CONDO BUSINESS

Canada’s Most Widely Read Condominium Magazine

October 2016 • Vol. 31 #7

WHAT OWNERS WANT New research digs into condominium governance in New York and Toronto

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Onboarding new directors, passing tough bylaws and snuffing out infighting

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Contents FEATURES

30

New research digs into condo governance

DEPARTMENTS

12

14

18

Dispute resolution The risks of refusing to cooperate

By Jeanette Bicknell Governance The hardest bylaw to pass

By Ben Zelikovitz Finding common ground

By Marc Bhalla

22

Five things new directors need to know

By Pat Crosscombe

28

Legal Condominium boards can rely on business judgment rule

By Christy Allen

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How to assess a bill from your lawyer

By Michelle Kelly

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Management The case for analytics

By Adrian Teh

44

Maintenance Why do pre-winter roof inspections

By Nuno Torres

46

A guide to roof inspections

By Dale Kerr

50

Technology Sensor solutions

By Nicholas Gill

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Finance Four common audit issues

By John AbedRabbo

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EDITOR'S LETTER

What owners want

Publisher Mitchell Saltzman Editor Michelle Ervin Advertising Sales Sean Foley, Stephanie Philbin

What do unit owners really want? Why not

Senior Designer Annette Carlucci

just ask them?

That’s what Dr. Randy Lippert, professor of criminology and sociology at the University of Windsor, did. His independent research into condominium governance, which included interviews with board members and property managers, identified seven major issues.

One of them was communication, or rather lack thereof. This finding won’t surprise any veterans of the condominium industry.

Neither will some of the research’s other findings. They echo findings from the Condominium Act review, which ran roughly in parallel.

Dr. Lippert said he is optimistic about the potential for the Ontario government’s legislative reforms to address some of the major issues he identified. However, with the reforms passed but not yet in force, he is waiting to see the details of the accompanying regulations. So are board and industry members. Premier Kathleen Wynne set a fall 2017 deadline for rolling out “key elements” of the Protecting Condominium Owners Act in a mandate letter to Minister of Government and Consumer Services Marie Lalonde.

In the meantime, there’s plenty boards can do to govern their corporations more effectively.

Find lessons from Dr. Lippert’s research in this month’s cover story. Also look for articles from Ben Zelikovitz on passing tough bylaws, from Marc Bhalla on finding common ground, and from Pat Crosscombe on onboarding new directors. Plus, Adrian Teh talks about how to manage more effectively with analytics and Dale Kerr offers a guide to roof inspections.

Of course, knowing what unit owners really want may not make the board’s job any easier.

Different owners may want different things or, faced with unpalatable choices, “none of the above.”

In those cases, it may be helpful to lean on expert advice as to what’s best for the corporation.

Designer Jennifer Carter Production Manager Rachel Selbie Digital & Sales Coordinator Paula Miyake Contributing Writers John AbedRabbo, Christy Allen, Marc Bhalla, Jeanette Bicknell, Pat Crosscombe, Nicholas Gill, Michelle Kelly, Dale Kerr, Shlomo Sharon, Vaishali Taylor, Adrian Teh, Nuno Torres, Ben Zelikovitz Digital Media Director Steven Chester Subscription Rates Canada: 1 year, $60*; 2 years, $110* Single Copy Sales: Canada: $10*.

Elsewhere: $12 USA: $85 International: $110 *Plus applicable taxes Reprints: Requests for permission to reprint any portion of this magazine should be sent to info@mediaedge.ca.

Circulation Department Maria Siassina circulation@mediaedge.ca (416) 512-8186 ext. 246 CONDOBUSINESS is published eight times a year by

President Kevin Brown

Michelle Ervin Editor, CondoBusiness michellee@mediaedge.ca

Accounting Manager Samhar Razzak Group Publisher Melissa Valentini

/condomediaedge /condobusiness /condomediaedge

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Canadian Publications Mail Product Sales Agreement No. 40063056 ISSN 0849-6714 All contents copyright MediaEdge Communications Inc. Printed in Canada on recycled paper.

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ALL NEW LOOK

Coverage that is setting the standard in the Real Estate Management Industry.

Online Exclusives

October 2016

New research investigates condo governance

Industry sees promise in low-impact communities

For this month’s cover story, CondoBusiness spoke to Dr. Randy Lippert, a professor of criminology and sociology, about his recent in-depth research into condo governance.

Find additional content from the interview in an online article.

Industry proponents of sustainability are looking beyond buildings and thinking more about community scale in order to help impact decarbonization goals, such as Canada’s longterm greenhouse gas (GHG) emissions reduction target of 30 per cent by 2030.

Canadian retail market trends spur opportunity Mixed-use developments such as Toronto’s Canary District go beyond the zoning requirements for at-grade commercial units. This is just one of the factors influencing the retail market.

All the Buzz

From the Green Bin

Expert Advice

Social Media

Metro Vancouver home sales fall 32.6 per cent

Canada-wide carbon polluting fees coming

Getting the most from your swimming pool

Connect with us on

Vancouver saw more demand for condominiums and towns than detached homes as sales slid in September.

Provinces and territories will have until 2018 to put a price on carbon or accept a national model.

Martyn Knowles wades into pool maintenance.

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Condominium management standards The Ontario government is preparing to license both condominium managers and management companies. But until it rolls out the Condominium

M a n a g e me nt S e r v ic e s A c t , t he i ndu s t r y r e m a i n s unregulated. In the absence of regulation, the Association of Condominium Managers of Ontario (ACMO) created its own condominium management standards, which it recognizes with ACMO 2000 certification. What does it mean to be an ACMO 2000-certified management company? Taft Forward’s CEO, Shlomo Sharon, and VP and ACMO 2000 leader, Vaishali Taylor, explain.

