8 minute read
Who Plays A Role in Managing Vested Interests?
from Condo June 2021
by MediaEdge
Have you ever heard the director proclaim at the board
meeting: “my son is an electrician and can do this job for free” or “I have a cousin who can do this for half price?”
BY VAL KHOMENKO
What about situations where it is a little more complicated? For example, a stepson of the board’s president is a security guard working full time and the president has not disclosed this relationship to the board or otherwise. Should the president have disclosed it at all?
The board of directors for condominium corporations is accountable and responsible for millions of dollars in assets. Condominiums are lucrative investments, holdings and, for many people, their only homes. As a result, conflict of interest on the board of directors is a topic that often raises ire of many owners and prospective buyers. Stories of the “infamous three” who took control over downtown Toronto condos still plague the industry.
How do you resolve or mitigate such conflicts? Let’s break it down by role.
The Role of the Owner
Owners must always ask themselves what is in it for the director. Is there a potential direct or perceived conflict? Does it pass “the sniff test?”
With the amended Condominium Act, 1998 (the Act), owners have the right to request records with prescribed forms and deadlines. By regularly attending annual general meetings, owners are presented with the opportunity to receive updates on major renovation projects and ask questions.
Furthermore, the owners, if in doubt, should request the minutes of the meeting where such “conflicting” transactions were voted on. Has the director in question recused himself/herself from the vote and declared the conflict to the board at a duly called meeting? Section 40 & 41 of the Act clarifies the disclosure obligations for directors and officers of the corporation.
Lastly, and most importantly, owners should take the time and thoroughly acquaint themselves with the condo’s governing documents. If the conflict of interest on the board persists and the board does not meet the obligations under the Act, the owners should consider seeking professional legal advice, preferably from a lawyer wellversed in condo law.
The Role of the Condo Manager
What If the manager discovers a conflict of interest on the board? What steps can he or she take to facilitate a resolution?
Determine the client
Who’s the client? Is it the president who signed the management agreement and has a potential conflict of interest? Or is it the corporation itself?
Seek advice
When in doubt, the manager should seek advice of the supervising licensee or the principal condo manager. They can guide the board on their obligations under the Act and instill best industry practices to promote fairness and transparency.
Walk away
If the conduct of the board is of egregious nature, the manager should consider resigning and walking away from such conflict.
Ultimately, it is up to the manager to employ any of the above steps necessary to perform their fiduciary responsibility as agents acting in the best interest of the client—as long as they do so in accordance with the code of ethics outlined by Condominium Management Services Act, 2015 O.Reg. 3/18.
The Role of the Board
If a fellow member of the board is in a position of a conflict of
interest, remaining directors should feel empowered to address the issue directly at a duly called meeting without personal repercussion. Any and all disclosure obligations must be met and recorded accordingly. If not, failure to do so may raise future accountability and liability issues.
To avoid this, the board should follow three simple guidelines: 1. Adopt a procurement policy for the corporation, which would list the proper bidding requirements. 2. If possible, engage a third-party minute taker to ensure that impartial record keeping is done. When in doubt, the board should consult the corporation’s solicitor on the
disclosure obligations and compliance under the Act. 3. Exercise caution and awareness when the fellow director is an “industry insider” (e.g., regional manager of a major condo management firm, condo lawyer or developer’s affiliate). Setting proper expectations for the “insider,” as well the board in general, reinforces the mandate that the board exists first and foremost to serve the best interest of the corporation and its owners.
In all cases, the mindset of equal vote and participation should be maintained.
Condos are complex entities. The mix of owners and boards is ripe for conflict and personal agendas. Perhaps one of the most valuable assets in maintaining this delicate balance between self and collective interests is the strength and integrity of the property manager.
A healthy board can only exist if fundamental practices in disclosures, procurement and transparency are maintained, and meticulous recordkeeping is king. 1
Val Khomenko is the principal condominium manager for Regional Group, a full-service real-estate investment and management firm, based in Ottawa, Ontario. Val leads Regional’s condo team with 7+ years of experience in the condominium industry. He can be reached at 613-230-2100, Ext. 7409.
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POST-PANDEMIC PROJECTS FOR CONDO BUILDINGS
The pandemic caused multifamily building teams to narrow their focus on health and safety. As a result, many electrical and mechanical projects fell under the radar. Now that the world is making a slow return to “normal,” it is time to bring critical maintenance and retrofit activities back into the spotlight.
“The last year-and-a-half has been stressful for multifamily teams, and some electrical and mechanical items had to be put on the back-burner due to COVID-19 transmission concerns, budget, or even time,” says Ed Porasz, Vice President with M & E Consulting Engineers. “The good news is we’re heading to a better place, and it’s a good time to revisit key considerations.”
These considerations include: • Makeup Air: Indoor air quality (IAQ) has always been a critical consideration. Now, it’s a top priority. The ability to bring fresh, outside air into a building in a controlled manner reduces the risk of
cross-contamination, maintains optimal comfort levels, and increases e ciencies. As such, a building’s makeup air system should be reviewed by sta and/or a professional engineer to make sure it is working as intended and that ideal pressure levels within suites, hallways, and public areas are being met. At the same time, it is worth looking into how the building can better dehumidify or cool makeup air to future-proof your building against rising temperatures. • Kitec pipe failures: If your apartment was constructed between 1995-2005, the suites may have Kitec piping. Unfortunately, these pipes have been found to fail after just 10 to 15 years from the initial installation. If you weren’t already replacing these pipes before the pandemic, now is the moment to revisit this issue.
“Kitec failings are a known concern. It’s not a matter of if they will fail, but when,” explains
Porasz. “And since it typically takes a number of
months to prepare design drawings and go to tender start the project, the best time to get started is yesterday.” • PEX piping risks: PEX pipes were installed on risers and recirculation lines in buildings built between 2005 and the present. PEX has been known to fail, if the velocity of water within the pipes exceeds manufacturer recommendations.
Herein, it pays to have a professional engineer or service contractor come in to review the velocities within your piping system and take measures to extend their lifespan. • Energy-smart retrofi ts: It’s always a good time to revisit HVAC upgrades. Today’s high-e ciency boilers and chillers can dramatically reduce CO2 emissions, smaller environmental footprints, and generate signifi cant energy savings. For example, a high-e ciency condensing boiler can create energy savings to recover your initial investment in as little as four to six years, while an oil-less and bearingless chiller can enable a payback of fi ve to eight years.
Building automation systems (BAS) can also contribute to greater e ciency and operational savings. Moreover, they can help with ease of operation and enable faster responses to equipment failures and repairs. Here again, the initial investment can pay o over the long-term. • EV charging stations: The electric vehicle revolution started well before the pandemic.
Now? It’s shifted into full gear. With eco-friendly attitudes higher than ever, more and more drivers are moving to cleaner, greener, and electric forms of travel. This is a good opportunity to add value to your building by installing EV charging stations for your residents and visitors.
Catching up on essential projects
It’s been a trying time for multifamily teams. Between keeping owner and staff safe and productive, it’s understandable that electrical and mechanical initiatives fell by the wayside.
Nevertheless, electrical or mechanical projects can’t be put on hold forever. As we move into the post-pandemic, there are benefits to exploring the upgrades, repairs, and maintenance activities that will keep your building operating at its peak for years to come.
Ed Porasz is Vice President with M&E Engineering, a professional and multi-disciplined mechanical and electrical engineering firm serving clients in the GTA and across Canada. For more, visit www.me-eng.com.
