CCI-Toronto: Board of Directors' Tips, Tools And Techniques by LS Graphics

Board of Directors’ Tips, Tools And Techniques

CCI………..YOUR CONDO CONNECTION

Acknowledgements CCI Toronto would like to acknowledge and thank the following individuals who have contributed to the writing and development of this publication:

• Marc Bhalla, Hons BA, Q. Med, Elia Associates Professional Corporation • Richard Elia, B. Comm., LL.B., LL.M. (ADR), ACCI, Elia Associates Professional Corporation • Murray Johnson, RCM, Brookfield Residential Services Ltd. • Sue Langlois, WOWnetwork • Stan Morris, RCM, Brookfield Residential Services Ltd. • Lynn Morrovat, Taylor Enterprises Ltd. • Ernie Nyitrai, YRCC # 636

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Table of Contents Page #

Section 1: CCI Toronto: An Overview

Section 2: The Condominium Act, the Declaration, By‐Laws and Rules: An Overview

Section 3: Professional Support

Section 5: Principals of Budgeting

Section 6: Alternative Dispute Resolution

Section 4: Condominium Boards

Section 7: Communications

Section 8: Glossary of Terms

Section 9: Frequently Asked Questions

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Section Index: CCI Toronto: An Overview Page # • • • • • • • •

What is CCI What Does CCI‐T Do? Resources and Information CCI‐T Courses & Qualifications Condo Recognition CCI Initiatives CCI Achievements Find Out More About CCI‐Toronto

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CCI Toronto: An Overview What is CCI? The Canadian Condominium Institute is an independent, non‐profit organization formed in 1982 with chapters throughout Canada, including a very active Toronto Chapter. “Representing CCI is the only national condominium association dealing exclusively with over 135,000 condominium issues affecting all of the participants in the condominium units in the GTA or 35% of the community. estimated total market” – as of June 2013.

What Does CCI-T Do?

The Toronto chapter is the largest Chapter of CCI, representing over 135,000 condominium units, and close to 700 condominiums in the GTA and surrounding areas. CCI Toronto has worked on many initiatives over the years, and continues to grow, implementing new benefits and connecting members in the following areas: •

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Your Condo Connection To Education Providing education through courses, seminars and networking, and providing condominium board members, unit owners and other industry participants with the skills and knowledge necessary to conduct the affairs of a condominium corporation in a proper and diligent manner. Your Condo Connection to Professional Assistance The use of CCI resources and direction on resolving condominium problems or for referrals to appropriate condominium professionals and services.

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Your Condo Connection to Legislative Change CCI’s Legislative Committee is constantly working with various levels of Government in order that they produce legislation (including, but not limited to the Condo Act) that reflects the improvements required to properly protect directors and condominium homeowners. Your Condo Connection to Developing Industry Standards CCI has developed standards of competence in several key areas pertaining to condominium life. These spheres cover law, accounting, property management, insurance, real estate, building sciences, mediation/arbitration and reserve fund

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planning. Through education and examination, the Institute extends Professional Associate status upon those of its members who attain the required standard – Associate (of the) Canadian Condominium Institute (A.C.C.I.)

Resources and information CCI‐T strives to provide our members with various resources which can be used to find information on any of the many individual issues which can arise in a condominium daily. Many of these resources can be found on our website; www.ccitoronto.org Bookstore Featuring specially selected titles, the CCI‐T online bookstore contains a range of publications, from our bestselling ‘Condominium Handbook’ to help you navigate the Condominium Act, to books about Reserve Funds, Issues for Realtors and Legal FAQ. condovoice The condovoice magazine is CCI‐T’s Quarterly publication, keeping our members up to date with the latest news in the Condominium industry, as well as a selection of articles written by experts in the industry. Professional & Trade Service Directory The CCI‐T Professional &Trade Service Directory is published annually, and is compiled of every Professional and Trade Service member, providing you with a quick and easy collection of experienced people within the industry, to suit your Condominium needs.

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CCI-T Courses & Qualifications Education is an important initiative for CCI‐T. We offer several courses specially designed to help provide our members with relevant information about the ins and outs of condominium governance. If you’re on the board, or simply a unit owner wanting to know more, there is a CCI course for you. Course information LEVEL 101 An introduction to director responsibilities, management and condominium annual cycles. Price: $125 + HST Non Members: $225 + HST ** Condo Corporations receive two complimentary registrations for the Level 101 course as part of their annual membership.

LEVEL 102 Including Governance, Meetings, Committees and Dealing With People Price: $125 + HST Non Members: $225 + HST LEVEL 200 Building on administration, insurance, maintenance and using professionals. Price: $250 + HST Non Members: $350 + HST LEVEL 300 Examining Reserve Funds, People Issues, Health & Safety/Emergency Planning Price: $250 + HST Non Members: $350 + HST Visit the CCI Toronto Website at www.ccitoronto.org for details on course dates and registration. Rev Sept 2013 7

Condominium Recognition Here at CCI‐T we recognize the unique challenges facing Condominiums on a daily basis in regards to Community, Management, Building maintenance and general quality of living. Every year, we recognize those Condominiums that truly excel at what they do, with the following two awards. Condominium of the Year A chance to share your success with the Condominium Community! This prestigious award is presented annually, to those buildings that we feel truly go above and beyond just being a ‘place to live’. All CCI‐T members are welcome to enter, with the winner receiving a street sign to display on the exterior of your building, funds to host a gala celebration party, as well as feature length article in our widely distributed publication, condovoice. Quarter finalists are also featured in our magazine. Does your Condominium have what it takes? Condominium Newsletter of the Year Keeping a sense of community spirit alive in a condominium building is challenging in itself, but keeping owners informed is an additional challenge! The Newsletter of the Year contest recognizes those Newsletters that bind together a community; the winner is announced at our AGM and awarded with a plaque for the winning Condominium, as well as a feature in the condovoice magazine and 3 free passes to any CCI‐T seminar, hosted on various topics throughout the year.

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CCI Initiatives CCI Toronto has worked over the years to represent its members and provide various programs and events which allow us to connect on with our members on all levels. The information contained in this booklet outlines some of the exciting initiatives that CCI‐T members have access to. Networking With various events held throughout the year, CCI‐T is a great place to meet other people representing all facets of the Condominium world. Conference CCI‐T partnered with ACMO (The Association of Condominium Managers of Ontario) hosts an annual conference in each fall, with special discounted prices for all members. Usually spanning 2 full days, the Conference features a full floor trade show, seminars and workshops on a variety of topics, hosted by experts in the industry, as well as a great chance to mix and mingle at our wine and cheese reception. Seminars and Events CCI‐T hosts a variety of seminars throughout the year which provide information on the ‘hot topics’ in the industry. Past seminars have looked at Electric Cars in Condos, Energy Efficiency Issues, Mediation & Conflict Resolution, Health & Safety; What Directors Need to Know, and the Chapter even hosted a Mayoral debate!

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CCI ACHIEVEMENTS…….

As your Condo Connection, CCI Toronto improves many areas of the industry. Below are some highlights of our recent achievements:

Preparation of a Legislative Brief and Consultations with the Ministry to Update and Improve Condominium Legislation in Ontario

Annual Educational Conference and Tradeshow

Offering Improved Education for Condominium Directors

4. Newly Updated Quarterly Magazine with Educational Articles for Directors and Owners 5.

Celebrating Condominium Successes through the Condo and Condo Newsletter of the Year Awards

Ongoing Consultations with Municipalities re Organic Waste Collection and Recycling

Reduction on Tax Assessments on Superintendent Suites and Other Common Elements

Mayoral Debate on Condominium Issues Prior the 2010 Municipal Elections

Condominium Survey of All Political Parties Prior to the 2011 Provincial Elections

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Advocacy Day at Queen’s Park

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Advocate for Fair Taxation for Condominiums

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Reduction on Security Deposits Required by Hydro

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Find out more about CCI-T!

• Visit us on the Web at www.ccitoronto.org • Order a free Membership Information Kit! Call (416) 491‐6216 • Schedule a Membership Presentation! Have Volunteers from CCI‐T come to your neighborhood condo association for a 15 minute presentation about our services. Contact ccitoronto@taylorenterprises.com for more information.

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Section Index: The Condominium Act, The Declaration, By-Laws and Rules: An Overview Page # • • • • • o o o o o o o • o o o o o o o o o o o o • • •

The Condominium Act Declaration By‐Laws Rules Board Meetings Preamble Notice of Meeting Officers Minutes Code of Conducts and Ethics Meeting Duration Declaration of Conflict of Interest Annual General Meetings (AGMs) Preamble Notices Meeting Preparation Quorum Entitlement to Attend Scrutineers Annual General Meeting Minutes Meeting Chair Auditors Voting at the Annual Meeting Nomination and Election of Directors Proxies Matters Requiring Determination at an Owners’ Meeting Requisitioned Meeting Annual General Meeting – Rules of Conduct

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The Condominium Act, the Declaration, By-Laws and Rules: An Overview The Condominium Act: The Condominium Act has priority over the Declaration, By‐laws and Rules and all other agreements, and thus is paramount in governing a condominium. The current Act came into force in 2001 to assist staff and clients of the Land Registration System with the registration of the various types of condominiums permitted under the Act. It is the ‘go‐to’ legislation which governs condominiums in Ontario.

Declaration: The Declaration deals with the basic aspects of the corporation such as common element allocation and creation of exclusive‐use common elements. In most circumstances, it is alterable only with the consent of 80‐90% of all owners and mortgagees. The Declaration is building specific and is similar to the ‘articles of incorporation’ for private businesses. This is a high level document that describes unit boundaries, percentages for basis of common element fees and insurance requirements. Obligations for repairs after damage are also included.

By-Laws: Generally, By‐laws govern the Board of Directors who oversee the condominium. By‐laws must be consistent with the Act and Declaration and deal with a range of matters including: matters relating to the officers and employees of the corporation, the board, the property management company, maintenance of the units and common elements, corporation assets and duties, assessment and collection of common expenses, and borrowing. By‐laws require the approval of at least 51% of the unit owners at a meeting specially called for that purpose.

Rules: Rules generally relate to the use of common elements and units. The Board may make rules to promote the safety, security or welfare of the owners and the condominium property and to prevent unreasonable interference with the use and enjoyment of the common elements. Rules are passed by resolutions of the Board and become effective 30 days after giving notice to each unit owner. However, if the Board receives a requisition for a meeting, signed by at least 15% of the unit owners, the rule is not considered to be in effect until approved at the owner’s meeting. Rules must be reasonable and consistent with the Act, Declaration and By‐Laws. Rev Sept 2013 13

Board Meetings Preamble

Directors elected by owners of the condominium units are empowered and obligated under the condominium act to manage the business and affairs of the condominium corporation. The board of directors is the governing body and business of the condominium corporation may only take place at duly called meetings of the board. It is when these elected directors come together at a meeting that they are able to exercise their authority. Outside of the board meeting, unless specifically empowered and minuted by the board at a duly called meeting, Directors are not authorized to conduct corporation business. Outside of a board meeting, directors are acting only as owners in the condominium corporation. In order to conduct the business of the condominium corporation, the board must have a quorum of directors present as defined in the declaration or by‐laws of the condominium. A quorum is typically a majority of directors. There are no provisions in the condominium act to allow directors to assign a proxy to attend the board meeting on their behalf. For this reason, the act does allow for boards to pass by‐ laws, subject to the act, that allow for teleconference attendance at meetings.

Notice of Meeting

The by‐laws of a corporation may provide for holding regularly scheduled board meetings as well as the type of business to be dealt with at such meetings. If the by‐laws do not provide for regular meetings or if a special meeting must be called, the following procedures must be followed: • The meeting must have a quorum of directors s.35(1) • Written notice of the meeting must be given to every director s.35(2). To avoid this onerous requirement many boards choose to set the next meeting date as the last act of business at each board meeting. • The notice must be given at least ten days before the day of the meeting unless the by‐laws state otherwise s.35(2)(a). • Notice must be delivered personally, by prepaid mail, courier, fax or email at the address shown in the records of the corporation unless the by‐laws state otherwise s.35(2)(b). • The notice must state the time and place of the meeting and contain a general description of the business to be dealt with at the meeting s.35(3).

A director who attends a meeting is deemed to have waived notice unless a director expressly objects to it at the meeting s.35(4).

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Officers

All condominium corporations must have a President and Secretary and may have other officers that the by‐laws provide for s.36(1). Except for a few specific duties of officers as may be referred to in the by‐laws of the corporation, or may be identified by resolution of the board and not be in contravention of the declaration and Act, officers may be seen as figure head positions. As an example the by‐laws typically say that the president shall chair meetings or appoint a chair in his or her place. In addition to chairing duties the president and secretary may have certain signing obligations for legal condominium documents. It is to the benefit of the board to clarify and review the roles and responsibilities of each officer following the annual general meeting of owners. The officer positions on a board of directors are not awarded for as long as director may sit on a board, instead, they must be voted on each year at the first board meeting following the annual general meeting and are held only until the next annual general meeting of owners. Unless the by‐laws state otherwise, the directors must elect from among themselves a President as well as appoint or elect a secretary. They may also appoint or elect one or more vice presidents or other officers (ie: treasurer) s.35(2)(a)(b)(c). The same person may hold more than one office s.36(3)

Minutes

The minutes of the board meeting are essentially the collective memory of what was decided at a duly called board meeting and form the official record of the business of the corporation. It is highly recommended that minute takers be hired to record the business that transpires so that directors and managers may focus all of their attention on the discussions and decisions that are taking place rather than worrying about how to record the business. It is often incorrectly understood that the minutes are not the official record of the business of the corporation until they have been duly approved by the board. Until the minutes are amended or approved, the minutes may be relied on as the collective memory and direction of what transpired at the board meeting. Management may rely on unapproved minutes as clear direction of the board until such time as minutes are amended at subsequent board meetings. The minutes of board meetings are considered to be records of the corporation and therefore, once approved, owners are entitled to review them s.55(2). Boards should keep a set of “in camera” minutes that contain personal and private information that owners are not entitled to review. These “in‐camera” minutes may include references to liened units, employment discussions or discussions related to pending legal issues. By keeping a set of “in‐camera” minutes, private information is segregated from the normal business of the corporation and owners requesting to review minutes need not look at blacked out and edited minutes.