There are cu r re nt l y a b o u t 6 0 0 p ro p e r t y m a n a g e m e nt companies operating in Ontario. At the time of writing, only 3 9 of them possessed the Association of Condominium Managers of Ontario’s ACMO 2000 certification.

T he ACMO 20 0 0 cer tification predates the provincial g o v e r n m e n t ’s p l a n s t o r e g u l a t e t h e c o n d o m i n i u m management industry. In fact, the association representing condominium managers in Ontario lobbied for licensing as a way to raise professional standards.

Bill 106, which introduced the Condominium Management S e r v i c e s A c t , h a s b e e n p a s s e d b u t i t h a s n ot b e e n pro c l aime d into forc e. F or now, the industr y rem ains unregulated.

In this un r e g u l a te d e nv i r o n m e n t , t h e A C M O 2 0 0 0 cer tification recognizes condominium management firms who meet its core operational standards. These standards are designed to ensure the consistent deliver y of high quality ser vice to condominium corporations and provide benchmarks against which to measure ongoing performance.

The ACMO 2000 certification is based on eight principles: Customer focus, leadership, involvement of people, process approach, systems approach to management, continual improvement, management by facts and supplier relationship.

10 CONDOBUSINESS | Part of the REMI Network

The ACMO 2000 program provides credibility to participating ACMO members, who are supervised by ACMO’s Condominium Management Standards Council. The council includes a lawyer, an accountant and Registered Condominium Manager (RCM), an Associated of the Canadian Condominium Institute (ACCI) representative, an engineer or architect, corporate member and/ or experienced condominium board member.

A management company must meet the following eligibility criteria to obtain ACMO 2000 certification: 1. Legal s tatus: The management company can be an incorporated company, registered partnership or a registered sole proprietor. It cannot be a condominium corporation or employee thereof.

2. Organization of the firm: The management company must manage a minimum of three condominiums or a total of more than 500 units, and have an office, equipment and personnel to operate its business.

3. Experience: A senior operating manager or the owner must have at least five years of condominium management experience and possess the RCM designation.

4. Financial reference: The management company must provide a financial reference from its bank.

5. Membership: The management company must be a corporate

ACMO member in good standing and actively engaged in managing at least one condominium in Ontario.

Initial certification involves an audit of the management company’s standards and procedures. The compliance audit is done through sampling, meaning it is not necessarily a full review of the company’s standards, procedures and policies. The audit, which takes place over two days, focuses on eight quality management principles to ensure that the management company meets all the ACMO 20 0 0 requirements.

On the first day, the auditor meets with and interviews management executives regarding the firm’s ACMO 2000 policy and strategic objectives and how they meet ACMO standards. The auditor then reviews the firm’s ACMO 2000 manual

interior, exterior, all facilities and common elements. The auditor also interviews site staff and reviews the building’s operations manual and associated records. If the condominium corporation does not have an on-site office, the auditor tours the exterior of the property.

The auditor prepares and sends his or her report directly to the Condominium Management Standards Council (CMSC).

The council's report is then submitted to ACMO, who notifies the management company of the outcome.

There are two possible outcomes.

One is that the auditor found no nonconformities and issued a clean report; the other is that the auditor identified deficiencies. If there are deficiencies, the management company must rectify them within 90 days from the date of notification.

Once certified, the company must undergo

compliance audits every three years. and associated, documented policies and procedures. This includes management responsibility, board relations, purchaser and supplier relationships, accounting, administration and insurance, human resources and the measurement and improvement.

The auditor also selects fives properties from a list of properties under management provided by the company. The auditor then reviews their monthly operating reports, which includes the income and expense statement, cash disbursements and cheque register, accounts receivable, investment of the reserve funds, list of accrued invoices, bank statements, statements of reserve fund as well as actual financial statements and budgets.

On the second day, the auditor inspects any two out of the five properties that were chosen on the first day of the audit.

These visits include a tour of the building’s

Since management companies pay for these audits, it’s in their interest to ensure that they are in compliance — not only for the audit purposes, but also to ensure that their day-to-day operations maintain ACMO 2000 standards. Once certified, the company must undergo compliance audits every three years to ensure that it continues to meet ACMO’s standards.

Just as management companies benefit from this certification, so do condominium corporations and their boards. Knowing the management company is ACMO 2000-certified gives the board additional security that the management company is expected to provide an assessable standard and consistent level of service to the corporation. 1 For more information on ACMO 2000 certification, contact ACMO’s executive director, Amanda Curtis, at acurtis@acmo.org.

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DISPUTE RESOLUTION

The risks of refusing to cooperate L e t ’s s a y a c o n d o m i n i u m unit owner has some kind of BY JEANETTE BICKNELL disagreement with the corporation. Maybe the

board wants to install water meters in each unit and she regards this as an unnecessary expense. Or maybe another unit owner received a letter about his dog, but he’s pretty sure that no one has the right to tell him whether he can keep a pet or not.

Is the best course of action for the unit owner to deny access to her unit so a new meter can’t be installed? Can the other unit owner disregard the letter about his dog?

Unfortunately, when unit owners fail to cooperate with condominium boards it rarely goes well for them. Owners who withhold

fees — either regular common expense fees or special assessments — are in a particularly weak position. They put themselves at risk of legal action and having a lien placed on their property.

