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Welcome to the condominium style of living!!

You will find valuable information in the articles below to help you adjust to living in a condominium.

• • Election of Condo Directors
• • The Pitfall of Energy Savings in Shared Facilities
• • What the Condominium Act Allows or Disallows
• • Do Condo Directors Get Paid?
• • The Term of a Condo Director
• • Owner-Occupied Units
• • How Many Condo Directors?
• • Reserve Fund Study
• • Reserve Fund
• • Shared Facilities
• • Condominium Directors
• • Condominium Management
• • Condominium Governance
• • Condominium Corporation
• • I Live in a Condo

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Do Condo Directors Get Paid?

Many condo owners often wonder:
- Do condo directors get paid?
- How do I know that whether the directors in my condo get paid or not?

The Condominium Act 1998 stipulates that in order for condo directors to get paid, it has to be set up as a By-law of the condominium corporation, and the By-law also has to specify how much the condo directors are to be paid. [1]

Unless the condo builder (in legalese: the Declarant) has already put such (paying condo directors) in a By-law (rarely the case), all subsequent By-laws will have to be passed at a meeting of owners, such as the Annual General Meeting (AGM).

When you buy a resale condo unit, you should (if not, you are making a big mistake) obtain a document called Status Certificate which includes, among other documents, the By-laws of the condo you are buying into.

Just go through the By-laws of your condo documents, and you’ll know that whether your condo directors are getting paid, or are they doing voluntary unpaid work.

Another place that usually should contain such information is the financial statements that come with the package for the AGM. It should contain an item showing the amount of director remuneration.

Most condo directors don’t get paid for being a director on the condominium corporation, including all the directors of the three condominium corporations of the Grandview Way residential complex.

So, please pay your respect to your condo directors as they expend their time and energy for this voluntary unpaid job, just to look after your interest in the condo. Give them a round of applause at your next AGM.

[Note 1] The Condominium Act 1998 Section 56, subsection (2):
A by-law relating to the remuneration of directors shall fix the remuneration and the period not exceeding three years for which it is to be paid.

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The Term of a Condo Director

How long can a condo director serve? Thai is, what is the term of a condo director?

The Condominium Act 1998 stipulates that a condo director can serve at most three years, but if the By-laws of the condominium corporation say the term is shorter, then it’s the shorter term.[1]

When the term expires, the position is up for election. The same person can run as a candidate for the same (or a different) position on the Board. Nevertheless, other people can also run for the same position against the incumbent candidate.

If at the end of his/her term, a director does not want to run for the Board again, but there is no other person wants to fill up the vacancy, this director may (i.e. if he/she agrees to) continue to act as a director until a successor is found – even if it means the term is longer than three years.[2]

If a board consisting of five members has five new faces elected at the same AGM (Annual General Meeting), this would disrupt significantly the continuity of operations of the condo.

In order to minimize the chance of such happening and make the transition smooth, at the very first meeting (in legalese: the turnover meeting) the condo builder (in legalese: the Declarant) turns over the affairs of the condominium corporation to the owners of the condo, they help elect five directors. Usually (but no always), these five first directors are of different terms: two for a 1-year term, two for a 2-year term, and one for a 3-year-term.

After one year, the terms of those two 1-year directors expire and are up for election. The newly elected directors (it could be the same two persons, or two new faces) now start to serve 3-year terms.

After two years, the terms of those two 2-year directors expire and are up for election. The newly elected directors (same or different persons) now start to serve 3-year terms, too.

After three years, the term of the 3-year director expires and is up for election, The newly elected director (same or different person) now also serves a term of three years.

After that, all terms are of three-year durations. So every year, there are one or two positions on the Board up for election.

A director is expected to, but not obligated to serve the full term. There are many reasons why this may happen, and the most common reason is a director resigns. Other reasons are, touch wood, a director dies, or does not meet the qualifications of being a director. (Read more about the qualifications of being a condo director here.)

When a director cannot fulfill his/her term, the rest of the board may decide (by majority vote if they cannot all agree) to appoint some person to be a member of the Board. Of course, this person has to meet the basic qualifications of being a condo director.

This director, appointed but not elected, can only serve until the next Annual General Meeting (AGM), [3] even if the remaining term of the resigned director may be longer than one or two years.