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Minutes need not be a verbatim transcript of all that was discussed. Directors should remember that untoward statements included in the minutes are not privileged and may constitute slander. It is more effective to record directions, deferrals, motions, resolutions and decisions and simply refer to long discussions as “following a long discussion it was resolved that….”. Minutes should include the following: • Names of each director present along with the names of any invited guests (ie: the property manager). • That a quorum was present. • The kind of meeting (regular or special) as well as the date, time and location. • Identify the chair of the meeting and the recording secretary and the name of the person who called the meeting to order. • That the minutes of the previous meeting have been reviewed and approved as read or amended with a description of the amendment. • That the monthly financial statement of the corporation has been reviewed. They need not be noted as approved because they are unaudited. • All motions passed, who moved the motion and who seconded the motion. • A summary of all pertinent business discussed and all directions, decisions, motions, resolutions etc. agreed on at the meeting. • Any points of order, objections or appeals and how they were disposed of. • It is preferable to set the next meeting date and record that as part of the minutes eliminating the need to send special notice of the next meeting to each director.

Code of Conduct and Ethics

Whether a board agrees to use Roberts Rules of Order or other such protocols, or whether the board decides to adopt the CCI Directors Code of Ethics (see section on Condominium Boards) and attaches a code of conduct, it is advisable to set the rules and protocol in place and review them at the first meeting following each annual general meeting. All directors should conduct themselves at board meetings based on respect of each other and respect for opposing points of view. Confidentiality of details of discussion must be observed. Directors offer the best input when they are free of any concern that anything they might say will be repeated outside of the board room. Directors must feel that they have complete freedom to speak their mind knowing that in the end only the decisions resulting from open and free discussion will be recorded and become an official record of the corporation. In addition, unity of a board is essential to the reputations of the board and the individual directors as being effective as a governance team acting for the benefit of the owners, free of individual agendas. To this end, directors should always support the decisions of the board, even if they do not personally agree with the final outcome. Only a unified board will garner respect from owners. As a best practice, directors should not indicate that “I didn’t agree with the decision, but I was outvoted!” Rev Sept 2013 16

Meeting Duration

The ability to make rational and well thought out decisions is diminished as directors start to tire. It is best to limit meetings to two or three hours at most. If this is not enough time, another meeting should be scheduled or items of lesser importance deferred to future meetings. Remember your invited manager or guests may have a long distance to travel home, you are already there.

Declaration of Conflict of Interest

Directors who have a financial interest or who stand to materially benefit from influencing a decision must declare their “conflict of interest” at the start of a discussion. It is always best practice to excuse that director from the room during any discussions in this regard. Boards are advised that while an actual conflict of interest may not be present, often the perception of a conflict of interest can have the same damaging effect on the decision process if viewed later by an owner…better safe than sorry.

Annual General Meetings (AGMs) Preamble The Annual general Meeting is the meeting of the owners, boards would do well to remember that may be the only annual opportunity for owners to not only hear about the business of the corporation they have invested in, but to also have input with suggestions for improvement or investigation of the upcoming tenure of the newly elected board of directors. It is difficult not to give simple yes and no answers to questions and to promise to look into issues or execute ideas, but the chair must be cognizant that the board normally has the benefit of professional guidance, research, discussion and sober second thought before agreeing to proceed with any single idea or suggestion. The annual general meeting should be no different. As suggestions come forward, and in fairness to those present, ensure that the suggestions or idea is captured in the minutes, and then commit to the board reviewing and investigating the idea or suggestion…never commit the board to something without the benefit of regular discussion behind closed doors.

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Notices •

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The official record of owners or the corporation register is to be used for the purpose of notifying owners of an upcoming Annual General Meeting (AGM). The official register of the condominium should be kept up to date at all times, s.47(2). It is the owners responsibility to notify the condominium corporation of any changes s.47(1)(c). This record can be used for no other purpose except for the purposes as outlined in the act s.47(3). There must be no less than 15 days’ notice between the day upon which the notice is given and the day of the meeting. It is general practice, but not legislated, that the day of the meeting and the day of mailing are not included as part of the 15 day notice period s.47(1)(b). The notice of the meeting must specify the place, date and hour of the meeting, and the nature of the business to be presented (the agenda) including copies of any proposed changes to by‐laws, rules etc. s.47(9). Notice must be given to each owner either personally, electronically with owner approval, or by prepaid mail, addressed to the corporation at the address shown in the corporation’s records s.47(1). Notice must be given to each owner of record that is on the official register of the corporation 20 days before the date of the meeting s.47(5). A copy of the auditor’s report and the financial statements are to be included with the notice s.69(2). A notice of the meeting is also to be sent to the auditors s.70(2). Coordination of the meeting should include input from the auditor, manager, Regional manager and other invited guests before the final date of the meeting is set. A statutory Declaration of Service sworn by the person who actually mailed or delivered, or caused to be mailed or delivered the notices, shall be prepared and retained for the meeting and be made known to all present at the meeting. Copies of any relevant material, such as proposed by‐laws, leases, contracts or rules shall be included with the notice s.47(9). The notice package may also include other information such as director’s or committee reports, resume of candidates for election, proxy forms or any other item that is to be discussed. The notice shall include the names of candidates running for election to the board if advised either 4 days or 1 day prior to the date of mailing (depending on the position being elected, Owner Occupied Elected Position or General Director Position). It is advisable to include Rules of Conduct so that the chair can refer to these rules to assist in maintaining order at the meeting if required.

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The meeting venue (room, or building) should be set up with the abundant seating and extra chairs if required, amplifiers and microphones if needed and if

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possible name plates for those at the head table. The head table should be set up for the sitting board of directors, guests, minute taker, manager and auditor. Refreshments are always a welcome diversion for those present and water, juice or some other beverage is always a welcome addition. Many corporations will incorporate a social aspect to the refreshment aspect of a meeting. A full registration desk should be set up at eh entrance to the room for owners to sign in, receive ballots and copies of any pertinent information circulars. A flip chart or chalk board should be available for the purpose of listing nominees and candidates for the positions on the board up for election. A full set of corporate documents (declaration, by‐laws, rules and other official records) should be available as reference material if required during the meeting. A full and current set of accounts receivable listing should be on hand to confirm who is or is not eligible to participate in the meeting. It is very important that all details as noted in the notice of meeting are adhered to. Only those items noted for voting in the notice of meeting package may be voted on except for procedural matters. Remember that people make their decision to attend or not attend the meeting based on the information contained in the notice of meeting package. To add additional business of the corporation requiring votes at the meeting could have caused those not present to decide to attend. These additions are not legal and binding on the corporation. This does not exclude the board form taking informal and non‐ binding “show of hands” votes to get some flavor of the general meeting when attempting to decide what action to follow after the meeting.

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Quorum is the minimum number of people, in person or by proxy, required to determine if a meeting is duly constituted to conduct the business of the condominium corporation. A grossly undersized group of owners should not be responsible or capable for setting the direction or making key decisions of a condominium community. The condominium act states that 25% of all units must be present either by proxy or in person, or any combination of both for quorum to exist. The act also allows a corporation to pass a by‐law to increase quorum t 33 1/3 % s.50(1). An owner must be entitled to receive notice of the meeting, be entitled to vote and be present in person or by proxy to count towards quorum s.50(2). Without quorum or following loss of quorum any transaction of business is invalid and non‐binding on the corporation.

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The auditor of the corporation may attend and must be notified of the meeting and must be sent a copy of the notice of meeting package. All unit owners and mortgagees of record may attend subject to qualifications and up to date payment ledgers.

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Scrutineers •

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The chair, board or owners at the meeting may appoint the scrutineers to assist with taking attendance, confirming the attendance as noted by the registration table and counting ballots and proxies for elections. Each candidate may request a scrutineer to oversee the counting of ballots.

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Adequate records of the business of the corporation must be kept and this includes minutes of owners meetings s.55(1). AGM minutes can treated the same way as board of directors meeting minutes in that motions and discussions not passed need not be recorded. It may be beneficial to have a copy of the sign‐in register for the minute taker so that when those present give their unit number they can be recorded by both name and unit number. Minutes of the previous AGM are to be approved by the members present at subsequent meetings and should be signed by the board of directors only after the meeting has approved them. Until approved, they are not an official record of the corporation.

Meeting Chair •

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In the absence of specific provisions for a meeting chair, the president presides. Failing the president, the vice‐president presides. By‐laws should be checked for more specific details. If no one having the right to preside as chair is willing to preside a chair may be elected or appointed at the meeting. If a chair is elected or appointed at the meeting, a temporary chair is selected who takes nominations and calls the vote. The chair can be disqualified if the chair does not act in an impartial manner. A chair must act fairly, in good faith and without malice, may be removed if they do not put proper questions to the meeting. The chair has the right to eject an unruly person or make a decision on the validity of a proxy form. The chair can vote, if qualified, but has no deciding vote unless one is specifically given by the meeting. Duties of the chair include: Ensuring the meeting is properly constituted, that reasonable accommodation is provided, to ensure all persons entitled to attend are admitted, to maintain order and to determine the consensus of voters. The chair also established the speaking order and recognizes those who are to speak next.

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Auditors •

It is important to note that the auditor reports to owners and not to management or the board in their capacity as directors. The purpose of the report is to inform owners of the financial position of the corporation and the governance practice supporting that position. • The owners appoint the auditor to hold office until the close of the next annual meeting and, if the appointment is not so made, the auditor in office continues until a successor is appointed s.60(2). • No person may be appointed as auditor who has an interest in the contracts of the corporation or is a partner, employer or employee of, or is a director, officer, employee or manager of the corporation s.61. • The auditor is entitled to attend any meeting of owners and to receive all notices, etc., which are sent to owners. The auditor is entitled to be heard on any part of the business of the meeting that concerns him as an auditor s.70(1). • The auditor has an obligation to answer inquiries directed to him or her s.70(6). (see additional information relating to the role of the Auditor in the section on Using Professionals – page 30)

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Each unit is entitled to one vote s.51(2) Votes may be given either personally or by proxy, on a show of hands or by a poll s.52(1) If an owner is in arrears of contributions on their unit(s) for more than 30 days prior to the meeting, that owner is not entitled to vote s.49(1). Unless otherwise provided in the act, all questions proposed at a meeting of owners shall be determined by a majority of the votes cast s.53(6). Parking units and locker units are entitled to vote at a meeting of owners s.49(3) Voting to amend the declaration of the corporation requires consent of either 80% or 90% of the units depending on the reason for amendment s.107. The passing of a by‐law requires the support of a majority f the units of the corporation s.56(10). A substantial change to the common elements or assets of the corporation requires the approval of 66 2/3% of the units of the corporation at meeting duly called for that purpose s.97 (4)(5). There shall be no vote other than those disclosed in the notice of meeting package delivered to all owners s.47 (10).

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Nomination and Election of Directors •

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Nominations do not require a seconder and are not amendable or debatable. Owners may volunteer themselves or others. Persons nominated someone other than themselves must agree to stand for election. Persons nominated may decline at any time. Persons elected in absentia must agree to their election in writing within 10 days of the date of election s.30(3). The chair may call for a motion to close nominations after a reasonable time has elapsed or by resolution of the voters, but a speaker may not be interrupted for this motion. A motion to close nominations requires a seconder and vote and is not debatable. Qualifications to be a director are outlined in the act and may have further qualifications noted in the by‐laws. By‐laws for a corporation should always be consulted for any other or more detailed requirements.

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The instrument appointing a proxy shall be in writing, under the hand of the appointer or his attorney and shall be for a particular meeting of owners s.52 (6). For this reason the candidates who put their names forward should have their names put on the notice of meeting and the spaces for candidates should be left blank on the proxy forms. The chair has authority to decide on the validity of a proxy form, but may delegate to scrutineers. The chair is to be satisfied that the appointer of the proxy has the right to vote. The chair is to be satisfied that the proxy is present and qualified to act. The chair is to be satisfied that the document appointing a proxy is in the proper form and properly signed. The chair is to be satisfied that the appointment of a proxy has not been revoked. The chair is to be satisfied that the vote cast conforms to the restrictions and instructions contained in the proxy document. The proxy form must contain the date, appointment, name of proxy, signature of proxy issuer and contain revocation of former appointment, instructions as to voting, and authority to act a meeting in the manner that the appointer could. Proxies used to determine quorum and submitted may not be withdrawn for voting purposes. Once registered, they are retained by scrutineers. A proxy must contain the name of directors to be elected or removed to be counted as a ballot s.52 (5). Unless otherwise motioned at the meeting, ballots must be kept forever or may be called for destruction at the end of 90 days along with the proxy forms. Proxies are to be kept on file for 90 days following the meeting. s.52 (7).