A recent legal case, Nicholas v. TorontoDominion Bank and Carleton Condominium

12 CONDOBUSINESS | Part of the REMI Network

Corporation No. 336, illustrates how risky it can be not to cooperate with a condominium board. Mr. Nicholas stopped paying his common expense fees and refused access to his unit after a dispute with the board over a plan to replace the exterior windows of all units. The corporation obtained court-

DISPUTE RESOLUTION

ordered access to change the windows and registered a lien on the unit to cover its legal costs, the ongoing monthly expenses, and interest. Eventually the mortgagee forced a sale of the unit and Mr. Nicholas was evicted.

While the Nicholas case might be an extreme example, it is by no means the first time that an owner has paid the cost of noncooperation. In Ottawa-Carleton Standard Condominium Corporation No. 671 v. Friend, owners who refused access to their unit to install new energy meters ended up being ordered to pay the $15,000 in legal costs that the corporation had spent in an effort to make them comply. And a Toronto owner who rented his unit to dog-loving tenants ended up spending about $23,000 in legal and other costs when the tenants refused to comply with the board’s demand that they remove the animal from the premises in the case of Carriero v. Carli, 2013.

Unit owners are not the only ones who face consequences for failing to cooperate.

When disputes end up in court judges have been reluctant to award full legal costs to corporations who have behaved unreasonably. For example, a Toronto condominium corporation refused to accept an owner’s monthly expense fees because her cheques included a $50 payment for a C parking spot to which the corporation felt she M was no longer entitled. Reasonable attempts to work things out evidently broke down.

Y When the dust settled, the corporation CM ended up being ordered to pay her more than MY $16,000 (see Couture v. TSCC No. 2187).

CY If refusing to cooperate is a bad idea, what are the other options?

CMY First of all, owners should educate K themselves about the issue at hand, and about their rights and responsibilities.

They should attend the annual general meeting so they’re aware what is going on in the corporation and are not surprised by the board’s actions. The board has the responsibility to maintain the building and to enforce the corporation’s declaration, bylaws, and rules. The board cannot please everyone and some of its decisions may be unpopular but necessary. That said, sometimes boards do make questionable decisions and it is important that owners have recourse.

If owners have a disagreement with the board, they should consider consulting a condominium lawyer to get a realistic assessment of their options. Is the board’s decision one they can reasonably fight? If

the decision affects other owners they may have enough support to request a meeting of owners or request that an item be added to the agenda of the annual general meeting.

Board members and property managers should keep in mind that people are more likely to comply with rules when they understand the reasons behind them. So it’s important that the board and property half_page_residential_ad_PRINT.pdf manager are able to explain their decisions.

Finally, for owners, board members, and condominium professionals alike, a little

goodwill, cooperation, and attempts to understand the other’s perspective can go a long way to preventing messy and expensive disputes. 1

Jeanette Bicknell, Ph.D., C.Med., is a mediator who specializes in condominium disputes. Her company is Principled Dispute 1 2015-06-01 12:42 PM Resolution and Consulting (www.pdrc.ca) and she can be reached at jeanette.bicknell@ pdrc.ca.

www.REMInetwork.com | October 2016 13

GOVERNANCE

The hardest bylaw to pass W hat’s the hardest bylaw to pass? It’s a tricky question, as every

BY BEN ZELIKOVITZ

bylaw has its own intricacies that make it difficult to pass. However, all bylaw proposals face two challenges: first, the

condominium corporation must convince enough owners to vote at the meeting so as to ensure that the meeting is validly held (the quorum challenge); then, the corporation must convince enough owners to vote in favour of the proposed bylaw (the bylaw challenge). In many respects, trying to pass a bylaw is a lot like running a political campaign.

It’s hard enough getting owners to just come out and vote, but every owner that votes against or to abstain is a vote that doesn’t count towards passing the bylaw. If a 200unit condo requires 101 votes in favour to pass a bylaw, then condos have to work that

much harder to convince more owners than that to vote — they need to make-up for any unfavourable votes. Experience suggests that it’s a tie between general operating bylaws and standard unit bylaws as to which is the most difficult bylaw to pass.

14 CONDOBUSINESS | Part of the REMI Network

General operating bylaws are tough to pass because it is often difficult to succinctly explain to owners why they should vote in favour of the proposed provisions. Owners are so confused about the specifics of these bylaws that they defer their vote to “smarter” or

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GOVERNANCE

“more knowledgeable” neighbours. This can often result in a high number of abstentions, or they’ll just plain refuse to vote.

By comparison, the specifics for standard unit bylaws are easier to grasp, but commonly misunderstood as being detrimental — it might seem like the condominium corporation is taking away a benefit. “As an owner, why would I want the corporation to stop paying for my flooring?!?” This sometimes controversial bylaw can result in division within

a community and result in a high number of votes against such proposals.

Fortunately, misconceptions about the standard unit bylaw can be debunked by better educating owners. Looking to pass a standard unit bylaw soon? Here’s what the board will want to do: 1. Start educating owners early Educ ating owners early — ideally a month or two before officially serving

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notice of the meeting — means they are less likely to vote based on misconceptions and thus helps minimize the number of “against” votes.

2. Give owners hard numbers “$10 0,0 0 0 was spent on replacing upgraded flooring last year. This represents an eight-per-cent increase in maintenance fees.” Hard numbers such as this help owners understand the impact the bylaw has on the condominium corporation’s finances as well as their own.

3. Explain how the bylaw directly benefits the individual owner Tell owners about how the bylaw will help keep maintenance fees in check.