[Note 1] Condominium Act 1998 Section 31, subsection (1):
A director is elected for a term of three years or such lesser period as the by-laws may provide.

[Note 2] Condominium Act 1998 Section 31, subsection (2):
A director may continue to act until a successor is elected.

[Note 3] Condominium Act 1998 Section 34, subsection (2):
If a vacancy arises in the board and a quorum of the board remains in office, the majority of the remaining members of the board may appoint any person qualified to be a member of the board to fill the vacancy until the next annual general meeting.

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Owner-Occupied Units

All units in a condo have owners. Some owners live in their units; some rent out their units.

Let’s face it, renters are less likely to take good care of the rental units or the common elements. I am not saying that they won't, but they are just less likely. Hence, the more rental units a condo has, the more likely that the faster the common elements become run-down.

In order to protect the interests of the owners who actually live in their units, the Condominium Act 1998 tries to protect the interest of these owners who occupy their units by creating a “reserved position” on the Board of Directors of the condominium corporation.

The Act stipulates that if 15% or more of the units in a condo are occupied by owners (“owner-occupied units”), a position on the Board of Directors is reserved (the “reserved position”) to be voted only by owners of owner-occupied units. [1]

What a mouthful! “Owners of owner-occupied units” in plain English means “owners who live in their units.” In other words, the director who takes up this “owner-occupied position” can only be elected or removed by owners of owner-occupied units.

Some condo by-laws (such as those in the Grandview Way residential complex) refer to this “owner-occupied position” as “owner-occupied director.”

A common misunderstanding (even among some property managers) is that this owner-occupied position can only be filled by owners of owner-occupied units. This is incorrect. The Act does not stipulate that. Unless the by-laws of the condominium corporations restrict that (but rarely the case), the qualifications for the person who take this “owner-occupied position” is no different from any other persons taking up any non-owner-occupied positions.

Click here to read about the qualifications for being a director.

[Note 1] Condominium Act 1998 Section 51, subsection (6):
If at least 15 per cent of the units of the corporation are owner-occupied units on or after the time at which the board is required to call a turn-over meeting under section 43, no persons other than the owners of owner-occupied units may elect a person to or remove a person from one of the positions on the board.

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How Many Condo Directors?

The Condominium Act 1998 mandates that a board must have at least 3 persons.[1] However, the By-Laws of a condominium corporation may increase this number.

For a board of directors meeting to be legitimate or in legalese "duly constituted," a quorum of the board has to be present (i.e., the minimum number of directors present at the meeting), and the quorum is a majority of the members of the board.[2]

If there are only three members on the board (as the minimum number required by the Act), the quorum will be the majority, i.e., two persons.

If the board consists of four members, the majority will be three persons, not two persons. Think about "majority" as "more." Here, "the majority has to be present" simply means that "more people present than absent." If two persons present and two persons absent, then the number of persons present is not more than the number of persons absent, so there is no majority, thus no quorum.

If the board consists of five members, then the quorum is three persons.

Since the quorum is the same for even number of persons and the next odd number, it is obvious that it is advantages to have odd number of persons on the board of directors because this will diminish the chance of a board meeting being called off because of not enough directors present (i.e., in legalese: a quorum is not present).

For a 4-member board, two directors absent will not meet the quorum. But for a 5-member board, it takes the absence of three directors to not meet the quorum.

The same can be said for a 7-member board rather than a 6-member board, a 9-member board rather than an 8-member board, etc.

If a board consists of only three directors (the minimum number required by the Act), it only takes one director's resignation (or, touch wood, untimely death) to make the condominium corporation violate the Act.

Since it is very hard to find people to be a director of the board, so five appears to be an optimal number. Perhaps that’s why most condo builders set the number of directors at five in a By-Law of the condos they build.

[1] Condominium Act 1998, Section 27, subsection (2):
The board shall consist of at least three persons or such greater number as the by-laws may provide.

[2] Condominium Act 1998 Section 32, subsection (2):
A quorum for the transaction of business is a majority of the members of the board.

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Reserve Fund Study

We talked about reserve fund previously. It’s the money we (the condominium corporation) set aside for “rainy days.” But how do we know that we have enough money in the reserve fund?