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Matters Requiring Determination at an Owners Meeting

The following matters require approval by a majority of the votes cast by units present at a duly constituted meeting: • Appointment of the auditor s.60 (2). • Removal of the auditor before expiration of his or her term and appointment of another auditor at a meeting called for that purpose s.63 (1). • Filling a vacancy to the board (other than by removal) or as a result of an increase in the size of the board s.34. • Confirmation of a rule at a meeting called for that purpose s.58 (7). • Any other matter properly brought before the meeting and not requiring special percentages of approval. The following matters require approval by a specified and minimum percentage of all units as noted below: • Substantial addition or alteration of common elements requires approval of 66 2/3 percent of all units of the corporation s.97. • Amending the declaration requires approval of either 80% or 90% of all units of the corporation and persons who have voting authority such as mortgagees s.107. • To remove a director form the board requires over 50% of all units of the corporation s. 33 (1). • By‐laws passed by the board need to be confirmed by a majority of units of the corporation s.56 (10).

Requisitioned Meeting • A requisition under the condominium act is similar to a petitioned meeting. • Under section 46 of the condominium act owners who own at least 15% of the units in a condominium may requisition a meeting of owners to conduct specific business of the corporation. It is important to know that the business to be conducted must be in accordance with the act, declaration and bylaws of the condominium corporation. • Only those specific requests put forward in a requisition explanation are to be considered as the business of the requisitioned meeting. For example, if a requisition asks that a meeting be called and that a proposed rule be discussed, then it can only be discussed and not voted on. In order for a proposed rule to be discussed and voted on it would have to be specifically worded as such in the requisition. • If 15% of the units in a condominium sign a requisition requesting a meeting the condominium is obligated to call the meeting, failing which the persons requisitioning the meeting are able to call the meeting and charge back the condominium corporation for all related costs. Rev Sept 2013 23

•

There are many reasons a requisitioned meeting may be called including the removal of directors and all requisitioned meetings are subject to the conditions noted in the condominium act. Directors should refer to the condominium act or the corporation solicitor for more specific information.

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Annual General Meeting – Rules of Conduct

General Procedure • The Chair will impartially maintain the fair and proper conduct of the meeting, and will decide all issues pertaining to registration of owners, Proxy Forms, Meeting Procedures, and Order, subject to the Condominium Act, the Declaration, Bylaws, Rules and the consent of the meeting. To Be Recognized • Raise your hand to be recognized and in speak in turn when acknowledged by the Chair of the meeting. Identify Yourself • Begin by clearly stating your name and suite number so that the Recording Secretary may record the correct information. When Speaking • Speak loudly and clearly so that everyone in the room can hear you. • Be concise in your remarks and speak only once on any given issue. • Limit your statements to no more than two minutes. • Pick your priorities and speak on no more than three topics during the meeting so that everyone gets a chance to participate. Be Relevant • Comments must be relevant, and restricted to current agenda items or other business items as accepted by the Chair. Conduct • Govern yourself by normal standards of good behavior. • Show respect for the other people in the room, and the role of the Chair of the meeting. • Do not interrupt other speakers or jump in before being recognized by the Chair. Expectations of Comments • The Board of Directors usually has the benefit of research and discussion before making decisions, it would be unfair to expect any director to make a commitment at the meeting except to say the board will investigate and discuss further at a future board meeting. Removal • The Chair may require any disruptive individual who has been called out of order twice to leave the meeting. All attendees are deemed to have agreed to this protocol. Rev Sept 2013 25

Section Index: Professional Support

• • • • • • • • • •

Preamble Hiring a Lawyer Hiring Trades People Selecting Long Term Service Providers Tendering and the Law Appointing An Auditor Management; Tendering for a Manager; What to Expect; What Not to Expect Reserve Fund Planners Investment Planners Engineers

Page #

27 27 28 29 29 30

31 32 33 34

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Professional Support Preamble The duty of the board of Directors is to control, manage, administer, operate, care for and maintain the common elements and assets of the corporation. Section 37 of the Act imposes a Standard of Care upon Directors to act honestly and in good faith and to exercise the care, diligence and skill that a reasonable prudent person would exercise in comparable circumstances. The Act offers protection from liability for a breach of duty if the breach arises as a result of the Director’s relying in good faith upon: a)

Financial statements of the corporation that the auditor in a written report, an officer of the corporation or a manager under an agreement for the management of the property represents to the director as presenting fairly the financial position of the corporation in accordance with generally accepted accounting principles, or’

A report or opinion of a lawyer, public accountant, engineer, appraiser or other person whose profession lends credibility to the report or opinion.

Directors should therefore have an understanding of when and how to best use professionals. Hiring a Lawyer The appointment of a lawyer is not mandated by the Act but it is a wise decision to appoint one. Dealing with a firm that specializes in condominium law is preferable as their expertise may save both time and money in the long run. The CCI Toronto Directory lists many such firms to choose from. The board may or may not choose to review proposals from firms and/or to interview them. Generally, the board appoints a legal firm to deal with and the firm then assigns a lawyer to handle their file. In order to control legal costs, the board should set a policy on who can call the lawyer and for what reasons. For example, unless necessary or requested, legal counsel should not be copied on emails, as this obligates the lawyer to read the

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emails. It is important to note that legal counsel charges for all conversations and correspondence. The corporation’s solicitor is generally called upon to provide expertise in the following areas: interpretation of governing documents, drafting of amendments to governing documents and/or section 98 agreements, enforcement related issues, assistance with collections or the placing of liens, interpretation or drafting of any agreements or contracts, advice relating to insurance claims, assistance with the preparation of notices, proxies, and/or special meeting requirements; advice relating to Status Certificates, assisting with the appeal of realty tax assessments, attendance at owners meetings, defending the corporation against claims from any outside party, advising the board as required on any issue, including those relating to the reserve fund. Hiring Trades People Owners very rarely remember that Joe the plumber or Fred the elevator technician came to the site early to fix that emergency problem. They will, however, remember that the manager or trades selected by the board were extremely proactive or quickly reactive to emergencies. Often, the resolution to emergency problems, as executed by the service people who are contracted to service the condominium, are only as good as the willingness of the service technician to visit the site. In short, the condominiums resolution to problems is as good as we treat our service people. Imagine if you had to visit a site where you were made to feel inferior or subservient, a second class citizen, or worse yet, subjected to a toxic environment of harassment, yelling and belittlement? Would you drop what you are doing to go to that environment? Yet the same person confronted with an emergency, facing the arrival at a site where they are respected, thanked and seen as a major asset, will do what they can to address that sites problems first, simply put: the site will benefit from good service provider relations. Trying to save twenty or thirty dollars from a billing, or attempting to squeeze just one more hour for free creates an environment where the dispatch at a service provider’s company attempts to avoid sending their service people there. After all, why would they subject themselves to endless negotiations over nonmaterial costs and late payments? Net payment of 15 to 30 days creates a good relationship with service provider companies that often translate to little extras while in the field servicing a site. Good customers are often related to prompt payment of invoices. Everyone is in business to make a profit, not to gouge customers, but a profit nonetheless. Those who begrudge the service provider for attempting make a few dollars will only suffer in the end. All of us know that a little pat on the back from time to time only highlights that we are appreciated and prompts most of us to do a little more, take a little pride or take ownership of what we do. Service providers are no different. From the property manager to the once per year garage washing company, everyone deserves respect. Rev Sept 2013 28

While many condominiums hire service contracts to avoid hiring in house, by virtue of providing a place of employment to service providers such as the property manager, cleaners or security company, the condominium has a certain obligation to provide a workplace free of harassment. These people come into the common space of many people’s homes and should be treated with respect. Selecting Long Term Service Providers Many condominiums select contracted in‐house services such as management, cleaning or security as a financial decision. This approach to establishing long term relationships often result in condominiums “getting what they pay for”. These types of contracts should be treated as a “hiring decision” rather than a financial decision. If you were hiring staff for your place of employment you would not settle for the person willing to take the lowest salary, instead, you would look for the person most qualified to provide the best service: long term in‐ house contracted services should be no different. The last question to be addressed should be what the price of the service is. While it is important to operate in a fiscally responsible manner, the bottom line is not the way to decide if the cleaning company being interviewed is capable of cleaning to the standard you are expecting. Ask questions about how the company trains its staff, what salary they pay staff, how do they cover for sickness or vacations and what sort of benefits are provided. Answers to these questions will highlight if staff can be expected to remain at your property or if they will change employers for the sake of a few cents per hour more. One of the major problems with long term in‐house contracted services is the ongoing turnover of staff. Engineers, reserve fund consultants, investment brokers, lawyers and auditors all fall into this category. Better to approach the contract as a hiring decision rather than a financial decision. This approach will pay large dividends in the long run. Tendering and the Law Many condominiums will tender a project based on verbal specifications or expectations and be surprised when the tenders received are not “apples to apples”. Work with your manager to develop specifications of how the board of directors expects a job to be completed. Develop a clear set of deliverables, materials to be used, colors, timelines, use of site utilities etc. and then distribute that set of expectations or specifications to each service provider to submit a quote. The board of directors should not assume that the manager is capable of reading their minds to determine what they want without their input. When a request for tendering goes out to the various service providers, condominium boards should insist that the tender request include a statement that they may not select the lowest bidder or that the submission of a tender is to be construed as a verbal or written agreement to enter into a service contract. Under contract law, there are times when a request for tender can be construed as Rev Sept 2013 29

entering into a contract and a statement vetted by the corporation solicitor can be used over and over again to protect the condominium from unwanted legal expenses. In more complex situations directors should avoid the pitfalls of believing that their personal or professional experience makes them a good project manager for a project. Check with the terms of Directors and Officers liability insurance to see if acting as a professional on a volunteer board is a service that is covered under the policy, most times it is not. A retired engineer on the board giving engineering advice to a board may not have insurance coverage and may be exposing themselves to personal liability. Directors and Officers liability insurance protects directors as long as they act on the advice of a professional hired by the condominium for the purpose of providing such advice, even if the advice turns out to be wrong in the end. The use of engineers as project managers, the development of CCDC contracts and the sealed bid tender process keeps a complex project free of the perception of conflict or influence. Personal experience should be used to vet the information given rather than to provide the information. Appointing An Auditor The Act states that all corporations, except those with fewer than 25 units, must have an auditor appointed. In Ontario, only licensed public accountants can prepare an audit. Section 61 of the Act states that:

“No person shall act as auditor of a corporation if the person,

(a) is a director, officer or employee of the corporation (b) is a manager under an agreement for the management of the property of the corporation

(d) is a partner, employer, or employee of a person mentioned in clause (a) or (b)

The rules of conduct under which chartered accountants must practice would prohibit an auditor from being a unit owner, even though that is not specifically covered in the Act. As with hiring a lawyer, it is preferable to engage an auditor with specific experience in condominium audits and their requirements. The Declarant will appoint the first year auditor and thereafter, the auditor is appointed by the owners at the Annual General Meeting. The owners rarely set the remuneration for the audit; this is handled by way of a motion at the AGM to permit the board to negotiate and set remuneration. If an auditor is not appointed at the AGM, the current auditor continues until a new appointment is made. Rev Sept 2013 30

The role of the auditor is to perform an audit of the corporation’s financial records, prepare necessary not for profit tax returns and to attend the AGM. The auditor may also from time to time provide the corporation with advice on loans and taxes and/or attend special meetings. Management; Tendering for a Manager; What to Expect; What Not to Expect

The style of management for the corporation is generally determined by the unit owners. There are typically three styles of management which corporations may opt to use: i) Self‐Management (ie. the Board of Directors fulfills the Management role) ii) Management by a Professional Management Company iii) In‐house Management with a Professional Manager as an Employee of the Corporation Within whichever management style the corporation opts to use the functions of property management will fall into three main categories: Physical Management, Financial Management and Administrative Management. Due to the overwhelming amount of work to be completed and the knowledge required to successfully complete this work, most corporations in Ontario opt for some style of professional management. Those who do opt for Self‐Management are usually smaller corporations and do so because 1) the cost of professional management is prohibitive and/or 2) the size of the management contract is so small that it is not of interest to most management companies. Corporations can however, be successfully self‐managed provided that the Board is committed to taking on extra responsibilities and that they rely upon the expert advice of professionals and consultants as necessary. If selecting a professional style of management there are several considerations to keep in mind when tendering for a company. The CCI Level 200 course covers this topic in greater detail, but below are some key considerations: 1.

Develop a list of all required management functions

This list, as well as general information about the community should be forwarded to several companies with a request to submit a Request for Proposal (RFP).

The board should review all quotes and prepare a short list of firms to be interviewed.

Obtain client references.

Consult with the corporation’s solicitor to review the management contract.

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Cost should be a consideration but not necessarily the deciding factor. Cost will reflect the management functions required by the board and also the level of experience of the management company. Consideration should be given to companies with specific experience in managing condominium properties and who are affiliated with professional organizations such as ACMO or CCI. The ACMO 2000 certification and the ACCI, RCM or CPM designations all designate companies or individuals who have advanced condominium experience.

