Condo Reform #4 – Governance: Directors and Officers, Fines, Rights and Responsibilities

As mentioned previously, the stage two report on the Condominium Act, 1998 review made several recommendations aimed at improving governance in condominiums in Ontario. In addition to records and owners’ meetings, the stage two report made recommendations regarding directors and officers, fines, and owners’ and directors’ rights and responsibilities. Directors and Officers Because many directors are inexperienced, which can lead to poor decisions and increase the risk of fraud or theft, the stage two report includes recommendations aimed at improving the knowledge of directors. One of the recommendations is mandatory training for first-time directors and additional training requirements for directors of self-managed condominiums. Another recommendation is to allow a condominium to limit by by-law the number of terms a director may serve. The third recommendation is to remove the owner-occupied position that currently confuses most in the industry. The fourth recommendation is the creation of a code of ethics that cannot be altered by by-law. The final recommendation is to increase the qualifications and disqualifications of directors to require training, limit owners from the same unit from being on a board at the same time, require disclosure of legal proceedings between the individual and condominium, and allow by-laws to require a criminal record check.

Fines

The report recommends that the Act continue to prohibit a condominium corporation from levying fines against an owner or occupant unlike the legislation in other provinces, such as British Columbia’s Strata Property Act, which permits condominium to levy fines against owners. Instead, the report includes a recommendation that the Act recognize charge-backs and user-fees for exceptional services, such as picking up extra garbage.

Owners’ and Directors’ Rights and Responsibilities The stage one report identified uncertainty amongst owners and directors about their rights and responsibilities. The stage two report recommends that a basic statement of rights and responsibilities be created to help educate owners and directors. The statement should be posted on the property, the condominium’s website (if any), and the ministry’s website. It should also be included in status certificates and packages for annual general meetings.

The recommendation for the Act to recognize charge-backs and related fees is, in my opinion, the recommendation most likely to reduce conflict and improve compliance. Most owners are unaware of a condominium’s ability to charge costs back to them as a result of their conduct. Some condominiums abuse the ability to charge back certain costs and levy charges against units that are not related to any actual cost incurred, but are designed to penalize unwanted conduct. These charges, which are in essences fines, are not currently permitted in Ontario. It is definitely an area that requires clarification going forward. Up next week – #5: Condominium Management.