Also tell owners about how the bylaw will keep the condominium corporation’s insurance premiums low, preventing sudden increases in condo fees. To the extent that it is possible, use layman’s terms to communicate with owners.

Communication written in formal legalese can be challenging for the average owner to comprehend. Make it easy for the owners to understand and there will be fewer “No” or “Abstain” votes.

4. Do a Q&A To find out what misconceptions exist, ask owners for questions or comments about the standard unit bylaw. Have a Q&A session with owners to address their concerns. Either hold a series of town hall meetings in a common meeting room on-site, or compile all the questions a n d a nswe r s o n t h e c o n d o miniu m corporation’s website and make it available for owners to read.

Attempting to enact a standard unit bylaw doesn’t need to be a daunting task.

Condominium corporations simply need to take the time to educate owners on the benefits of the new bylaw, and provide enough time leading up to the vote so that their community has a chance to engage in a discussion about the proposed bylaw. 1 The preceding article is reprinted with permission from the Get Quorum blog at www.getquorum.com. Ben Zelikovitz is co-founder of GetQuorum, an online proxy-voting system and meeting package distribution service. Ben can be reached at contact@getquorum.com.

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GOVERNANCE

Finding common ground Condom in iu m commun it ies tend to be f illed with people from all walks of life, so it only makes

BY MARC BHALLA

sense for elected representatives serving on the board to come from diverse backgrounds. Such diversity can allow for different perspectives to be considered in the

course of decision making.

18 CONDOBUSINESS | Part of the REMI Network

GOVERNANCE

As a mediator, this writer encourages exploring differing views while holding hands and singing kumbaya. However, the realist in him also appreciates that differing views can give rise to conflict, which can, in turn, lead to bitterness and negative emotions that live on far longer than anyone would have ever expected.

Considering what is best for the overall community will not always translate into unanimous approval. But not every decision a condominium board makes should be unanimous. Why? Because what is best in the view of one director may not be what is considered best to another with a differing background, value system or past set of experiences. For example…

It can be easy to assume that everyone invested in a condominium community wants to maximize property values. Consider, however, that someone living off of a fixed income may see a downside to the increased

property taxes that come with a higher property value… especially if they have no plans to sell and are part of a contingent that shares this perspective within the community.

Beautiful gardens may be a source of pride of ownership for one, viewed solely as curb appeal to attract prospective purchasers to another and considered just another unnecessary expense to someone else.

In recent years, much attention has been given to different approaches to reserve fund planning and condominium budgeting. It is easy to see conflict emerging when one director is looking to the distant future and another has no intention of sticking around for it.

There is no one answer as to what is best.

While there are few things consistent from board to board, experience suggests there is one certainty consistent for every board and every condominium community: It’s impossible to please everyone!

Rather than accepting this and shrugging off the concerns, feelings and views of those one cannot please, take the time to understand why someone is not happy with a particular direction, especially when that particular decision is personally important.

Understanding the underlying interests behind a competing view can go a long way in both preserving relationships with one’s fellow directors and opening the door to options that satisfy everyone’s interests.

W hat follows are three tips for condominium directors to consider in working with directors who have differing views.

There is no “i” in team Directors must appreciate that they are part of a team… that they have a vote but that others do too. Individuals may not always get their way, but properly fulfilling their responsibility to their community as a director does not mean that they must have a “my

www.REMInetwork.com | October 2016 19

GOVERNANCE

There is perhaps no director quite as challenging as the one who always has to be right.

SOLUTIONS FOR WHAT YOU CAN’T SEE

way or the highway” mindset. Directors should view their fellow directors as teammates as opposed to competitors and work with them rather than against them when exchanging ideas and concerns.

Pick your battles There is perhaps no director quite as challenging as the one who always has to be right. Don’t be that guy (or gal)! If directors are willing to battle ‘til death for their way on the colour of the petunias, that is their prerogative, but they should appreciate that there are other items their fellow directors may carry similar passions for. Not every decision is about the flowers!

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Put yourself in their shoes Understanding what is important to one’s fellow directors can better equip a director to win them over on his or her preferences and ideals when it comes to the decisions that are important to him or her. This can especially be the case if a director gives and takes personally or spends time considering what is important to his or her fellow board members. Exert some creative energy to find ways to advance one’s own interests in a manner easier for fellow directors to get on board with.

There would be no point in having multiple members of a board if everyone saw things the same way or simply “rubber stamped” one’s ideas. Different viewpoints can certainly complicate and frustrate matters, yet they also provide a tremendous opportunity to embrace the concept of community — something that is not isolated or individual but rather that is common and shared by many. 1 Marc Bhalla holds the Chartered Mediator (C.Med) designation of the ADR Institute of Canada, the nation’s most senior designation available to practising mediators. He focuses his mediation practice on condominium conflict management. Marc leads the CONDOMEDIATORS.ca team and manages MarcOnMediation.ca.

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Five things new condo directors need to know now Cong rat u lat ions on get t ing elected to the condo board !

Now the fun begins. For first-time

BY PAT CROSSCOMBE

directors, there is an overwhelming amount of new information to digest. While it may seem like everything has to be learned at once, it may be more realistic to take a gradual approach. Here are five need-to-know topics to get the journey started:

22 CONDOBUSINESS | Part of the REMI Network

GOVERNANCE

1

Preserve the corporate record This might seem like a bizarre idea, but consider the condominium corporation like a living being; the records serve as its memory. No living being can survive without a memory; the corporation likewise cannot function effectively without complete records.