What to expect or not expect from the Manager will depend to a large degree on the list of requirements the board developed and the specifics of what is covered under the management contract. This could vary significantly from corporation to corporation. In a general sense though, “Directors direct and Managers manage”. This means that it is a function of the board to set policy, guidelines and expectations for the manager and for the manager to carry out those policies. Managers need to clearly understand and fulfill the directives from the board and Directors should not attempt to micromanage the daily activities of the manager. In all successful corporations, the manager and directors work together within a team environment where communication and mutual respect are key values. Reserve Fund Planners The Reserve Fund Study is essentially at least a 35 year major repair and replacement plan for the common elements in a condominium corporation. The condominium act in section 93 and 94 and in Regulation #48 sections 27 to 38 clearly outline the minimum requirements of the people preparing the reserve fund study as well as the requirement for what must be included in the study. These sections of the legislation also outline how often this long term major repair and replacement plan must be updated and to what extent. Section 94 (6) of the act specifies who is authorized to carry out a reserve fund study on behalf of the corporation. What is clear from all supporting sections related to reserve fund studies is that the person(s) preparing the study must take into consideration many related requirements as well as having a clear understanding of the condominium act and condominiums in general. Section 32 of Regulation 48/01 attached to the condominium act clearly states the requirements of the persons conducting the study. This section sets out a very specific set of credentials that must be in place by the person(s) conducting the study. Directors should seek satisfaction (and sometimes proof) that the persons they are contemplating to hire for this purpose hold the proper credentials and accreditations. In any case, the person(s) contracted to perform the study shall not be affiliated in any way with a director or officer of the corporation. The firm or engineer/consultant engaged to conduct the reserve fund study will in many cases be the same firm or person(s) who will perform many of the engineering requirements of the condominium corporation throughout the years. The selection of this professional should clearly be a hiring decision and based on the ability of the firm to meet the current and future needs of the condominium corporation as Rev Sept 2013 32

the building or townhouses start to age. The old adage that “you get what you pay for” really applies to this role. Directors should research the firm supporting the individual and obtain some comfort if the contact person were to leave the employ of the firm, that the firm can still carry business “as usual” with very little loss of experience unique to the condominium. Back room or professional support can’t be emphasized enough. Investment Planners Section 115 of the condominium act is very clear on how monies may be invested and in what securities the money may be deposited. This section of the condominium act, specifically in subsection (5), offers a very clear definition of what securities are allowed. It should be noted that a few very basic accounting principles apply as well as one very important investment principle. From an investment standpoint, monies can only be invested in securities whereby the principle is protected by the government of Canada or a Province of Canada and is further protected by institution insurance. In essence, only low risk securities such as GIC’s etc. can be invested in. The intent is to prevent any newly elected board from “gambling” the assets of the corporation on stocks, mutual bonds etc. where there is an inherent risk of the principle funds being diminished or lost. From an accounting standpoint, the requirement to report on interest earned and the securities where monies are held in the name of the corporation must be reported on in a regular manner for the purpose of inclusion in the monthly financial statements and the annual audited financial statement. The person or firm being hired or engaged to manage the investment and subsequent re‐investment of corporation money should be able to provide detailed statements of earnings and investments to the corporation. The condominium act also stipulates that monies can be invested only after the board develops and approves an investment plan. The “laddering” of maturity dates and the term of individual investments should coincide with the need to have cash on hand according to the reserve fund study contribution and expense model. Because the investment of monies for the operating and reserve accounts has so many legislated requirements, accounting principle requirements and also demands such a detailed understanding of institutional Canadian Deposit Insurance Corporation (CDIC) insurance and protection, the hiring of a properly qualified and insured Financial Planner is strongly advised. This financial planner should be familiar with condominium legislation and have a number of successful condominium clients as references. Directors are advised not to assume the liability of acting as the financial planner for a condominium, even if the director is a financial planner by profession. When interviewing for a financial planner ask questions seeking the planners understanding of the requirements as outlined in the condominium act and always check references. Once engaged, allow the investment planner to manage the investments and trust that they know

Rev Sept 2013 33

what they are doing. Second guessing an investment planner is like second guessing a lawyer…it may actually create more problems that the questions will solve. Engineers In sections 44 and 93‐95 of the Act, relate to the use of engineers for the preparation of the Performance Audit and the Reserve Fund Study. The engagement of the engineer initially includes both the Performance Audit and the Reserve Fund Study. For future reserve fund studies or updates, the Act does permit other professionals to complete the study (for details on which ‘other professionals’ are permitted, refer to the Regulations accompanying the Act). There are certain restrictions within the Act though on who cannot perform the Reserve Fund Study and this includes anyone who has a direct affiliation with the condominium corporation – including Directors, the Property Manager, certain relatives of the board or manager, and/or any owner or resident of the building. When looking for an engineer, the board should look for someone with experience specifically relating to condominiums and to reserve fund studies. Ideally, the individual will also be capable of specifying designs and tendering repair projects as well. The board will also need to verify the minimum liability insurance requirements the reserve fund study provider carries. The Act defines the limits of insurance for engineers.

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Section Index: Condominium Boards

• • • • • • • • • • •

Qualifications Term of Office Quorum Officers of the Board Role of the Directors Directors Code of Ethics Confidentiality When is a Director Not a Director Insurance Job Description for Board Members Directors’ Code of Ethics

Page #

36 36 36 36 37 37 37 37 38 39 40

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Condominium Boards Once the Condominium is handed over to the owners (turnover meeting), an elected Board of Directors is constituted. The Condominium Act specifies the number of directors to be elected. Currently, the Act specifies that the Board must have a minimum of 3 elected members. (Although this is the minimum requirement, some Condominiums have either 5 or 7 directors). The Condominium Act further specifies the qualification of the individuals seeking election to the Board. Qualifications To qualify as a director, a person must; be at least 18 years of age; cannot be an un‐discharged bankrupt; be mentally competent (s.29 (1) a, b and c); and must comply with any other ‘reasonable’ qualifications that may be listed in the corporation’s bylaws (s 56 (1) a). An example could be the requirement for all directors to be owners. Term of Office The term of a director is generally 3 years and the individuals can run for reelection as often as they wish, unless the corporation’s by‐law states otherwise. Ideally, the first directors elected serve staggered terms and thereafter three‐year terms. That way, there will always be experienced individuals for the Board. Since the owners elect the directors, the owners are the only ones who can remove directors. (The Condominium Act specifies the rules that must be followed for this to happen). If a meeting of members is called for the purpose of removing a director (s), the members will elect other eligible persons to complete the unexpired portion of the removed director’s term. If, however, a vacancy occurs on the Board (for whatever reason), the Condominium Act allows the Board to appoint an eligible person to fill the vacancy until the next annual meeting. The other option, if a quorum remains, is to leave the position vacant until the next AGM. Quorum A quorum is achieved when a majority of the Board is present, as defined in the corporation bylaws. Officers of the Board The Condominium Act requires that the Board appoint, from within members, one to act as President and one to act as Secretary. Although the Act does not require other officers to be appointed, many Corporations usually also elect a Vice‐President and a Treasurer. Each officer, so appointed, will have specific responsibilities and is subject to re‐appointment each year.

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Role of the Directors As elected representatives of the owners, the Board takes responsibility for managing the condominium property and its business affairs. In order to transact business, a quorum of the Board must be present at meetings. Board meetings are generally held on a pre‐arranged basis, usually monthly. The duties of the Board are specified under the Condominium Act. It must ensure that the corporation’s monies are held in trust and properly invested, keep the records required by the Condominium Act and ensure they are available for inspection. In addition to these specific legal requirements, the Board is also responsible for enforcing the provisions of the Condominium Act, the declaration, the by‐laws and the rules. (The declaration, by‐laws and rules elaborate on the duties of the Board.) The Board may engage a condominium management company (property manager) to manage the day‐to‐day business affairs of the corporation. However, in doing so, the Board must not, indeed cannot by law, relinquish the ultimate responsibility for the business and financial affairs of the corporation to the management company. As a best practice concerning the finances of the corporation, one director and the manager, should co‐sign any operating account cheques. Any cheques relating to expenses from the Reserve Fund Account should be signed by two directors. This should be set up in the banking documents. Directors Code of Ethics Although there is a significant responsibility in serving as a director for a corporation’s Board, it is expected that you also conduct yourself ethically. To this end, the conduct of all directors should be seen as transparent. The creation of a “Directors Code of Ethics” should be written for your corporation and adopted as a by‐law to ensure that it becomes more enforceable. This “Directors Code of Ethics” should also be prominently displayed in you building. The “Directors’ Code of Ethics” prepared by the Canadian Condominium Institute, is an excellent example of what this code of ethics should look like. A copy of the code is enclosed in this binder. Confidentiality In the main, minutes of the board meetings are public and open to any resident. Residents can request copies of board meetings upon the payment of a fee to cover the costs of duplication and staff time. Boards can discuss issues that are to be kept confidential, such as discussions concerning personnel matters, issues affecting a single owner, litigation, arbitration, etc. Further, any other issue under investigation or study that has not yet been completed should also be kept confidential until completed. When is a Director Not a Director? A director is only a director when involved at a Board Meeting. It is only at these times that the director is protected by the corporation’s directors and officer’s liability insurance (D & O Insurance). However, at a board meeting, a decision can be taken to hold a unit‐owners meeting to discuss an issue that affects all unit owners. At these meetings, directors are also acting in their capacity as an elected director and are protected by D & O Insurance. At other times, directors are one of the unit owners, just like all the other unit owners. It is at these times that directors need to be careful in offering opinions since these may be construed as Rev Sept 2013 37

Board Policy. These opinions should always be prefaced as the individual’s opinion and not that of the Board especially if the issue has not ever been discussed at a Board Meeting. Insurance Insurance is the most misunderstood aspect of condominium governance, thus it is highly recommended that directors take a course on insurance, such as the CCI Level 200 course. The Condominium Act specifies that the corporation must insure its obligation to repair the condominium property to its replacement value, subject to a reasonable deductible. It is also the responsibility of the directors to ensure the condominium assets are appraised from time to time to determine that the insurance needs are being met. The corporation should also insure that they have adequate liability insurance as well as Directors and Officers Liability Insurance. To ensure that the corporation has adequate coverage, an insurance broker, knowledgeable in condominium insurance, should be engaged. It is on the advice of this professional, that the complete insurance coverage should be based. While the insurance covers the full replacement value of the units and common elements, it does not cover the improvements to the unit or the personal property of the owner, nor will it cover a unit owner’s responsibility for any insurance deductible. Replacement value of a unit is generally identified, as the way the unit was when it was ready for sale. The best way to identify the replacement value of a unit is for the corporation to adopt a Standard Unit bylaw. This by‐law would identify all that is covered by the corporation’s insurance. All else would be covered by the unit owners insurance. The unit owner’s insurance should cover the improvements made to the unit, as well as personal property, third‐party liability and any deductible which may be charged back to the unit for damages caused by an act or omission by the unit owner or those for which the unit owner is responsible.

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Job Descriptions for Board Members As mentioned earlier, the Condominium Act specifies that all Boards of Directors must have a President and a Secretary only. Most Boards will also appoint a Vice‐President and a Treasurer. The President, Vice‐President, Secretary and Treasurer are identified as the officers of the corporation. They all have specific duties. The President presides over Board meetings and leads the Board, which is charged with the responsibility for the corporation’s affairs. The Vice‐President assists and can substitute in the president’s absence. The Secretary is responsible for the minutes of meetings, giving notices of meetings, keeping the records for the corporation, including the record of owners, mortgage lenders and leases. The Treasurer is responsible for expenditures and financial records Generally, the management company (property manager) takes care of all the day‐to‐day business affairs of the corporation, reporting to the President, Secretary or Treasurer as required.

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Section Index: Principals of Budgeting

Page # • • • • • • • •

Budget Process Preamble Budget Process Goal Material Budget Lines Line Based Budgeting Detailed Budget Notes Key Budgeting Tools Budget Approval Timing Role of the Annual Audit and Auditor • Board Review of the Annual Audited Statement • Monthly Financial Reporting and Review

42 42 43 43 43 44 44

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Principals of Budgeting Budget Process Preamble Directors have a fiduciary responsibility to condominium owners to prepare an annual operating budget on which monthly fees will based for each owner. This can be a very daunting task, specifically for inexperienced directors. While the responsibility lies with the directors to ensure the budget is prepared, thankfully, the responsibility of actually preparing a draft budget for review by the board of directors is not entirely theirs. Enter the management company hired by the condominium corporation or the book keeper for smaller or self‐ managed corporations.

Budget Process Goal When owners question directors on the budget process, the directors need not be well versed on every number contained in the budget. When looking at multi‐million dollar budgets the number of budget account lines can often exceed thirty or forty and expecting anyone, even the person who prepared the budget, to remember every number is unrealistic. The goal of good budgeting and the review and approval process should be focused more on the process than on the numbers.

If an interaction between a director and owner went something like this then the owner and director could part knowing that the budget was well thought out and executed:

“Mr. Director, why did you increase the budget by so much this year?”

