As president, he hires and provides direction to contractors without informing owners of the expenditures.  At a recent annual general meeting, nobody was made aware that one position was open for election and the sole candidate on the ballot won by acclamation.  The condominium manager is quietly accepting of all this.

What in this scenario is acceptable practice and what is improper?  Some of these issues are problematic for the community but not illegal.  Others are clearly questionable.

The condominium manager is typically a contractor of the corporation and reports to the board.  If there are concerns about how the president operates, the manager would bring these up privately in board meetings or private consultation in the form of advice or recommendations.  Their public opposition to how the board chooses to operate is not an option and would likely result in termination of employment.

“Elections for directors are governed by the Condo Act and the corporation’s by-law” explains Andrea Lusk of Gardiner Miller Arnold LLP.  “If they have provided notice of their intention to run for election, candidates should be clearly listed in the Notice of Meeting, ballots and proxies provided by the corporation.”  A simpler approach would be for the board to elect another individual as president, or for owners to replace the individual when they are next up for election.  The condominium manager should facilitate but not influence the outcome of an election so is likely blameless.

The assertion is that the condo board president has a conflict of interest.  This is unlikely given the situation.  It is common for owners to own multiple units, make some available for rental, and to act as their own agent.

Only the condo board, not the president, can hire contractors, and only by a majority vote at a meeting once quorum has been established except in emergency situations.  The condo board is generally not involved in the hiring of employees and typically delegates this responsibility to the condominium manager.

Serving as a director on the condo board is a responsibility not always understood by condo owners.  Best practices may not always be observed and this is often to the detriment of the corporation.  Correcting for this becomes an obligation of owners who bear the costs.