A recent episode of The Agenda on TVO discussing whether Ontario's condos are well governed resonated with us. In this blog post, I'd like to take the opportunity to explore condo governance from three different angles - as an owner, board director and property manager.
Being an Owner
The episode begins with an analogy comparing condo governance to the mysterious process of sausage making. I agree, to most owners the inner workings of a condo (how it is governed) is neither properly understood or an area of particular interest. Most owners, as long as something doesn't negatively impact them significantly, are apathetic to issues facing their communities. To be honest, condo governance was a mystery to me until pipes in my condo started exploding!
It was not until my Condo Corporation took action to remove faulty Kitec piping that I was forced to learn the basics of the Condo Act and about how a condo is governed. I'll spare you the gory details but they include an Application for Court Order, a Requisitioned Owners Meeting, court ordered mediation, lots of proxies, a multi-million dollar plumbing project and, finally, getting personally elected to my condo board.
In retrospect, I would describe myself as the average downtown Toronto condo-owner, a real estate rookie. So, why then was I apathetic prior to the disastrous Kitec removal project? After all, my condo was the largest investment I'd ever made. My presumption, as a average owner, was that paying condo fees absolved me of any additional financial liabilities. As well, I presumed that no one could tell me what to do in my own unit. A combination of too busy, uninformed and uninterested. Oh how wrong I was...
"If you don't like it, move out" was what the Judge said to us.
During our mediation, the Judge commented that as owners in a condo, we forfeit certain decision making rights and privileges. "If you don't like it, move out" was what the Judge said to us. "Sell and get out" is the advice of Holland Marshall of www.condomadness.info. Both are harsh but true, in my opinion. Unfortunately, most owners learn this lesson after it is too late. Megan Mackey from Shibley Righton describes the main difference between condo and freehold ownership as "decision making". Based on my experience, many owners really, really did not like having someone else making a decision that would directly impact their suites (and wallets). Most had no idea that the Corporation could obligate and force an owner to do something. So, I wholeheartedly agree, condo owners generally lack the understanding of their rights and obligations, period. I did too, until I had no choice but to learn it.
The Role of the Board & Property Management
Becoming a Board member was also an eye opening experience. Learning the role of the Board, the Property Manager and how to govern in compliance with the Condo Act was all new to me. After approximately 4 years, I can confidently concur with Audrey McGuire, the horsepower of a property management firm was massively beneficial to our corporation. Whether it was using financial models and best practices for budgeting, leveraging tender processes and curated vendor lists or the fully staffed back office accounting services, our Management firm made our role as Directors easier. Property Management presented the Board with options, often times the choice was clear. We directed the corporation in accordance with the Act and based on our philosophy of protecting the value of our property.
Lastly, I found that the Board's role is a balance between risk mitigation, financial management and, unfortunately, dealing with conflict arising between owners and/or the corporation. For the most part, financial issues and risk mitigation were pretty straight forward. A good Board will seek out and act upon the advice of professionals (e.g. lawyers, engineers), obtain multiple quotes, use proper contract tendering processes and adhere to accounting standards. When it comes to handling conflict, whether it is between owners or with the corporation itself, the Board is to follow and enforce the Condo Act, the declaration, bylaws and rules of the corporation regardless of any personal sentiment towards an owner. Of course, there were times when we sided favorably with an Owner that chose to communicate with us in a less-than-courteous manner... but that is part of being on the Board (and a PM).
So, are Ontario's condos well governed? I think they can be. However, a good Board with solid and relevant professional skills is helpful. As well, an experienced Property Manager and Management firm, with the 'horsepower' needed to support buildings with sophisticated needs, are critical.
Want to keep the conversation going? Feel free to drop me a line to share your thoughts and comments.
Ben @ GetQuorum
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