“Mr. Owner, the board of directors and our management company reviewed a budget that was presented in draft form. We reviewed how each budget line was calculated and were given detailed explanations on the reasoning behind every significant budget line. The board made a few minor changes, however, the board is of the opinion that the process used to calculate the required revenue to conduct business for the upcoming year is based on sound reasoning and calculation. The approved board budget is free of wild estimates and we were all comfortable with the outcome of the process used to arrive at the required numbers.” The above interaction between a director and an owner does not include one single number, yet it describes a process that clearly instills a level of comfort for the owner that the board of directors did not wildly guess at the numbers required to finalize the distributed budget. Rev Sept 2013 42

If directors attempt to achieve this goal each year then the process of reviewing and approving a budget has a specific outcome identified at the onset and should make the review process much easier. Questions related to how numbers were arrived at should be the core of the review process. Material Budget Lines In a typical high rise condominium building the utility budget line and perhaps the security expense line will form as much as fifty percent of the entire expenses for a single year. In a townhouse condominium, Landscaping and management contracts can be the largest percentage of the budget. Directors should seek a high level of comfort in the way that these major budget categories are derived. Extra time should always be taken to question, review and examine the budget process utilized to arrive at these major expense items. Directors would be wise to establish the dollar value of one percent of the proposed budget. If directors feel that a proposed budget contains too high of an increase, avoid getting caught up on smaller or immaterial amounts. No sense spending half an hour on a banking expense line that will eventually result in saving one cent per month per unit. Better to spend time looking at lines and calculations that will result in whole percentages. Line Based Budgeting The key principle of budgeting is to calculate each line based in its individual needs. Boards should ensure that the person who prepared the budget has started with zero dollars for a particular line and presented a calculation that determines exactly what amount is required to fulfill the needs of that line only. The line should not be “padded” or “extra lean” but rather should illustrate through calculation exactly what is needed to execute the requirements of that expense line for the upcoming year. This process is repeated for each line that the corporation requires for the upcoming year and typically is repeated from year to year. This line budgeting process does not take into account the “bottom line” increase in fees. If each line is calculated on its own merit and requirement, the bottom line will fall where it is required to fall. This approach would mean that a reduction in the overall budget (and resulting monthly fees per unit) would only be accomplished through the elimination of discretionary spending as identified throughout the year by the board. Detailed Budget Notes All too often the verbal description of how budget lines are arrived at is lost in the budget review meeting. It is the detail contained in the notes for each budget line that add value as the budget is expensed throughout the year. In the event that a manager changes or the treasurer moves on, there must be a detailed record of how a budget line was calculated and what was intended to be included in the budget line. Rev Sept 2013 43

Boards of Directors can use these notes throughout the year to add clarification as to why certain expenses are assigned to specific budget lines. Directors are advised to keep a copy of the approved budget in their files and to bring their copy to each board meeting. The approved budget is an invaluable tool that will assist in the expense or project approval process throughout the year. Is the proposed expense accounted for in the approved budget? What is the impact on the budget of we approve a non‐budgeted expenditure? What would the effect be on cash flow? All good questions that can be answered when weighed against the proposed and approved budget and budget notes. Key Budgeting Tools Boards or managers should be keeping a file throughout the year to keep all notes, suggestions and requests of what is to be included in next year’s budget. It is too difficult to remember ten months later what was discussed and requested to be included in the next budget proposal. Short notes, copies of board minutes or copies of the AGM minutes all form good reference notes for the budget preparation process. Contracts should all be negotiated so that they coincide with the fiscal year of the condominium corporation. It is much easier when increases to contracts are in line with the start of the fiscal year rather than falling in the middle of the year. The Annual Planning Guide is perhaps one of the most critical tools to be utilized by the Board of Directors, their manager and can be used to achieve many differing goals. It is the development of the Annual Planning Guide that guarantees that the calculation of numbers is actually transformed into actions throughout the year. As each budget line is calculated, the planning guide should be updated to indicate what steps must be taken, and when, to achieve the goals of that expense line. As an example; when calculating the window washing expense line, the budget should note which month the expense is expected, the expense should be based on a quote and the Annual Planning Guide updated to show when the window washing must be scheduled, when a notice must go out and when it will actually take place. Sometimes a single expense item will result in multiple entries across many months in the Annual Planning Guide. At the end of each month the completed items form the Annual Planning Guide could be included in the Management Report to the Board to show the activities completed in the past month (as measured against the actions anticipated in the budget). Budget Approval Timing Budget approvals should be scheduled so that the maximum notice time permissible can be given to each owner of potential increases. As a rule of thumb, at least thirty days notice should be given to owners in a letter specifically addressed to them and a copy of the summary of the budget included for reference. Rev Sept 2013 44

It is important to understand that owners are not permitted to vote on the budget under the condominium act. It is the responsibility of the board to prepare and approve a budget each year. Many years ago owners were consulted and approval of the annual budget sought from them. It can be no surprise that in those days owners would not approve any increases to the budget and as a result many condominium corporations found themselves in financial difficulty after a few years of zero percent increases. The Board of Directors has access to monthly financial information, the projected cash flow requirements and physical needs of the property that owners do not have. For this reason, the Directors (aside from the manager) are the only ones in a position to make sound fiscal decisions on behalf of the owners; this is an obligation and responsibility bestowed on the board by virtue of the condominium act. Role of the Annual Audit and Auditor The Annual audit of the financial position of a condominium offers the owners and the board insight into the financial health and management practices of the condominium. An auditor is appointed each year by the owners, one of the few powers that the owners actually have (aside from electing directors) so that the auditor may report to them on the activities of the board and management of a condominium. Aside from auditing the books, the auditor will also audit the management practice of the governance team. The governance team typically consists of the Board of Directors and the manager of the condominium. The auditor will look for multiple tendering of large projects or contracts, minuted decisions of the board, and assurance that the generally Accepted Accounting Principle (GAAP) are being followed. If any abnormalities are found they will be noted and reported to the owners. Apart from being a great report card back to owners, the annual audit provides historical information related to financial management decisions and trends of the condominium corporation. History of budget line expenses for utilities, plumbing, contracts etc. can all be measured year against year when reviewing past audited financial statements and packages. Board Review of the Annual Audited Statement Boards should take time each year to properly review the proposed audited financial statement prepared by the auditor before the sign and distribute to owners. Look for trends upward or downward and seek clarification as to why these trends exist. Consider the audit a summary of the past years process used to financially manage the condominium. Did the budget accurately reflect what was expected as a budget line expense? If not, why not? Directors are encouraged to use the audit to measure the accuracy of the budget forecasting methodologies used in budgeting each year. Imagine how much confidence is conveyed to owners at an Annual General Meeting each year if the board can report back that the comparison between the Annual Audited Financial Statement and the budget prepared and reported on in that audit can illustrate that the budget process and budget approved by the board was 99% accurate? Rev Sept 2013 45

Boards of Directors are encouraged to take time to speak to the transition between budget preparation, monthly financial reviews and the final audited financial statement being presented each year as part of the Annual General Meeting. Nothing will instill confidence in owners on the capabilities and competency of the board and management more than knowing that good sound financial monitoring and management is taking place on their behalf. Monthly Financial Reporting and Review Each month the Management Company or Bookkeeper should be producing a detailed unaudited financial statement that shows all activity and expenditures for the last monthly period, if not the year to date. Unaudited statements are a snapshot of the financial condition of the condominium corporation at the end of any given month. Boards of Directors should ensure that a full explanation of the statement including key points is provided each month. Specific attention should be paid to either positive or negative cash flow and the financial health of the condominium should be considered when approving extraordinary or additional non‐budgeted expenses. Financial statements mean very little for the first quarter of the year and boards are advised to defer extra spending until the last half or last quarter of the year. Directors should be comfortable that periods of cold weather (affecting utility budgets) have passed before looking to extra purchases. It is better to ensure that monies are available for planned expenses before approving unplanned expenses, particularly those not absolutely essential to the proper running of the condominium corporation. Do not assume that everyone in the board room understands what any particular number represents, seek clarification so that you can measure your decisions against cash flow and projected bank balances. Ask questions or arrange to have your treasurer meet with the manager or accountant to seek clarification prior to the board meeting. The treasurer and manager can team up to present the statement and answer any questions that may arise. Always ask for a variance report indicating reasons, clearly defined, why accounts are not on budget. Look for material changes on the year to date accounting and not the monthly accounting as monthly trends can fluctuate radically and year to date accounting can reveal trends that will be more accurate at year end. If a board is having trouble understanding the accounting package being presented each month, ask the manager or bookkeeper for specialized training at the next board meeting. The unaudited monthly financial statement is a report card on how the condominium governance team is managing as compared to the reviewed and approved annual budget. Finally, remember that the auditor will justify a surplus in the operating account equal to one or two month’s revenue. It is a standard practice to carry a small surplus such as this in order to guard against seasonal or monthly pressures on cash flow. Rev Sept 2013 46

Section Index: Alternative Dispute Resolution

Page # • • • • • • • • • •

Introduction Mandatory Mediation/Arbitration Mediation Explained Arbitration Explained What the Act Does Not Say How To Choose a Mediator/Arbitrator Costs Goals Appropriate Dispute Resolution The Future

48 48 49 53 53 54 55 56 56 57

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Alternative Dispute Resolution Introduction In considering dispute resolution within a condominium corporation, the optimal goal is not necessarily to facilitate “advocacy” for the condominium corporation, nor is it to ensure that the condominium corporation wins and the other side loses. In a condominium community, it must be recognized that conflict and disputes can originate and grow within the community simply due to parties regularly coming into contact with one another. Put another way, there are no “high fences” to help make good neighbours. The goal therefore must be to look beyond a traditional understanding of winning and losing as between the disputing parties and to embrace the goal of advancing the well‐being of the greater condominium community. Often overlooked in the dispute resolution process is the underlying conflict. Conflict is all around us and is unavoidable; however, conflict can be managed with a view to avoiding its escalation into a greater dispute. The challenge, therefore, is to recognize the underlying conflicts as well as the varied interests that propel them, and to then embrace and manage the conflict in a way that advances the greater interest of the condominium corporation. It is questionable whether the overriding interests of a condominium corporation are advanced if conflict is ignored, thereby challenging the other party to escalate matters to find a resolution. Mandatory Mediation/Arbitration i) What the Act says: Section 132(1) of the Condominium Act, 1998 (the “Act”) provides as follows: “Every agreement mentioned in subsection (2) shall be deemed to contain a provision to submit a disagreement between the parties with respect to the agreement to, (a) mediation by a person selected by the parties unless the parties have previously submitted the disagreement to mediation; and (b) unless a mediator has obtained a settlement between the parties with respect to the disagreement, arbitration under the Arbitration Act, 1991, Rev Sept 2013 48

(i) 60 days after the parties submit the disagreement to mediation, if the parties have not selected a mediator under clause (a), or (ii) 30 days after the mediator selected under clause (a) delivers a notice stating that the mediation has failed.” The Act speaks only to the requirements for mediation and arbitration. It does not put in place a procedure to be followed. However, section 56 (1) (o) of the Act permits a condominium corporation, by by‐law, to establish a specific procedure to be followed with respect to the mediation of disputes and disagreements as between a condominium corporation and owners. Such a by‐law is voluntary, but highly beneficial to the condominium corporation. ii) When is it mandatory? Generally, mediation, and if necessary, arbitration, is mandatory with respect to disagreements between the condominium corporation and owners pertaining to a condominium corporation’s declaration, by‐laws and rules [see section 132(4) of the Act]. It is important to note that mediation, and if necessary, arbitration, is not made mandatory with respect to those disputes not identified in Section 132 ‐ specifically, disputes involving breaches of the Act and disputes involving tenants of units. There has been a recent trend by the courts to underline the importance of attempting a conciliatory approach even when one is not mandatory. In the case of Toronto Common Element Condominium Corp. No. 1508 v. Stasyna (“Stasyna”), the court agreed that mediation was not required prior to the condominium bringing forward its application, as the subject matter of the dispute dealt with a direct breach of the Act and not the condominium’s documents. Notwithstanding that the condominium corporation was successful in its application and had an indemnification provision in its declaration, the court only awarded costs on a partial indemnity basis, reduced by 20%, as the court found that: “TCECC No. 1508 has wasted considerable time and expense in my view by insisting on this litigation when mediation was available to the parties. It could have achieved a more conciliatory resolution long before now.” The result was a costly “win” in court for the condominium corporation. Mediation Explained The mediation process can be described as a guided conversation which takes place on a confidential and without prejudice basis. Parties in conflict come together – sometimes with legal representation or other support and sometimes without – and converse about their dispute with a view to working with one another to potentially resolve it. The mediator guides the discussion by maintaining order and asking questions to give all parties involved an opportunity to express their views of the conflict, share their interests (“why” something might be important) and generate various settlement options for consideration. Each party then weighs such options against their next best step for otherwise addressing the conflict to determine if a settlement option may be worthwhile. Participants are not forced into resolution or otherwise compelled to settle, rather they are free to embrace a potential Rev Sept 2013 49

settlement option or opt to address the dispute another way, such as through the pursuit of court proceedings. While largely considered a formal process, mediation likely takes place every day on an informal basis. For example, a property manager might address a unit owner’s concern about decisions made by the Board. Mediation can also take place at a variety of stages of a dispute – at the outset when parties attempt to proactively manage the conflict to avoid its escalation; during court proceedings while awaiting the hearing date; or even on the eve of trial. Mediation permits the parties to have a measure of control over the outcome and/or attempt to preserve their ongoing relationships. Traditionally, the role of the mediator is that of a neutral, third party. The mediator’s role is not to provide any legal advice or an evaluation of the conflict. Rather, the mediator’s participation is focused on guiding the conversation to ensure that the parties better understand one another and explore all of their options. Often, this includes an injection of creativity and “outside of the box” thinking to see if any settlement options exist which may serve to address the interests of all parties without any having to compromise. However, an unusual aspect of the Condominium Act, 1998 is the ability of the mediator to award costs against a party when mediation fails [see section 132(6) of the Act]. In practice, mediators rarely exercise such power as doing so would involve the mediator casting judgment on the dispute and foregoing his/her neutrality. i) Advantages / Disadvantages Advantages: Mediation is a party‐driven process. It provides an opportunity for parties involved in a conflict to control the process (as compared to court) and to find their own resolution. This is achieved through the facilitation of the mediator which involves the sharing of perspectives. As opposed to the court system or arbitration, which involves each party presenting their position to a third party who will ultimately impose a resolution to the dispute, the mediator helps the parties better understand each other; to understand “why” a particular position is of importance and to generate settlement options for consideration. Advantages to the parties of mediating in good faith include: (1) having control over the process and the resolution to the conflict, (2) gaining insight into the interests of others and (3) using such insight to develop and consider options which might not otherwise come to light. Mediation offers a chance to reduce the investment of time, money and emotion which would be required if the conflict was prolonged or addressed in court or arbitration. As the mediation process is confidential and non‐binding, mediation also provides a safe environment for parties to think “outside the box” and to consider options/ideas that may not previously have been considered.