We have to do a study to see what needs to be repaired or replaced down the road, and how far down the road, and how much will it cost? This study is called reserve fund study, and is actually mandated by the the Condominium Act 1998. The Act also stipulates that a reserve fund study has to be conducted by qualified professionals. [1]

For condominium corporations registered under the “new” Act, they have to perform a first reserve fund study within the first year after the registration of the Declaration and Description of the condominium corporation. [2]

Reserve fund study is a new thing introduced in the “new” Act. For condominium corporations registered under the “old” Act, they did not use to have to conduct a reserve fund study. As the “new” Act comes into effect, they now have to. [3] They now have to conduct their first reserve fund study within three years after the “new” Act comes into effect. [4] And the “new” Act came into effect on May 5th, 2001.

There are three kinds of reserve fund studies: [5]
- Comprehensive study – this is usually a first reserve fund study.
- Updated study based on a site inspection.
- Updated study not based on a site inspection – this is usually just a financial review.

The first reserve fund study (which is a comprehensive study) consists of taking inventory of assets (i.e. big items) of the condominium corporation, estimating the remaining lifespan of each component, and reviewing the current financial position of the reserved fund. Then an estimated projection is made as to how much money will be required to repair or replace items that are due for repairs or replacements.

At the end, a reserve fund study report will be produced, detailing the findings. The report also recommends the dollar amount (after taking into consideration the projected interest rate and inflation rate) to contribute to the reserve fund each year for the next 30 years so as to meet the obligations of “saving enough money for the rainy days.” (The 30-year time span is mandated by law.[6])

Reserve fund study, after the first one, has to be conducted once every three years, as stipulated by law. [7] (Just to be technically more complete: Each subsequent reserve fund study after the first one will alternate between a financial review and an on-site inspection.)

This year, the three corporations of the Grandview Way complex are due for conducting a reserve fund study with on-site visit. And as of writing, the reserve fund studies are already in progress.

When the reserve fund study is complete, the Board has to send a notice to unit owners in Form 15. [8]

Notes:

[1] Condominium Act 1998, Section 93, Subsection (6): “A reserve fund study shall be conducted by a person of a prescribed class who shall have no affiliation with the board or with the corporation that is contrary to the regulations made under this Act.”
Ontario Regulations 48/01, Section 32 goes on to fill in the details as what professionals are qualified to conduct the reserve fund study.

[2] Condominium Act 1998, Section 94, Subsection (4): “A corporation created on or after the day this section comes into force shall conduct a reserve fund study within the year following the registration of the declaration and description and subsequently at the prescribed times.”

[3] Condominium Act 1998, Section 94, Subsection (5): “A corporation created before the day this section comes into force shall conduct a reserve fund study at the prescribed times.” (And Ontario Regulation 48/01 Section 31 fills in the detail by defining this prescribed time.)

[4] Click here to read Ontario Regulations 48/01, Section 31.

[5] Ontario Regulation 48/01, Section 28: “The following classes of reserve fund studies are established:
  1. Comprehensive study.
  2. Updated study based on a site inspection.
  3. Updated study not based on a site inspection.”

[6] This 30-year time span actually is not stipulated in the Condominium Act 1998 itself, but in the Ontario Regulation 48/01, Section 27.

[7] The Condominium Act 1998, Section 94 just says “The corporation shall conduct periodic studies...”, and the Ontario Regulation 48/01 Section 31, Subsection (3) fills in the gap of stipulating it to be “within three years of completing the reserve fund study...”. Follow the links to read the full text of the Subsections.

[8] Condominium Act 1998, Section 94, Subsection (9)(a): “Within 15 days of proposing a plan, the board shall send to the owners a notice containing a summary of the study, a summary of the proposed plan and a statement indicating the areas, if any, in which the proposed plan differs from the study.”
Ontario Regulation 48/01 further stipulates that “the notice that the board is required to send under subsection 94 (9) of the Act shall be in Form 15.” (A copy of the Form 15 is also found in the same Ontario Regulation 48/01.)

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Condominium Directors

What does the board of directors do?
The Condominium Act 1998 says that the “board of directors shall manage the affairs of the corporation.” [1]

Who can be a director?
Any “typical” person can be a condominium corporation director.

But what is a “typical” person?
Well, a “typical” person is a person like you and me: [2]
- an adult (i.e., 18 years or older);
- not in bankruptcy now (i.e., not an undischarged bankrupt);
- not insane, nor mentally challenged (i.e., not a mentally incompetent person).

