The Business of Condominium Management

July 2023

Each condominium building, and community, serves as home to hundreds of people.  Each is also a business and commercial operation handling millions of dollars and providing employment.

Business issues become personal in a residential condominium community.  There are a multitude of decisions that must be made, legal issues to address, legislative requirements and safety concerns.  Every rule, revision, policy, undertaking and safety initiative somehow becomes personal or intrusive to some residents.

Does it make sense to have all of this handled by volunteers unprepared to commit the time necessary and lacking in experience?  The accepted approach is to employ condominium management expertise to fill these gaps.  In truth, too many condominium managers lack the required education, skills and experience, and would never be employed to manage a similar sized operation in the private sector.

Condominium communities are far from harmonious.  They represent the single largest expenditure for most, and are designed to have people living in close proximity of each other.  Residents have a heightened sense of personal ownership.  There can be an unrealistic expectation of personal control.  Conflict and disagreement are unavoidable and must be managed if harmony is to prevail.

Condominium managers will always be required to deal with irate residents.  Unlike volunteer directors, they don’t live in the same building and can be inaccessible outside of regular working hours.  Directors make decisions while considering how they are personally impacted and aware of how easily accessible they are to their neighbours and friends.  It can be difficult to separate good long-term decisions from those made simply to reduce short-term conflict.

This is a recipe for poor decisions and conflict if not managed well.  Condominium communities have rules and restrictions intended to deter, prevent or avoid conflict among neighbours, which can themselves become sources of conflict.

Condominium corporations have both the right and duty to ensure condo fees are paid, and decide how these funds are utilized.  When owners fail to pay their required fees, they can be forced to sell their unit(s).  Condominium corporations can influence tenant evictions, deal with anti-social people, and make decisions directly affecting the well-being of unit owners.


Volunteer Directors

Volunteer directors are chosen through elections typically held at the Annual General Meeting.  In practice, few are chosen because they have the requisite skills and experience.  They get elected by friends or owners who have little to no understanding of their practical skills and experience.  Many get elected by manipulating the election process through misuse of proxies.  Once elected, doing a good job requires far more time and effort than is reasonable to expect of volunteers.

Employing a “professional condo director” to advise and work alongside volunteer directors while handling many of the tasks not suitable for the condominium manager would help to resolve many problems.  The cost of a “professional condo director” should be offset by financial savings, better decisions and improved efficiencies.  Communities would struggle with fewer financial surprises and special assessments.

“Professional Condo Directors” …

  • Would not have another day job or employment obligation. They can spend more time learning about condominium law and management, and employing what they learn for the best interests of their community.
  • Would simplify the time and obligations required of volunteer condo directors. Fewer communities would struggle with lack of candidates.
  • Would be more independent and less biased than volunteer directors who can let their personal interests get in the way of making good decisions. In the business world, independent directors are desirable and sometimes mandatory.

Condominium Managers

The vast majority of condominium managers lack the experience, skills and training to fully manage an operation the size of a mid-size condominium community.  Requiring a higher level of experience and education would create a shortage of people for managing the growing number of condominium communities.  Furthermore, many communities are reluctant to pay for experience.  They prefer to employ someone with lesser skills and experience at a lower salary.  Condominium managers rely on their condo directors to the same extent as directors rely on management.

Condominium management will never be easy.  A more professional or business-like approach offers the best solution for improvement.

Implementing Major Improvements to the Current Situation

In this reality of condominium living and management, our government, including the Condominium Authority of Ontario and the ministry to which it reports, appears content to make minor changes in condominium governance while avoiding what will make a more positive impact on what has become a highly-desirable living arrangement.  Their most current focus is recognition that the year is 2023 and e-mail is an acceptable way to communicate so will soon remove those restrictions they have imposed, and also allowing online meetings although this is too easily abused without including some constraints.

Here we present eight changes that would dramatically improve on condominium living and management far more than most revisions to the Condo Act, hundreds of revisions that are sitting in limbo, many suggestions made by those whose primary purpose is to make money from condominium corporations, and those who reside in or own condo units.

  1. There is a lack of reliable data condominium communities can rely on when making decisions. Condo directors, management and owners find it necessary to rely on hunches and intuition. This is easily fixed.

The Condominium Authority of Ontario (CAO) is in a position to improve on data available to communities.  It currently requires each condominium corporation to file an annual return.  It should be easy to require each annual return to include audited financial statements and other desirable information being provided to owners such as condo fees by unit size.

This data could be anonymized and made available so that communities could be aware of the costs of condo operations for comparable buildings, energy efficiency upgrade costs by building size and building revenues by occupancy.  They could choose to incorporate search functionality that produces reports which any user could compare against their budget and level of condo fees.  A user would specify a building’s parameters – number of units; age of building; reserve fund balance; major cost of amenities such as full-time security, number of management office employees, swimming pool – and receive a report providing an averaged profit and loss statement, typical or suggested reserve fund balance, average condo fees and other useful information.

Once this financial data is in the public domain condominium corporations, private businesses and government agencies could access it.  Businesses could create analytic tools and reports utilizing this data to be used by condominium corporations and those that support the condo marketplace.  This information would offer solid data on costs and practices thus eliminating the cost, confusion and misdirection of invalid assumptions.

No community would be obligated to use this information.  They would be motivated to do so since better and more poorly run condominium corporations would be more easily identifiable, and possibly reflected in condo selling prices.  There would be more motivation and incentive for communities to improve as compared to averages generated from this data.

2. Update the Condo Act to address misuse of proxies, and have the Condo Authority of Ontario take an active role in discouraging their misuse. This would help ensure better qualified directors get elected.

3. Prior to any condo election, require director-candidates to speak directly with owners at a meeting where they present their credentials and what they hope to achieve if elected. This would ensure owners make better informed choices for their leadership than is currently the case.

4. Eliminate the “compulsory education” requirement for directors. It is impossible to force knowledge or education on those who are disinterested. Those interested in learning will always do so through advanced education and personal reading.  Forcing volunteers to undergo “training” is counterproductive.  It deters highly qualified and busy individuals from volunteering their time.  It is insulting to those who are qualified and capable of adding value to their community by virtue of their advanced education and experience.  Finally, the current system requiring directors to participate in online education is flawed.  It is far too easy to cheat when participating in virtual education sessions.

5. Require that reserve fund studies be based on 40-year projections and require that the minimum reserve fund contribution be increased from the current 10 percent to a more reasonable 25 percent or more.

6. The Condominium Authority of Ontario could encourage condo boards to employ a “professional condo director.” They could provide guidance for compensation and obligations including a standard job description communities could modify in accordance with their needs.

7. Expand on reporting requirements. Condominium corporations could be required to provide key data from their audited financial statements through the current reporting system.

8. Finally, resolve the varied issues that deter people from submitting to the Condominium Authority Tribunal, completing the process, and the Tribunal’s reluctance to address broader issues that could improve the situation for condominium communities.

Combined, these changes would go a long way toward improving condominium governance and influence better decision-making.