Disadvantages: Mediation provides no assurance that the conflict will be resolved. This risks the potential incurrence of cost and time of those participating which could ultimately add to the overall burden involved in resolving the dispute. Further, when parties do not participate in Rev Sept 2013 50

good faith, one may feel guarded about sharing his/her perspectives or interests out of concern that such could be used against them in the future or otherwise undermine the purpose of the process. ii) What to Expect Managing expectations of those participating in a mediation session is an important role of the mediator. Participants will be more likely inclined to make the most of the mediation opportunity if they are comfortable and sufficiently prepared for the session. Mediation is a process that is driven by the parties. It stands to reason, then, that the parties will get out of it what they put into it. “Fit the forum to the fuss”…within the four corners of the Act! An additional challenge posed in the realm of condominium conflict is that resolution possibilities are not endless. Rather, an aspect of condominium disputes that makes them unique, and which underlines the importance in the choice of mediator, are the confines placed upon potential settlement options imposed by the Act and the condominium corporation’s unique declaration, by‐laws and rules. A mediated resolution cannot contravene the Act or the particular condominium corporation’s declaration, by‐laws and rules. In preparing for mediation, it is prudent for parties to understand the restrictions placed upon them by virtue of the Act. An analysis and understanding of these boundaries of resolution – including seeking the advice of a lawyer – can help in making the most of the opportunity that mediation presents. Often, mediated settlements are subject to legal review for compliance purposes. When a condominium corporation itself is a party to a dispute, the authority of the representatives of the condominium who are participating in mediation is also an important consideration. Often, a representative of or from the Board is present with instructions and guidelines for settlement provided to them in advance or with a requirement that they bring a potential settlement back to the Board for review and ratification. Unfortunately, such parameters are often “positionally” based and have not accounted for the potential for “outside the box” thinking that may ensue through the examination of each party’s interests and the momentum that can be built in the course of participating in the mediation process. Consider what will happen if a viable and advantageous settlement option arises at the mediation which was not considered previously. Failing to accept a good settlement option due to a lack of settlement authority may be viewed as bad faith or otherwise serve to escalate the conflict. Some condominium corporations participating in mediation make arrangements in advance to ensure that other directors are available to the participating representative (i.e. via telephone) to provide consensus or otherwise consider circumstances which arise in the course of the mediation. iii)

The Value of “Failure”

Mediation can still be considered a benefit to the parties (or a success) even if it does not produce a resolution. Unlike proceeding to arbitration or court where disputing parties strive to convince a third party of their position and, win or lose, are guaranteed an outcome, mediation offers no guarantees of settlement. That is the point. Mediation provides those

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engaged in conflict with the opportunity to resolve it; whether or not the opportunity is taken – or is worthwhile – is within their own control. The parties control the process and the outcome. In the context of condominium conflict, there are several advantages that can fall out of a mediation which does not end in settlement: 1. A Chance to be Heard. It is not uncommon to find a party going to court with unwinnable cases that have become very personal to him/her. Even if the party loses and faces cost consequences (that could have very easily been avoided), some have expressed satisfaction. Why? Because the party had a chance to be heard. Particularly when a unit owner is in dispute with the condominium corporation, there may be little direct interaction between the owner and the Board (the decision makers of the condominium). The Board members may be perceived to be or purposely “ignoring” a conflict (and the owner). The owner, in turn, can feel ignored and may seek out an “empowering” option: litigation. Unlike at trial, where each party presents their case to a judge, the parties to a mediation present to each other. This provides an opportunity for each party to “get off their chest” their emotions and views of the conflict, and to hear what the other side has to say. This takes place in an environment that is without prejudice and confidential – or “safe”. The purpose is not to refute accusations or prove that the other party is wrong, but to listen and explore. Particularly when there is an opportunity for such an exchange to take place on a without prejudice basis with the parties interacting directly and in person, a great deal of satisfaction (and progress) can be obtained. 2. Cost Savings. How can there be cost savings if mediation does not resolve the dispute? One way is to narrow the scope of the conflict. When the parties have a chance to examine both their own interests and those of the other side, they can get to the bottom of what the conflict is truly about. Agreeing on certain facts, their next steps in addressing their dispute or even which issues are the most pressing can greatly reduce the overall cost of the conflict and perhaps even the amount of time invested in trying to find a resolution.

3. An Interaction Plan. Many condominium disputes involve parties who are in community with each other. Delay in resolving a conflict can impose particular challenges ‐ a chance meeting in an elevator, an awkward run in at the mailbox, an exchange of eye contact at the Annual General Meeting and so on, which can further antagonize the parties. The litigation process can take a long time and the close proximity of the parties to one another can be unpleasant, particularly in the setting of one’s home or workplace. In mediation, even if no settlement is reached, the parties can take the opportunity to explore how they will interact until a resolution is in place. Guidelines can be set and parameters established to provide an understanding in recognition of the inevitable interaction to take place going forward.

4. Something to Think About. Often, groundwork for a settlement can come out of the examination of options and exchanges of the parties in the confidential and without prejudice setting of mediation. The insight that can be gained into the other party’s perspective or ideas generated in a creative brainstorming session can provide something to think about and even impact the opposing Rev Sept 2013 52

party's Best Alternative To a Negotiated Agreement (BATNA). Even if the conflict proceeds and settlement is reached on the morning of the trial, mediation may be responsible. Arbitration Explained Arbitration is often compared to court – only private. Parties to a dispute hire a third party to act as “judge” to impose a resolution to their conflict. Each side presents their case in a similar manner as they would to a judge and awaits their determination. i) Advantages Arbitration offers a number of advantages to the parties taking part: 1. Time – while the court system can sometimes take years to see a matter through, arbitration provides an opportunity for an expedited resolution. 2. Control – when you proceed to court, you have little control over which judge will be assigned to impose a resolution for you. While it does require the involvement of the other parties involved, arbitration provides the opportunity to select your own judge. This can be particularly appealing when specialized knowledge is required to sufficiently understand the intricacies of the dispute, as is often the case with respect to condominium conflict. 3. Privacy – like mediation, arbitration is a private and confidential process. While the court system is a public process, parties at times may prefer to have the particulars of the conflict or even the outcome kept to themselves. ii) Disadvantages: 1. Cost – the parties do not have to pay for the judges, the courtroom, the court report, etc., in the court process. This cost must be paid for in arbitration and can be significant. 2. Uncertainty – while there is an element of control over the selection of an arbitrator, one cannot be sure what an arbitrator will consider (or not consider) in arriving at a decision. There have even been occasions where an arbitrator has ignored applicable case law in the course of rendering a decision. What the Act Does Not Say

While the Act mandates mediation, and failing which, arbitration, the Act does not provide any process to follow in order to mediate or arbitrate a dispute. This is perhaps the single most significant flaw in the dispute resolution process established within the Act. While the advantages of mediation include cost savings, time savings and the possible preservation of the relationships, if a dispute arises that requires mediation, it would not be unexpected for the parties to fail to agree upon the choice of mediator if a process were not already in place to assist them. It would seem counterintuitive if the parties would be required to proceed to court in order to seek direction on the appointment of the mediator. Rev Sept 2013 53

a) Mediation/Arbitration by‐law The lack of procedural direction underlines the importance of putting in place an effective and well thought out by‐law describing how mediation and arbitration will proceed. Many condominium corporations have passed a mediation/arbitration by‐law to speak to the process of mediation and arbitration and to address many of the gaps left by the Act. The procedure outlined by a condominium corporation’s mediation/arbitration by‐law typically includes: 1) 2) 3)

How and when the notice to mediate/arbitrate can be served; How the parties can select a mediator/arbitrator; An outline of documents to be provided to the mediator/arbitrator in advance of the mediation/arbitration; Guidance surrounding the time, place and duration of mediation/arbitration; The right to representation at mediation/arbitration; Guidelines surrounding the writing and ratification of any potential mediated settlement; How to terminate mediation; How costs of the mediation/arbitration will be shared by the parties; and Parameters surrounding an arbitrator’s power and rights of award.

4) 5) 6) 7) 8) 9)

How to Choose a Mediator/Arbitrator Section 132(1)(b)(i) of the Act permits the parties to a dispute to move on from required mediation and proceed to arbitration if they have not been able to select a mediator within 60 days of "submitting the disagreement to mediation". The Act does not provide a process for selecting a mediator, leaving further process details to be established (voluntarily) by the individual condominium corporation by way of a mediation by‐law. While many condominium corporations in Ontario have established such a by‐law, the result is an inconsistent process that can vary from condominium to condominium. Often, condominium disputes – or at least related costs – risk escalation as the parties are unable to agree on a suitable mediator. A number of factors may be considered in the course of selecting a mediator to assist in addressing a condominium dispute: 1. Mediation Qualification. Like condominium property management (at the time of writing), mediation is an unregulated profession. Anyone can “hang up a shingle” and call themselves a mediator. Also like condominium property management, an organization exists that has an accreditation program, Code of Ethics, complaints procedure, etc. The Association of Condominium Managers of Ontario (“ACMO”) and the ADR Institute of Ontario (“ADRIO”) both play a vital role in creating a voluntary framework of regulation in their respective industries. Accreditation from ADRIO can assist parties in ensuring that a proposed mediator is qualified; adoption of ADRIO’s Code of Ethics and having appropriate insurance in place may also provide assurances as to a mediator’s integrity. Rev Sept 2013 54

2. Condominium Knowledge. Unlike ACMO, ADRIO is not focused exclusively on condominiums. Accordingly, ADRIO affiliation alone does not indicate a mediator’s qualification to mediate condominium disputes, which are unique in nature in light of both the distinctive laws and regulations imposed upon the parties and, often, the on‐going relationships between the parties in conflict. Resolution must be found within the four corners of the Act. To achieve a mediated settlement that contravenes the Act wastes time and money and risks further polarizing the parties. It also risks bringing the mediation process into disrepute. There is currently no designation available to identify a condominium mediator. 3. Bias Perception. A fundamental aspect of mediation is the neutral role of the third‐ party mediator. While the mediator does not render a decision upon the parties, to be effective, it is important for the mediation process to present a safe and comfortable environment for the parties to consider their options. Bias perceptions may be formed through any number of factors – how the mediator is paid, the involvement of a property manager/lawyer with whom the mediator has interacted in the past, shared culture between the mediator and one party, etcetera. Discounting a seemingly appropriate mediator without fully considering, understanding and/or addressing the impact of a prospective perceived bias may be doing the parties an injustice, particularly as the mediator may provide the parties with comfort in the course of addressing a bias concern which will serve them well when they engage in mediation (at the very least by better understanding the process). Questions: The following questions could be posed to a mediator being considered to address a condominium dispute in Ontario: 1.

What credentials do you have that qualify you to mediate?

Are you affiliated with the ADR Institute of Ontario and are you governed by their Code of Ethics? If not, to which ethical standards do you practice?

Do you carry mediator insurance?

What experience do you have in addressing condominium conflict?

If applicable ‐ We have a concern that due to __________________________, you may be perceived as having bias if you were to become involved in this conflict. Can you mediate this dispute as a neutral facilitator?

Are you an active member of CCI?

Costs

Cost, in of itself, becomes another issue to be resolved in the mediation process. While it is most common for the parties to agree, initially, to share the costs of the mediation equally, this can be varied through the mediation process. Rev Sept 2013 55

Cost has also been identified as a barrier to mediation. A condominium specific alternative (which is not currently possible) would be for the condominium corporation to initially pay for the cost of mediation on the understanding that the other parties to the mediation (i.e. the unit owners) would later pay their proportion or share. The logic to this idea is that it would eliminate the cost barrier to proceeding as quickly as possible with mediation. To be successful, the condominium corporation would need the security of the condominium lien process in the event that a unit owner subsequently chose not to pay. Goals

Interests

The purpose of mediation is not to focus on the legal position of parties engaged in conflict, as is typically presented in a court of law. Rather, mediation embraces the opportunity to review the underlying interests of the parties which form the basis of their positions in respect of the dispute. In the course of identifying the interests of the parties, mediation can serve to open the door to potential settlement options which may not have otherwise been considered. In focusing on addressing the interests of the parties rather than on whose position is “right” and whose position is “wrong”, the opportunity for a “win‐win” solution may be realized. A fitting and popular analogy is shared by Roger Fisher and William Ury, in the best‐selling book Getting To Yes: Negotiating Agreement Without Giving In,1 of a story of two sisters fighting over an orange. Cutting the orange in half may be the middle ground, but understanding that one sister’s interest is to eat the fruit while the other is after the peel for cooking can allow for a better solution for everyone. b)

Values

In a condominium setting, where many individuals with differing values live in close community with one another, it may not be uncommon for values to be out of sync or even to contradict. It is often considered to be the case that values drive conflict. How close one holds a value and sees it as a reflection of themselves can affect how a conflict can escalate. A good mediator will help identify the values of the parties that serve to drive the conflict and help facilitate an investigation of options that honour such values. Appropriate Dispute Resolution

a) Communication It is often stated that parties in conflict do not take the time to fully understand one another. Many disputes escalate due to a lack or breakdown of communication between quarrelling parties. Mediation is intended to provide an opportunity to communicate in a safe environment, where parties have the chance to hear what the other has to say and take time to understand it. Ultimately, as opposed to trying to convince a judge or arbitrator that you are 1

“Getting to Yes: Negotiating Agreement Without Giving In.” Fisher, Roger, Ury, William, and Patton, Bruce. Penguin Group. 1981.