So, according to the Act, a director does not have to be a unit owner of the condo, nor someone living in the condo.

In fact the person can be totally unrelated to a condo. Hypothetically, if you ask John Doe, who just happens to be walking by, to be a director of a condo corporation, and if he agrees to it, and gets elected at the AGM, then he is a director of the condo corporation.

Thus it really does not matter whether any of the directors are closely or loosely related (such as siblings, parents and children, or spouses). As a matter of fact, the 880 Grandview Way building (TSCC 1446) in its first year (2002), two of the directors were husband and wife. And this year (2009), again two of the directors are husband and wife.

[Note 1] The Condominium Act 1998, section 27, subsection 1.
A board of directors shall manage the affairs of the corporation.

[Note 2] The Condominium Act 1998, Section 29, subsection 1.
No person shall be a director if,
(a) the person is under eighteen years of age;
(b) the person is an undischarged bankrupt; or
(c) the person is a mentally incompetent person.

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Condominium Management

Condominium corporations, in many aspects, are like business corporations.

In the business world, shareholders are the actual owners of a business corporation. They, according to some predefined rules and procedures, elect or appoint someone (or some people) to the Board of Directors of that corporation. A director on the Board of Directors has a fiduciary duty to look after the interests of the people who “send” (i.e., elect or appoint) him/her to the Board of Directors.

The Directors usually do not involve themselves in the day-to-day management of the corporation. They are in a supervisory role, or an over-seeing capacity. They establish and approve directions and general policies. They answer to the shareholders.

For day-to-day management of the corporation, they appoint, or approve the appointment of the head of the corporation: the President. They may also approve the appointment of other key officers of the corporation such as the Secretary, the Treasurer, and/or some senior vice-presidents (VPs).

Some corporations use different names, e.g., Chief Executive Officer (CEO) for President, Chief Financial Officer (CFO) for Treasurer, Chief Operating Officer (COO) for VP of Operations, Chief Information Officer (CIO) for VP of Information and Technology.

These officers of the corporation are involved in the day-to-day management of the corporation. They hire managers and staff to perform daily operations, such as processing an order, ordering supplies, etc.

Condominium corporations are usually structured in a similar way, even though the Condominium Act mandates the top two levels of corporate structure: the Board of Directors and the officers of the corporation.

Members of the Board of Directors in a condominium corporation are generally elected by the condo’s unit owners at the Annual General Meeting (AGM), but they can be appointed under certain specific circumstances.

The next level of management are the officers of the condominium corporation. The Condominium Act 1998 says that a condominium corporation has to have a President and a Secretary [1]. A condo’s By-laws may allow for other positions such as Treasurer, Vice-President(s), and other positions.

The Act also says [2] that the President of a condo Corporation has to be elected among the directors themselves, so that means the President must also be a director. All the other positions, including the Secretary, may be elected or appointed. Most commonly, the members of the Board of Directors will wear two hats and play double-role; they also take up a position as an officer of the condo corporation.

Similar to that of a business corporation, a condo’s Board of Directors manages the condo affairs from a macroscopic perspective, while the condo’s officers manage the day-to-day operations. The hands-on execution of daily tasks are usually carried out by a property manager.

A condo can hire a property manager as its employee, or contract out the service to a property management company. The Condominium Act 1998 does not stipulate in this respect.

Most new condos have over 100 units (if not hundreds of units), so it’s economical to contract out the property management service. However, in some smaller (older) condos that have only a handful (say, 30 or so) of units, it would be very, very costly to contract out the tasks to a property management company, or even hire a property manager. So, members of the Board of Directors usually just share the workload and take on the daily tasks hands-on themselves.

The three Corporations of the Grandview Way residential complex have contracted out property management function to DEL Property Management Inc.

[Note 1] Condominium Act 1998 Section 36, subsection (1):
A corporation shall have a president and a secretary and all other officers that are provided for by by-law or by resolution of the directors.

[Note 2] Condominium Act 1998, Section 36, subsection (2):
Subject to the by-laws, the directors,
(a) shall elect the president from among themselves;
(b) shall appoint or elect the secretary; and
(c) may appoint or elect one or more vice-presidents or other officers.

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