Directors and property managers are the key creators of the corporation’s memory, but change on a regular basis. Directors leave at the end of their term, resign because of ill-health or sell their unit and move. In some cases, an entire board gets removed by a vote of the owners. Relying completely on property management companies and their managers is not a good idea, either. Managers may similarly leave, get replaced or retire.

It is the board’s responsibility to make sure the corporate memor y is always up -to - date. Proper t y managers have an important role to play in creating and preserving corporate

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GOVERNANCE

memory, but the board must provide oversight and make sure this memory is created and immediately accessible.

Start preparing now because changes are dif ficult to predict! If directors and managers wait until these events occur, it may be too late. Memories fail, emails remain in personal inboxes, and handwritten notes get misplaced.

New directors and managers rely on good records to provide this memory.

Poor or missing records leave directors and managers floundering in the dark, wasting time trying to understand why a particular decision was made and wasting money because a high-value renovation contract has gone awry.

Act in the corporation’s best interests Fro m t he ve r y f ir s t meeting new directors attend, they must make decisions based on the principle of fiduciary responsibility. What does this mean?

2

Simply put, directors must act in the best interest of the condominium corporation and not in their own self-interest.

T his is an incredibly impor tant distinction to understand. It’s normal for people to act in their own selfinterest. However, for directors, the corporation’s interest replaces selfinterest. The corporation is like a living entity and continues to exist as directors and property managers come and go.

Directors ser ve the corporation and must ensure that the corporation stays financially and physically healthy.

An example will help explain.

The board of Green Condos is preparing to undertake a much-needed window replacement project. After reviewing finances, the board realizes that a special assessment will be needed to pay for the work.

One of the directors votes against the project because he does not have the money to pay for the special assessment.

Another director also votes against the project because she is planning on selling

her condo and doesn’t want to have to spend money on a special assessment at this point in time.

The decision has been made; the window replacement project is postponed for another year. This is a ver y poor decision for the condominium corporation as a whole and a good example of d i re c to r s f a i l i n g i n t h e i r f i d u c i a r y responsibility.

Review the status certificate regularly After making an o f fe r t o p u r c h a s e a condominium, potential buyers receive lots of documents to review. One of them is the status certificate. It provides a snapshot of the financial and physical status of the corporation as well as details pertaining to the specific unit being considered for purchase.

Potential condo buyers usually leave the review of this document to their

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GOVERNANCE

Memories fail, emails remain in personal inboxes, and handwritten notes get misplaced.

lawyer. Most condo buyers, especially first-time buyers, are unlikely to fully underst and the implic ations of this document. However, it is critical for directors to understand now exactly what a status certificate represents and how to use it to mitigate risk for the corporation.

Condominium corporations are required to provide status certificates on request. T he corporation usually d ele g ates this t ask to it s p ro p er t y m a n a g e m e n t c o m p a n y. H o w e v e r, because the corporation remains responsible for the content, it’s good practice to review the status certificate at every board meeting. This ensures

that the status certificate stays up-todate and incorporates any new issues as the board addresses them.

Potential buyers need to know about a ny f i n a n c i a l o r p hy s i c a l p ro b l e m s facing the corporation. If these details are missing from the current status certificate, the corporation is at risk of unhappy new condo owners who could sue the corporation if they find out, for example, that a substantial special assessment is due. Ensuring that the c ontent of the st atus cer tific ate is up-to-date helps mitigate this risk.

Potential buyers need to know that their status certificate is valid only for the date issued (as per section 76(6) of

the current (1998) Condominium Act) and ask for an update before closing on their new home. This is especially relevant if the purchase date is months in the future, as the financial or physical status may change in the interim.

4

Manage the corporation’s money responsibly Looking after money is obviously ver y important. New directors n e e d to know how the corporation’s finances have been managed in the past and consider whether this is an acceptable process to continue. Just

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GOVERNANCE

because a board has done it in a certain way before doesn’t mean that it is the right way or that it can’t be improved.

Directors are responsible for making independent decisions and not simply following along with past practices. Ask about the process of signing checks. Who signs? It’s best practice to require more than one signature. What is the process for approving quotes on small projects and more formal processes (tender) for larger projects? An excellent review of overseeing tenders appeared in the July 2016 issue of CondoBusiness magazine.

Improper management of corporate funds has significant consequences and could result in fines (as per section 137 (1) of the act).

Follow the legislative hierarchy The Ontario Human Rights Code, Condominium Act and condo corporation documents are long, complicated and difficultto-read. Understanding the content and intent of these documents is a core requirement for directors. Directors are not expected to understand the full legal implications of these documents, as this type of expert-level knowledge is the responsibility of their lawyer. However, there are a few key points directors should understand.

Condominiums are governed by provincial or territorial legislation. In Ontario, condominiums are subject to the Condominium Act and also the Human Rights Code, among other relevant provincial legislation. Remember that there is a hierarchy: the Humans Rights Code comes first; the Condominium Act is next and the condominium corporation’s declaration, bylaws, and rules follow. In other words, none of the many clauses contained in the declaration, bylaws, or rules can contravene the Human Rights Code, nor can they contradict the Condominium Act. T his is just a quick introduction to what new condo directors need to know now. To recap: Begin the habit of creating the corporation memor y; always act in the best interests of the condo corporation; review the status certificate at every board meeting; manage the corporation’s funds responsibly; and follow the legislative hierarchy. If a new director does these five things well, he or she is off to a good start in becoming an effective director. 1

5

Pat Crosscombe is the founder and CEO of BoardSpace, a company that provides software for condo boards and p ro p e r t y m a n a g e rs. S he is the p a st- p re s i d e nt of he r condominium board and was responsible for governing an 87-unit townhouse condominium. During Pat’s term on the board, she faced what seems like every possible challenge known to condominiums. This extraordinary experience required Pat to take every opportunity to learn more about condo management and governance in order to keep up. She can be reached by phone at 613-790- 0225, by email at pat@ boardspace.ca or by website at www.boardspace.co.