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right, in mediation success is often found in communicating “why” a particular issue is important. b)

Informal Mediation

Whether it be by one director attempting to make peace between two quarreling directors, a property manager facilitating dialogue between neighbours or a third party stepping in to help those in conflict find a resolution in a conciliatory way, mediation likely takes place in the condominium setting much more often than you realize. c)

Early Stage Actions

When conflict escalates to court or otherwise, an investment of time and cost is incurred by all involved, promoting the likelihood that parties will “dig in their heels” or otherwise become set into their positions. Increasingly, there has been thought toward addressing condominium conflict in the earliest stages, before a dispute has escalated. Particularly as those involved in condominium conflict often remain in community with each other in the course of addressing their dispute, early stage actions can help preserve the ongoing relationship and overall harmony in the community. The Future

Appropriate Dispute Resolution (“ADR”) is becoming more prominent for many reasons, including the backlog of the courts and case law encouraging a conciliatory approach first be attempted; increased familiarity with the role that ADR can play in the dispute resolution process and willing to encourage parties to try it. Mediation has also gained prominence in the resolution of highly publicized disputes such as the recent National Hockey League lockout. With the emergence of new technology, there is also increasingly the ability to overcome certain procedural challenges which have stood in the way of more traditional mediation from taking place. Video conferencing, for example, can provide parties in conflict with the ability to interact “in person” when the may be divided geographically or to gain access to a mediator from regions where qualified mediators may be in short supply. Historic concerns about the ability to conduct mediation sessions in such circumstances are increasingly being overcome through technological advancements. For many years, the Canadian Condominium Institute (“CCI”) has actively engaged and encouraged the Government of Ontario in seeking amendments to the Condominium Act, 1998 (the “Act”). In 2012, following news from the Government of Ontario that the Act would be revised, the Toronto and Area Chapter of CCI and the Association of Condominium Managers of Ontario (“ACMO”) established a sub‐committee to investigate and develop a “better” model to manage and resolve condominium disputes. In late 2012, following active participation of stakeholders across Ontario, and with the endorsement of all Ontario chapters of CCI and ACMO, as well as the ADR Institute of Ontario, a Condominium Dispute Resolution Model was presented to the Government of Ontario for consideration. The principle tenets of the proposed Condominium Dispute Resolution Model are as follows:

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1. Recognition that condominium corporations act, effectively, as a fourth level of government, and as such, should be afforded the necessary tools to operate; 2. A focus on managing conflict at its earliest states so as to avoid the escalation of disputes when possible. To this end, the model emphasizes the importance of education and accountability, including the education of owners and directors, regulation of the property management industry and annual filings for condominium corporations; 3. The introduction of fines, with appropriate safeguards, to deter basic rule breaches – i.e. parking in visitors’ parking or failing to pick up after a pet. This is not dissimilar to the use of municipal parking fines; and 4. The introduction of a Condominium Dispute Resolution Officer (“CDRO”) to act as an accessible, neutral third party to provide education and/or an early neutral evaluation of a particular conflict on a confidential and without prejudice basis. The CDRO would be appointed by the unit owners in a manner similar to the auditor. Rev Sept 2013 58

Section Index: Communication

Page # • • • • • • • •

Communication Board to Board Board to Manager Corporation to Resident (The Communication Strategy) The Science of Communication The Creative Evaluation Translation Chart

60 60 61

61 63 63 63 64

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Communication

Communication Effective communication is critical to ensuring a proactive, well‐run condominium corporation. Good communication reduces costs to the corporation, minimizes legal risk to the board, and increases the overall property value of the building. While there are many different circumstances that will require the application of different methods and styles of communication, the following are some best practices to ensure a good communication framework is initiated and adhered to. This will be known as your communication strategy, and will enable the board to communicate effectively in all sorts of situations. Board to Board A successful board with good communication practices builds an effective team that encourages and supports an atmosphere where each team member feels free to have their own say, without fear of public disclosure. Before building a communication strategy, it is important that the board itself is able to communicate among its own membership. Board dynamics can have a positive or negative effect (or both) on communication in your condominium community. The following are some easy steps to help your board function as a cohesive unit, designed to represent the best interests of the entire condominium. 1. Upon the election of any new board member, a few moments should be taken for the entire group to reaffirm their reason for being a board director, and the overall mission statement of what is envisioned for the corporation. Be honest. If you are there to protect the value of your own personal investment, say so. Now is a good time to review and discuss the Directors’ Code of Ethics. 2. Agree to leave egos “at the door”, for all board meetings. 3. Turn off cell phones at the start of each meeting. No‐one can pay appropriate attention to two things at once. If you are looking at your phone during a meeting, not only are you likely missing what someone else is saying, you are sending a message of your own that basically says you have more important things to do than properly participate. Rev Sept 2013 60

Make a plan for short breaks throughout your meeting where everyone can check messages, if required. The #1 key ingredient to great communication is the ability to listen. Be patient until it is your turn to speak. Have a notebook handy to quickly jot down your next point. This will enable you to then focus 100% of your attention on the speaker, without fearing that you will forget your point. Remember that regardless of your career, your personal job status has no bearing on your position in the boardroom. You may be called upon due to your external skill set to comment on issues pertinent to the board, (i.e. you are a lawyer or accountant) but the opinions of your fellow directors are still to be considered. No‐one likes to be “told” what to do. Avoid incendiary comments like “that is a stupid idea!” Opt instead for an approach based on asking for the opinion of others. I.e. “That is one idea. Have you considered the impact it will have on our resources? What are your thoughts on Plan B?” Get the entire board on the same page. It’s counterproductive to have one member educated in the processes of directing a condominium and the others not. Start each meeting with a 10‐20 minute educational segment (CCI can help you with this) until the entire board is well versed in the basics. Add other elements as required. A properly functioning board does not waste time arguing about proper procedure – they educate themselves from the start.

Board to Manager

Once the agreed upon ground rules are set for appropriate communication among the board directors, the next step is to apply the same principles to your management team. Perhaps the best way to view a manager is in the same light as you would view your corporation’s lawyer, auditor or engineer. They are professionals in their respective fields, well‐versed in many topics directly related to the good health of your corporation. Consult them, respect their opinions, process the information, and then make your decisions. Your property manager should be brought up to speed on your boards’ communication strategy, so they he/she knows exactly what your communication goals are from the start in order to better advise you on how to reach them.

Corporation to Resident (The Communication Strategy)

“He who fails to plan, is planning to fail.” – Winston Churchill How to implement effective communication to residents continues to be one of the main challenges faced by all sorts of condominium corporations, and yet rare is the board of directors that takes it seriously and plans for its proper implementation. Good communication requires an investment in time and tools to make sure it is properly planned and executed. Residents want and need to be informed of what is going on in the building, and it is critical to

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put together a strategy to make sure that residents get the information they require. A good communication strategy will include the following:

WHO? – Identify your audience. What is the demographic make‐up of your residents? Are they owners or tenants? Is English their first language? (TIP: Post the following phrase in many different languages: “This is an important message. If you are unable to understand it, please have someone translate it for you.”) What is their average age? How many ethnic backgrounds does your condominium represent? How do they communicate with their peers? How often do they approach your property manager? How do they perceive themselves? What are their spending habits? Why did they buy/choose to rent in your particular community? These are all questions that need answers in order to tailor your communication to best reach your target audience. WHAT? – What is/are the messages that you want to convey? Make a list of all the day‐to‐day notifications that you currently create. Things like window washing, fire alarm testing, fan coil maintenance alerts, etc. Make a separate list of emergency notifications. Then make a third list of all the “other” items that could be communicated – rules and regulations, decisions made by the board, responsibilities of both owners and tenants, community news and local events. A good start is to consider these four categories: The AGM, The Rules & Regulations, The Legal Responsibility and The Condominium Community. WHERE? – Where can you place notifications so that your audience gets the message? On the elevator, in the mailroom, on their computer or cell phone, or voicemail? WHEN? – Determine the most appropriate time to reach the audience with you message. Especially if you are using email; sending a message at 8am on Tuesday may not be ideal if your audience consists of busy nine‐to‐fivers rushing off to work.

WHY? ‐ This is the most important of all, as it identifies the purpose of your communications. This is where you clearly define your goals, and without goals, how will you ever measure the effectiveness of your communication strategy. What is the purpose of your message? Are you trying to change behavior? (ie. Too many residents are parking in the fire/emergency zone.) Are you trying to showcase board activities to build resident confidence and trust? To build understanding? Are you perhaps trying to reduce the number of negative resident‐to‐ management interactions? Make a list of what exactly you are trying to achieve. HOW? – What tools can be used to reach your audience? Technology has changed so much, and promises to keep changing all the time. From paper notices to emails to voicemail, newsletters, websites and digital signage, to state‐of‐the‐art broadcast systems, you are best to do research on these to see how they best work in your environment. This is where a communication specialist can help you navigate what can be used and when. Rev Sept 2013 62

The Science of Communication

The last part of your strategy deals with the science of communication. All communications need to be scheduled with the appropriate reach and frequency for maximum impact. With the exception of emergency notices, sending one message out, on just one occasion is not likely to register with the vast majority of your building’s population. Determining how to achieve the best results can be done on a trial and error basis, or you may consider outsourcing your communication to a specialist in order to save time and money. For example, posting the Top 3 Things Your Board Got Done, within a few days of the AGM, is an excellent way to achieve your goal of showcasing board activities in order to gain the appreciation and trust of your residents.

The Creative

Last but not least is the creative style and execution of your messages. As technology advances, it is becoming more and more difficult to penetrate through the din of social media and visual stimuli. It is important to watch the overall tone of your message, use pictures to demonstrate a point where applicable, and in some cases provide language translation. Further, good communication will not only inform and educate your residents, but it will be augmented by enough “infotainment” to keep your audience interested in anything that you send to them, no matter what technical tool you implement. In this case, infotainment can encompass any information content that is light‐hearted, fun and interesting. For example, posting local events, neighbourhood news and even tips and tricks for quality living in a condominium, will keep your audience engaged. Keep in mind that in the condominium environment, infotainment does not always have to be digital. You can still make use of existing cork bulletin boards by posting pictures and sharing news about both onsite and local events. The style and artwork of visual messages will matter as well – where possible, use images rather than words. When it comes to text, keep it simple and friendly.

Evaluation

Like any project, as a corporation you will want to determine the ROI (Return on Investment) or in many cases when it comes to communication, the ROO – (the Return on your Objectives). The results can be tangible; say for example you ran a communication campaign designed to reduce the number of calls to a waste management company to remove items from the garbage chute. It is fairly easy to see if expenses are down, year over year. An effective communication plan can reduce costs by as much as 60%. On the other hand, if your goal was to increase resident confidence in the Board of Directors, then a survey (ideally both before and after) will help you to determine both key issues and your success in addressing them. Once you have evaluated the results of your overall communication strategy, this will set the foundation for your next one. Rev Sept 2013 63

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Glossary of Terms Annual General Meeting

Approval Authority

Arbitration

Auditor

Board of Directors By‐Law

Common Elements

Common Expenses

A meeting of the unit owners held on an annual basis in accordance with subsection 45 (2) where Board members are elected and the financial statements for the previous year are presented to the unit owners. A person or entity named under the Planning Act to approve the plans of subdivision or real property in the geographic area of the condominium corporation (usually the municipality or region). The process whereby an independent third party hears a dispute between two or more parties and makes a determination of the obligations and rights of the parties. A Chartered Accountant appointed at an Annual General Meeting by the owners for the purpose of preparing the financial statements to be presented at the next Annual General Meeting and to provide a report indicating if the statements fairly and accurately reflect the financial position of the corporation. The Auditor may only be removed as the corporation’s Auditor by the owners. The elected representatives responsible for the operation of the condominium corporation. Part of the governing documents of the corporation which generally deal with the daily operational aspects of the condominium corporation and the duties and responsibilities of the Board of Directors. They are passed by the Board of Directors and approved by a minimum of 51% of the owners. Those parts of the property that are shared and jointly owned by the unit owners, meaning all of the property except the units. (Examples include the landscaping, parking, hallways and elevators etc.). Expenses incurred by the condominium corporation in maintaining the common elements of the property and in

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carrying out the duties and responsibilities specified in the condominium documents and the Condominium Act. (Basically it is the cost of running the condominium corporation). Common Interest

Common Surplus

Condominium

Conflict of Interest

Corporation

Declarant

Description

The percentage of ownership in the condominium corporation allocated in schedule D of the declaration to each unit in the corporation. It will generally reflect the size of the unit in comparison with other units within the corporation. The extent to which revenues of the corporation from monthly common element contributions as well as other sources of revenue, exceed the common expenses. The term applied to a specific type of property ownership rather than to any distinct style of building. In condominium ownership, the owner owns his/her own unit and shares ownership in the remainder of the property (the common elements) with the other unit owners. A situation in which someone who has to make a decision in an official capacity stands to profit personally either directly or indirectly from the decision. A legal entity created upon the registration of a declaration in the appropriate land registry office without share capital and whose members are the owners from time to time. The corporation, unlike a private business, does not enjoy limited liability and any judgment against the corporation for the payment of money is also a judgment against each owner at the time of judgment for a portion of the judgment determined by the proportions specified in the declaration for sharing common interests. The objects of the corporation and the duties of the corporation include effecting compliances by the owners with the requirements of the Act, the declaration, the by‐laws and the rules. Is the owner (generally the Developer) who owns the real property underlying the corporation, before the registration of the declaration and description and who following the registration is the owner of the individual units prior to their being sold. A detailed plan of the layout and location of the development, its units, common elements, and exclusive use common elements. It includes a survey of the land, building outlines and structural plans. The description thus clearly shows those parts of the

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condominium development that are to be privately owned and those areas that are to be owned in common by the owners. The description must be filed with the declaration to create the corporation. Disclosure Statement

Easement

Encumbrance Exclusive Use Common Elements

Financial Statements

Inspector

A series of documents prepared by the proposed Declarant and issued to proposed unit purchasers describing the property including the types and numbers of buildings, units, recreational and other amenities and containing a budget statement for the one year period immediately following the registration of the declaration and description as required by the Act. A right of way with respect to land. A corporation may, by special by‐law, grant or transfer an easement or license through the common elements. Easements for supporting the building provision of any service through any installation of the common elements are implied under and statutorily created under the Condominium Act without requiring a separate legal transfer by registered deed. A burden or claim on property such as a mortgage or lien.

