When you’ve been hired to manage a condominium, it can sometimes put you in a difficult position. If you’re doing your job properly, then serious conflicts will be avoided. But what happens when the condominium board sets out a policy that goes against the advice of management?
The sad reality is that conflicts of interest can and do occur. On the one hand, you are contractually and legally bound to provide a duty of care to the board. On the other hand, laws, regulations, and best practices may contradict them.
Unfortunately, there is no easy solution. The short answer is yes – under certain conditions, you may be legally bound to refuse to carry out the board’s wishes, especially where not doing so will expose you to additional risk. But it’s usually not that black and white, and how you choose to proceed will ultimately depend on the circumstances.
Let’s examine why you may need to say ‘no’ to the condominium board of directors.
The best way to handle conflicts of interest is to prevent them from happening in the first place.
As a condominium manager, it’s your responsibility to execute and facilitate the board’s decisions. It’s therefore vital that you establish best practices from the beginning and follow them. Doing so will help ensure that you have a productive and healthy relationship with condominium leadership that mitigates the chances of running into conflict.
If the board refuses to endorse or consider your recommendations, it usually occurs for one of three reasons:
It’s, therefore, incumbent upon effective condominium managers to operate in such a way that gives the board every opportunity to be successful. As the “professional” in the room, you have the big picture view. So use that to create an environment where all parties can be in agreement.
These condominium management best practices include:
A good condominium manager will ensure that there is full transparency between themselves and the board at all times. All parties need to understand their legal responsibilities, their financial responsibilities, and their myriad of other responsibilities.
There needs to be an inherent level of trust for the relationship to work. If that working relationship is dysfunctional, then the condominium manager usually has no choice but to end the relationship.
Otherwise, a board that breaks the law, acts unethically, or chooses to remain ignorant of their legal responsibilities will just expose the condominium manager to further risk. In those cases, you as the condominium manager have no choice but to say “No”.
Ontario enacted new legislation effective November 1, 2017, that impacts the relationship between property management companies and condominium boards. At the end of the day, the new Protecting Condominium Owners Act is designed to protect consumers who purchase condominium units, and it spells out certain legal responsibilities for condominium managers.
Up until recently, there were no requirements for acting as a condominium manager, however, this has changed. Condominium managers are now legally required to be licensed and have undergone a certain degree of education and training.
The Act outlines severe penalties for misrepresentation and malpractice by condominium managers, specifically:
Anyone convicted of an offense under the act could be liable to a fine of up to $50,000 or imprisonment of up to 2 years less a day. Management firms could be liable to a fine of up to $250,000. The Licence Appeal Tribunal would hear appeals against licensing decisions of the registrar.
However, the Act recognizes that condominium managers must walk a fine line between adhering to the board’s wishes and fulfilling their legal obligations. It states:
In addressing these concerns, Ontario has aimed to strike a balance between:
The Act also entrenches the obligation of board members as well, adding education and training requirements for anyone wishing to serve on a condominium board. This was partly as a result of reported cases of corrupt practices by some condominium boards.
So this brings us back to the original question of when it’s okay to refuse to cater to the board’s wishes. Many times, the issue will boil down to the issue of raising fees.
Among other things, the new Act sets the legal requirements to ensure that condominiums have enough funds to operate. There is a duty to ensure that budgets are properly funded to meet all anticipated needs and to make sure that there is a reserve fund to cover any additional costs.
The condominium manager, in their capacity of providing financial advice to the board, will take these factors into account and make budgetary recommendations which may involve fee increases. The board, on the other hand, under pressure from unit owners, may resist the idea of fee increases, and direct the condominium manager to remove them from the proposed budget.
In this case, the condominium manager would be placed in a difficult situation. After all, they take their marching orders from the board, and if they ask for fee increases to be removed from the budget, it’s difficult to argue.
Yet the condominium manager also has a legal obligation to follow the relevant laws. If removing fee increases and presenting a non-balanced budget resulting in an illegal deficit, they would be in breach of the Act.
So, the condominium manager really has little choice but to refuse to follow the board’s wishes, even if it results in the termination of their management contract.
There are other instances where a refusal to raise fees can put the condominium manager in a conflict. At the end of the day, management is responsible for carrying out a fixed set of duties; if there is not enough funding in the budget to fund those duties, the condominium manager can’t do their job. An example is maintenance – if there isn’t enough money in the budget to keep a property in good repair, it can have cascading negative consequences that increase the condominium manager’s liability.
Navigating conflicts with the board starts with you as the condominium manager doing your job properly. Following best practices, keeping communications open, and operating with trust and transparency will go a long way toward preventing conflicts.
If despite your best efforts, the board asks you to execute directives that interfere with your ability to provide effective property management services or place you at legal risk, then you may as a last resort have to say “no”.
Steven Christodoulou, RCM, is President and CEO of ICC Property Management Ltd.