26 CONDOBUSINESS | Part of the REMI Network

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LEGAL

Case confirms condominium boards can rely on business judgment rule A recent Onta r io Cou r t of

BY CHRISTY ALLEN Appeal decision conf irmed for the first time that the “business judgment rule” applies to decisions made by condominium boards. The business judgment rule “recognizes the autonomy and integrity of corporations, and the fact that directors and officers are in a far better position to make decisions affecting their corporations than a court reviewing a matter after the fact.”

In confirming that this rule applies to condominiums, the Court of Appeal set out the test for reviewing decisions made by condominium boards. The test is to confirm that the directors acted honestly and in good faith, and that the board acted reasonably in coming to its decision. But in determining

whether a board acted reasonably, the question is not whether the reviewing court would have made the same decision, but rather whether the board’s decision falls on the spectrum of reasonable possibilities.

If a court concludes that the board did act reasonably (given the circumstances),

28 CONDOBUSINESS | Part of the REMI Network

honestly and in good faith, the court will defer to the board’s decision. In other words, where the test is met, it would be inappropriate for a court to interfere.

The landmark case The precedent-setting case, Carleton

LEGAL

Condominium Corporation No. 375 v 3716724 Canada Inc., started with an owner’s request to make changes to the common elements. It then evolved into an oppression claim by that owner under Section 135 of the current Condominium Act (1998).

The owner possesses a number of commercial parking spaces located on the first level of the parking garage of CCC 375, which is a mixed-use condominium corporation. The commercial owner wanted to convert the use of the commercial parking spaces from monthly rentals to 24/7 payand-display use. This change in use required certain related changes to the common elements, which raised security concerns about the parking garage. In order to make the contemplated changes to the common elements, the commercial owner had to apply to the board for approval, pursuant to section 98 of the act.

A s a condition of approving the contemplated common element changes, the board advised the owner that it required a full-time security guard to be hired at the owner’s expense. The owner refused, on the basis that this additional cost would render the parking operation less profitable.

The owner instead commenced its court application, alleging that the board had acted oppressively, by favouring the security interests of the residential owners over the financial interests of the commercial owner.

The application judge agreed with the commercial owner, and found that the board had acted oppressively by requiring the commercial owner to hire a “prohibitively expensive” security guard. The application judge found that because there were cheaper security options available to the board, which would, in the judge’s opinion, adequately address the board’s security concerns, the board had acted improperly by insisting on a full-time security guard.

On appeal, CCC 375 took the position that its board had acted honestly and in good faith by requiring a full-time security guard, and that the board’s decision to require a fulltime security guard was within the range of reasonable decisions in the circumstances. In overturning the application judge’s decision, the Court of Appeal agreed with CCC 375’s position, and in so doing the court confirmed that decisions made by condominium boards must be given deference.

What it means Prior to the CCC 375 case, there was little judicial direction as to the decision-making authority of condominium directors. In particular, it was unclear under what circumstances it would be appropriate for a court to interfere with a board’s decision.

By confirming that the business judgment rule applies to condominiums, and by articulating the court’s test for reviewing condominium board decisions, the Court of Appeal has provided the condominium industry with much-needed guidance.

The court clarified what requirements condominium boards must meet as they exercise their discretion under the act.

The court’s decision in CCC 375 should give condominium directors some degree of confidence that as long as they act reasonably, honestly and in good faith, their decision will not be overturned.

The decision effectively confirms that dissatisfied unit owners cannot get a “second kick at the can” by bringing their grievance to court on grounds of alleged oppression. Provided the board has met the above-noted requirements, such applications will not be successful. This is particularly relevant today, as the number of claims of unfair treatment made by unit owners against their condominium boards are on the rise.

The CCC 375 decision is also important for all condominium residents because it ensures that their boards understand their decision-making obligations. In particular, it confirms that boards must give fair, reasoned consideration to all relevant factors surrounding a decision, including competing interests within a specific condominium. 1

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Christy Allen is a condominium lawyer with Nelligan O’Brien Payne LLP, and represented CCC 375 in this matter, both at the Superior Court level and at the Court of Appeal.

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www.REMInetwork.com | October 2016 29

COVER STORY

RESEARCH DIG

CONDO GOVER Dr. Randy Lippert, professor of

BY MICHELLE ERVIN criminology and sociology at the University of Windsor, has conducted in-depth interviews with roughly 150 unit owners, board members and property managers in New York City and Toronto. In a recent phone interview, he shared findings from his latest work investigating how condominium governance really works

GS INTO

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COVER STORY

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N ew resear c h i n t o c o n d o m i n i u m governance has found that board members, property managers and unit owners have a number of familiar topics on their minds. L ack of communit y, lack of director educ ation and poor c o mmunic ati o n were am o n g seven themes identified by Dr. Randy Lippert, professor of criminology and sociology at the University of Windsor, in a recent study.

For the study, Dr. Lippert and his research team of graduate students interviewed roughly 150 board members, property managers and unit owners in condominium

dense New York City and Toronto. The individuals represented condominiums ranging in price — more than and less than $600,000 in Toronto — and in size — from fewer than 50 units, to 50 to 150 units, to greater than 150 units.