Those common elements whose use is restricted to the owners of one or more units; conversely, those which are not available for use by all owners (eg. balconies, individual parking spaces, lockers etc.). The Declarant may, alternatively, describe individual parking and locker spaces as registered units in which event legal ownership of the particularly described area within the building is actually transferred to the unit owner. Documents setting out the financial position of the condominium corporation which generally include a statement of general operation (revenues and expenses), a balance sheet, a statement of changes in position since the last fiscal period, a statement of reserve fund operations and an indication of the remuneration, if any, of the Board of Directors and Officers of the corporation. A person appointed by the court to conduct an investigation or audit of the financial affairs of the corporation and to make such investigation of the affairs of any person in receipt of trust money as the Judge considers necessary and to report the results of his investigation to the Court.

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Agreement

Interim Occupancy

Lien

Mediation

Occupancy Fee

Operating Account

Oppression Remedy

Owner Occupied Unit

Proxy

An agreement whereby a trustee distributes the proceeds from an insurance policy, on behalf of the condominium corporation, the unit owners and mortgagees. The period of time during which a purchaser occupies a unit before he/she receives a deed for that unit. During this time a monthly fee is paid by the purchaser to the Developer which is not applied to the purchase price. A claim for the payment of money against a unit or condominium corporation. The right to a lien can only be created by legislation. The enforcement of a lien is by way of sale of the property. A notice of lien in the prescribed form is registered in the parcel unit register in the land registry office within three months after default and, provided that separate notice by registered mail is given to every mortgagee and encumbrance of the unit prior to lien registration, the lien (in respect of residential units only) has priority over such mortgages and encumbrances. The process whereby two or more parties in a dispute meet with an independent and neutral third party for the purpose of exploring the settlement of the dispute in a conciliatory manner. The amount paid by a purchaser of a unit from the time the unit is available for occupancy until title is transferred. It cannot consist of more than the units share of common element fees, realty taxes and interest on a ‘phantom mortgage’ or any monies not paid toward the purchase price at the time of occupancy closing. An account set up by the corporation from which all day‐to‐day operating expenses to run the corporation are drawn from. This differs from a Reserve Fund account into which funds for major repairs and replacements are deposited. A right that is available to seek the intervention of the court where individual rights are being unfairly prejudiced or disregarded. A unit in a residential condominium which has not been rented out by the owner within 60 days prior to notice being given for a meeting. A document used to authorize an individual, other than the person entitled, to vote at meetings on that person’s behalf.

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Records

Requisition

Reserve Fund

Reserve Fund Study

Rules

Standard Unit

A list of records a unit owner is entitled to see, upon giving a written request with reasonable notice, is given in Section 55 of the Act. A record of those owners and mortgagees of units who have advised the corporation of their interest therein and by doing so, are entitled to receive notice of any meetings of the owners. The corporation’s register may be similar to, but is not necessarily the same as the parcel unit registers in the land registry office. A document prepared and signed by at least fifteen percent of the owners of the units requiring the Board to call and hold a meeting of the owners within thirty‐five days. The requisition is required to state the nature of the business (the agenda) to be presented at the meeting and is deposited at the address for service of the corporation. This is sometimes referred to as a ‘petition’. A separate account fund required by the Act. Monies in this fund are to be used exclusively for major repairs/replacement of the common elements and other assets of the corporation. Investment guidelines for these funds are also outlined in the Act. A study that determines the life expectancy of the major components of the corporation and the associated repair/replacement costs. It will also provide a long‐range projection of the amount of money the corporation will require to meet these costs. The study must be conducted by a class of persons outlined in the Regulations. Also referred to as “house rules”, the Board adopts rules respecting the use of common elements and units to promote the safety, security or welfare of the owners and of the property. By resolution of the Board and by serving notice of the rules which are published and forwarded to each owner at the address for service noted in the corporation’s register, rules may be passes which are reasonable and consistent with the Act, Declaration and By‐Laws. New rules become effective thirty days after their publication unless the owners requisition a meeting to consider the rules, in which event they only become effective upon approval at such meeting of owners. A written definition of which components are considered to be part of the unit and which are considered improvements – used for insurance purposes.

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Status Certificate

Unit

Formerly known as the Estoppel Certificate. Issued under corporate seal to any person acquiring an interest in a unit, within ten days of written request and payment. It will contain specific information concerning the common expenses allocated to the unit and all arrears, as well as general information concerning the operation and financial stability of the corporation. Term used to denote those parts of the project that are individually owned. (ie. the suite, parking space, storage locker etc.).

Without Prejudice When used in relation to a statement or offer, this term adds a reservation to prevent the statement or offer from being considered as evidence of an admission in the future, including at court.

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Frequently Asked Questions Am I Insured as a Director?

Directors and Officers insurance must be purchased for the board of directors and this insurance should be updated as the need for higher coverage is requested. This insurance covers directors for most liability as long as the directors are following the advice of a professional (ie: lawyer, engineer, and accountant). If a decision is found to be faulty but the decision was based on the advice of a professional the directors are insured against liability. It is only when directors disregard the advice of a professional and the decision is found to be faulty could they be personally liable for any damages. No policy will insure a director against illegal acts.

Why does a condominium corporation have to spend money for a lawyer when an owner breaks rules?

The condominium act places and obligation on the board of directors to manage the affairs of the condominium corporation. Many of the details involved in this management are contracted out to a management firm, lawyer or other service provider. The board’s obligation to manage the affairs of the corporation includes the requirement to ensure that rules are followed fairly and equitably. The act does not impose a qualifier that says “unless there are legal expenses involved”. The cost of legal fees associated with the running of the condominium should be considered “a cost of doing business”. In some instances the monies may be recovered from the owner.

Can an attendee at an Annual General Meeting call for a vote on something new?

The act is very clear that binding votes can only be held for items noted on the official agenda of the meeting. There may be absent owners who, if they had been made aware of an impending vote, might have attended the meeting. For this reason only the votes noted on the agenda may take place.

Can the board change auditors?

No, only the owners can appoint an auditor each year at the annual general meeting of owners. The owners may empower the board to make a selection or change but the board cannot make the change without consulting with the owners. The auditor reports to owners and not the directors in their capacity as a board. The board may also make a recommendation to reappoint the auditor for the ensuing year, but again the owners must make the motion and pass it.

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If we don’t like the advice given by an engineer in a report commissioned by the corporation, can we seek other opinions until we find one that we like?

The board is always free to solicit second opinions, however, once a new or differing opinion is obtained, the original opinion is still active. The new opinion would have to be accepted by the author of the first opinion to effectively cancel that position. The risk would be if there was bodily injury or loss of life resulting from the issue and the first opinion placed liability on the board, even a second and differing opinion would not erase the presence of the first opinion leaving the board in a position of acting contrary to the first professional opinion and potentially uninsured. Always seek legal advice in these situations.

Can a director give his/her proxy to another director to ensure quorum at a board of directors meeting?

The Act is essentially quiet in this regard. The fact that proxies are governed for owners meetings and that there are sections of the act that specifically apply to teleconferencing for board meetings, it has been generally accepted that proxies for director quorum are not permitted. If challenged in a court, the decisions made a meeting of the board where a proxy was used for quorum would most likely be found non‐binding and not official.

Can a board of directors choose not to lien an owner if they are in default of payments of common element assessments?

The application of the condominium act places an obligation to follow the intent of the act as well as the word of the act. Fair and equitable application of by‐laws, legislation and rules is essential in law. A board is advised to ensure that the lien process is automatic and followed all the time regardless of the people involved. The only source of revenue for a condominium is from the monthly collection of assessments.

Does a director have to be an owner?

The condominium act only places three qualifications on being a director. The by‐laws of a condominium corporation may add further qualifications such as being an owner, being a resident owner and may add further qualifications for the disqualification of a director for consecutive missed meetings etc.

Do owners have the right to vote on the budget?

No. It is advisable, however, to hold an open information meeting to share how the budget was arrived at.

If we are a non‐profit corporation, how can we have a surplus each year in our operating account?

The non‐profit status is there to ensure that monthly assessments are not collected to intentionally accumulate a profit. It is actually advisable to carry a surplus of operating cash equal to between one and two months revenue in any given year. This surplus will protect the condominiums’ cash flow against any seasonal pressures on utilities or emergencies.

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If we’re not happy, shouldn’t we just change service providers?

Condominiums can very easily gain a reputation of being a client who changes service providers frequently. Many long‐term service providers will not realize profits in the first year or two due to the learning curve and training costs associated with a new contract and if they believe they will not be there long enough to realize some return on their training investment, they will not want to participate in the bidding process. It is always better to attempt to “fix” whatever is wrong with the contract relationship than to incur another learning curve. If after attempting to fix the relationship problems they still exist, then a change is definitely warranted. A board should always consider its reputation with service industry before making sweeping changes.

How much does mediation or arbitration cost? Mediation and particularly arbitration can be costly; however, the actual cost ultimately depends on the fee (hourly/daily rate) of the mediator/arbitrator selected, the expected duration of the session and, often, the complexity of the case, the number of parties involved and the particular approach taken by each party. In the course of the mediator/arbitrator selection process, it is not uncommon for parties to obtain quotes and a summary of experience from potential facilitators. Can I force the other side to mediate? While the Act does provide for mandatory mediation in certain instances, the premise of mediation is that the parties attending are doing so voluntarily and in good faith. If a party attends at a mediation session without desire to make a concerted effort to address the dispute, the process may be impeded and/or the opportunities presented with mediation missed. Can all disputes be mediated? While an assessment of the appropriateness of mediation should be made in respect of all condominium conflict to ensure that the appropriate dispute resolution mechanisms are being utilized, there are instances where mediation may not be appropriate. These include concerns surrounding a violation of Section 117 of the Act where a dangerous condition or activity may exists or circumstances where the participation of parties may be compromised by undue influence, coercion, etc. How can I find the right mediator or arbitrator for my dispute? The questions that appear at the end of Section 6 of this text are a helpful place to start, as is the Canadian Condominium Institute’s Professional Directory which lists mediators and arbitrators with condominium experience. What is the difference between a mediator and a lawyer? While some mediators are also lawyers, the role of the mediator and the role of the lawyer are very different. Lawyers advocate the “rights” of their client, provide legal advice and assess Rev Sept 2013 73

liability/risk. Mediators will seek to bring out the “interests” of the parties. They do not provide opinions or legal analysis of the dispute. While a lawyer will take a position and present arguments to support it, mediators do not take sides and rather ask questions of the parties in dispute to help reveal their underlying interests and examine resolution possibilities which may appeal to all involved. Don’t we pay our Property Manager to take care of communication? Yes. And, no. The scope of the average property management contract covers day‐to‐day items such as windows being washed, fan coils being replaced, etc. At many properties, this simply covers the information component of communication. It will not include the communication strategy described in this document which is, more often than not, critical to the success of a proactive and smooth running condominium corporation.

What are the basics of a good communication strategy? Use the 4W+H rule… Who, What, Where, When, Why and How. In a condominium, what are some of the key items to communicate to residents? Focus on the AGM, The Rules & Regulations, The Legal Responsibility and The Condominium Community. What are some of the tools that will help us to communicate? Paper is quickly being replaced. There are tools that will help you move to the next level ‐ email, electronic notification systems, LinkedIn, Twitter, digital newsletters and digital signage are all methods that you can use to communicate in your condominium. A communication specialist can help you determine what is right for you. What do we look for in a communication specialist? A good communication specialist will have strong marketing knowledge and experience, will be able to think strategically and creatively and will be able to assess your particular issues to provide you with an effective communication strategy. They should be able to evaluate the results and adjust the plan accordingly to achieve your goal.

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