A condo director unilaterally fires the property manager, hires himself in her place, enters into several other contracts without discussing it with the other directors, bullies the other owners, sues the corporation, and causes thousands of dollars in damages. It seems like an unbelievable plot for a movie, but this one is based on a true story!
Sometimes referred to as a “rogue director” or “condo commando” these directors often make decisions without approval, bully the other owners, and ignore the law. The condominium (and other owners) can suffer significant losses or damages as a result of their improper conduct.
How can a condominium deal with a rogue director? Well, that depends upon why the director has gone rogue in the first place. The rogue director’s actions are normally caused by one of the following: ignorance, narcissism, or fraudulent intentions!
Educating Ignorant Directors
Fortunately, most rogue directors seem to be misguided or uneducated in condominium matters. They make bad decisions, but the intention is to do good for the condominium and all of the owners. For instance, a director may hire a contractor to fix a hole in the hallway without talking to the other directors first. The director meant well; he wanted to fix the hole. The problem is that he did not follow the proper process for hiring a contractor and spending the condominium’s money.
One of the best ways to counteract this problem is to insist upon education for all new directors. The idea is that an educated director is less likely to behave badly since he knows what is expected of a director and the proper processes to be used in different situations. CCI provides various educational seminars and courses year-round for new directors. Countless condo blogs (like this one!) and magazines, books, and newsletters provide further educational opportunities.
If talking to the director about the improper behaviours and educating him do not help, consider some of the more drastic options discussed below for narcissistic directors.
Addressing Narcissistic Directors
Unfortunately, some directors seek election because they like the perceived prestige or perks (i.e. the title of “Mr. President”). It is all about ego for them. Others in this category include directors who put their own interests ahead of those of the condominium. For example, a director votes not to enforce a minimum lease term in the declaration because he plans on (or is already) leasing his unit on Airbnb. The director is putting his own interests (i.e. rental income) ahead of the condominium’s interests (i.e. security of residents, minimizing damage).
Not surprisingly, a director who makes these types of decisions is breaching his duties to the condominium. Section 37 of the Act requires directors to act honestly and in good faith and exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.
Education may assist with narcissistic directors, but other tactics may be more useful to the other directors and owners.
Limiting opportunities for the narcissistic director to derail meetings is one option. This could be accomplished by insisting upon rules of order for meetings or by having another director (or the manager) chair the meeting. This works best for directors caught up in the perks and prestige of the position.
A by-law with a code of ethics can reinforce some desirable attributes for directors, such as acting professionally and maintaining confidentiality. A by-law could also include a process for removal of a director by the other directors without a vote of the owners in certain circumstances, such as where the director breaches the code of ethics or fails to attend a certain number of meetings in a year.
If none of the above tactics resolve the issue, the other directors could remove the narcissistic director from his officer position (i.e. president). The idea is that removing some of the prestige and reducing the number of opportunities for the director to behave badly may result in better behaviour. The director would continue to be a director so this may not be helpful unless the undesirable behaviour is related to the officer position held by the director.
If the director continues to go rogue, the remaining directors may be able to call a meeting of owners to remove the directors if the by-laws allow such. If not, the remaining directors could use the requisition process to remove the rogue director. A requisition would require the directors to get the owners of at least 15% of the units to sign the requisition and a majority of the owners of all units must vote in favour of removal at the owners’ meeting.
Catching Criminal Directors
This is the scariest type of director. They deceive others, forge documents, and hide evidence of their illegal activities. Fortunately, these directors are quite rare.
One tactic for dealing with these directors is to prevent them from gaining office in the first place. A by-law could prohibit people from being directors if they have a criminal record, especially if it relates to fraud or theft. A by-law may not deter a criminal intent on stealing millions from a condominium so other tactics should be used in addition to any by-laws.
Safeguards on bank accounts and access to investments are one of the best ways to limit the opportunities for criminal directors. Requiring two signatures on cheques is a common option. Not using online banking or electronic transfers is another. Directors should discuss possible safeguards with their bank representatives, investors, and auditors.
If the directors suspect theft or fraud, they should immediately contact someone they trust to discuss the issue. If the property manager is suspected of being involved in the criminal activity, don’t contact them! Contact the condominium’s lawyer to get advice on options (i.e. inspectors, criminal charges) or the police to report the suspected criminal activity. Be prepared to assist the police in their investigation.
If, after reading this, you think you may be the rogue director – seek help! Educate yourself. Attend courses and read materials. Remember the golden rule: treat others as you want to be treated. Put the condominium’s interests ahead of your own. Disclose conflicts of interest. ,If these tasks sound too hard, RESIGN.