Funded by the Social Sciences and Humanities Research Council of Canada, the independent research was designed partially to highlight the issues for unit owners and service providers in hopes of improving condominium governance.

CondoBusiness recently spoke to Dr. Lippert about his findings in a phone interview.

32 CONDOBUSINESS | Part of the REMI Network

What inspired you to study condo governance?

I’m partly a criminologist, so a lot of my work is on security. I started researching gated communities back in 2006. What’s interesting in terms of the way they operate is the condo governance aspect. The vast majority of them are condos, or based on condo arrangements, so you need to know how condo governance works.

That’s why I became interested and, to some degree, fascinated by it, because it really is a complex set of arrangements. The boards are faced with a remarkable range of challenges. So are property managers.

COVER STORY

RESEARCH HIGHLIGHTS And it really is an area that just has not been investigated. Millions of Canadians live in condos, and for that reason, there’s a lot of work that still needs to be done.

When you look at it, this is only a small, albeit in-depth, study.

What was the scope of your research?

We asked specific questions about what they thought of the board and the challenges that they face. Property managers were difficult to get to talk to us, which was pretty disappointing, because the ones that we did talk to, we learned a great deal from in terms of how condo governance actually works.

The aim of the study was simply to find out how does this work in terms of the different actors — owners, renters, board members especially and the property managers? What do they actually do in practice, as opposed to what the legislation says, what everyone thinks they do?

Going into the study, what did you expect to find?

We know a lit tle bit about similar arrangements in the U.S., for example, so we expected a lot of conflict, a lot of litigation, and in some places, we found that, but in others, we didn’t at all. Some of the condos are run extremely well.

What I expected was that it would be complex, and it certainly turned out that way. I don’t think people have any idea some of the things boards in conjunction with property managers have to deal with … everything from hoarding, tobacco smoke drifting through corridors, fire hazards, mentally ill owners, wandering the halls, crime, conflicts of interest on the board in terms of arranging contracts, and just a huge list of ongoing things that they have to deal with in a fair way and consistent with the legislation.

What were the most significant findings of your research?

There were about seven of them. First of all, the way that people experience governance is that there’s a real lack of any sense of community. The second one was the influence of developers (after turnover).

The third one was lack of education of board members, even amongst the board

Dr. Randy Lippert describes seven important takeaways from his study of condominium governance.

1. Lack of community Even if there’s no outright conflict, many owners in various buildings felt that there really wasn’t sort of collective decision-making. It was often them against the board, or the board not fostering a sense of community, and a lot of the owners wanted that. Some people like to be left alone, but a lot of people expressed that when they moved into a condo, they figured that it would more of a cooperative arrangement, even though everyone still owns their individual units.

2. Influence of developers Even after the condo became a condo officially, there was concern and many examples listed of developers continuing to influence the way that the condo was run, whether that meant avoiding their obligations for warranties or arranging for developer-friendly people to be on the board and so on. Again, there was a concern that the average owner’s interest wasn’t being represented in those instances.

3. Lack of education Some [board members] were very knowledgeable, but there was a sense that a lot of decisions were sort of transferred over to the property manager with almost a blind faith, without really knowing the ins and outs. The owners expressed that that can be dangerous. Board members in the know thought that that was inadequate. Of course, the legislation, the reforms, are trying to address that in Ontario.

4. Poor communication The board members that seemed to really know what’s going on were pushing for more meetings — not just the AGM, but fireside chats and this kind of thing in conjunction with the property manager. They were convinced that better communication made for better governance. And owners, the same for their part, wanted to know more about what was going on.

5. Reserve fund spending That came up often and it often had split along the lines of investor-owners or absent residents versus the owner occupiers in terms of spending priorities by the board. That seemed to be a real split in terms of what the money should be spent for, what it was spent on — aesthetics versus making sure we have enough money for the roof, that type of stuff.

6. Conflicts of interest Board members’ relationships with contracting companies, even property management firms, sometimes owning their own companies and whether the whole process of selecting contractors was fair and open did seem to be an ongoing problem. Now some of that is being dealt with in new legislation, as well, which I guess we’ll see in the details.

7. Condominium Act enforcement For the most part, owners felt like it was boards and their lawyers for the corporation sort of pitted against them and unless they organized or got with other owners, they really didn’t stand a chance, citing violations of the statute and so on. For those who knew what was happening with the legislation, which really wasn’t many of them, they were hopeful that the Condominium Authority would be able to better serve their interests.

www.REMInetwork.com | October 2016 33

COVER STORY

“Sometimes people just

want their beef to be heard and that can go a long way in terms of defusing problems and litigation later.” members we spoke to. The fourth was poor communication generally between owners and boards. The other one was reserve fund spending (disputes over priorities). Number six was the conflicts of interest on the part of boards, board members. The last was the poor enforcement of the statute (Condominium Act). (See sidebar: Research highlights.)

What are some of the lessons for boards and property managers?

Actually have more open meetings for owners — not just an AGM that you’re absolutel y re quired to have in the legislation. I get that it can be uncomfor table sometimes for condo directors and property managers. At the same time, sometimes people just want their beef to be heard and that can go a

long way in terms of defusing problems and litigation later and just finding out where owners are at.

Yes, a lot of those meetings won’t be incredibly well-attended. Some people will, as they know, continue not to really care, but for people who do, particularly owner occupiers, [meetings] should be available because I think they go a long way in improving governance.

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What impact do you hope your research will have on condo governance?

Generally to make owners, would-be owners, and also service providers, aware that these are some of the main issues regarding condo governance to improve ultimately condo governance. There are some longstanding problems.

I don’t think it’s all about regulation of property managers. It’s much more complex than that, and there are a lot of businesses that are dependent on the condo industry, and I think it really is in their interest to see some of these concerns get resolved.

There’s a sense that owners are sort of having most of this on their shoulders, and that that shouldn’t necessarily be the case. Government needs to take more responsibility.

Are you optimistic that the Ontario government’s legislative reforms will solve some of the problems you’ve identified?

I’m optimistic. Let’s see what the regulations say. They did address some of the main ones,

like lack of education of board members, regulation of industry, and then the Condo Authority has someone to get more involved in the issues without having to go into the courts. In principle, those are good ideas and I applaud them for doing that.

However, as we noted in our brief [to the Standing Committee on Finance and Economic Affairs], there were some gaps there as well. One of them was that there wasn’t real opportunity to have an average owner on the Condo Authority board — people who are in the know but don’t have any sort of vested interest in the condo industry; people who are familiar with the challenges in condos, but don’t have something to gain by a particular decision being made.

I was really disappointed to see that that wasn’t going to be mandated because that’s really where this all begins at the end of the day. It’s basically owners of these buildings who are looking for good governance and frankly whether the other industry players benefit is more of a side issue. 1

Dr. Lippert plans to report further on the findings of his work in forthcoming academic papers. He is also finishing a book manuscript tentatively entitled Condo Conquest, which will be reviewed for publication by University of Toronto Press.

Anyone interested in obtaining a copy of the final report can contact him at lippert@ uwindsor.ca. He is also still interested in reaching more property managers for confidential interviews.

The preceding interview has been edited for clarity and length.

Find the latest on condo governance at

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LEGAL

How to assess a bill from your lawyer In a case that concluded last BY MICHELLE KELLY fall, a condominium spent more than $150,000 on a court application against an owner.

The judge was very critical of the condominium’s actions and suggested that the board made its aggressive decisions based upon a belief that the condominium would recover all of its costs under section 134(5) of the Condominium Act.

36 CONDOBUSINESS | Part of the REMI Network

LEGAL

The extraordinary costs could have been avoided if the parties had acted more reasonably. Here’s how a condominium, or any client, could assess a lawyer’s account: Assessment process There are so many resources online about assessing a lawyer’s account that there is no point in explaining the process in detail here.

That said, there are three points worth noting.

First, the process is easier if the condominium starts it in the first month after the lawyer delivers the account. If it has been more than one month since the lawyer delivered the account, the condominium will need the permission of the court to assess it.

Second, without meaning to dissuade anyone from pursuing a proper assessment, it’s important to recognize that it’s possible that costs could be awarded against the condominium. Keep this in mind when considering an assessment, especially if the account is fair and reasonable.

Third, there are certain factors that an assessment officer will consider when determining if the bill is fair and reasonable, including the time spent by the lawyer, the complexity of the issues, the issues at stake, the responsibility of the lawyer, the importance of the case to the client, the skill and competence of the lawyer, the result, the client’s ability to pay, the client’s expectations about the cost, and whether any steps taken by the lawyer were unnecessary or not in the client’s interests.

For more information on the process, see the Law Help Ontario site (https://www. probonoontario.org/) for a great summary of the assessment process.

Avoiding assessments and dissatisfaction with accounts There also ways for condominiums to avoid dissatisfaction with the accounts they receive from their lawyers.

First, discuss cost expectations with the condominium’s lawyer before work begins.

The lawyer should be able to give the condominium a reasonable approximation of the costs that it can expect, including any expenses (disbursements) that the lawyer may incur on its behalf. Ask if the lawyer provides set fees for certain services, such as registering liens or drafting bylaws.

Second, get familiar with the lawyer’s accounting and billing policies. Is there a

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set fee? Will the lawyer bill hourly? Who, apart from the lawyer, will work on the file?

How are disbursements billed? How often are accounts sent out? When are accounts due after they are delivered? What are the payment options?

Third, remember that if the condominium makes it easy the lawyer will usually charge less. Instead of handing over boxes of documents, sort through the boxes and provide only what the lawyer actually needs.

It’s also very helpful to include summaries of the file and charts describing the documents provided to the lawyer. Also, keep in mind that multiple emails or calls a day will result in multiple replies from the lawyer. Try to be succinct and limit communications to a “need-to-know” basis.

Fourth, if the condominium is dissatisfied with an account it receives, the condominium should talk to its lawyer about its concerns.

Many lawyers will reduce their accounts if their client has a legitimate concern (note: “I just don’t want to pay” is generally not persuasive). Remember, law is a business; lawyers need to keep their clients happy to stay in business, so lawyers are normally willing to work with their clients to address any concerns they have about the account.

Fifth, if the condominium’s lawyer is not receptive to its concerns about its accounts, look elsewhere. There are plenty of lawyers that are willing and able to help. If the condominium needs help finding a lawyer, it can contact its local Canadian Condominium Institute (CCI) chapter (for condominium matters) or the Law Society of Upper Canada for a referral. 1 Michelle Kelly is a partner at Sutherland Kelly LLP located in Guelph. She serves condominiums, unit owners, and developers across the province. Michelle practises exclusively in the areas of condominium and real estate law.

The preceding article is reprinted with permission from www.ontcondolaw.com.

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www.REMInetwork.com | October 39 15-03-12 2016 10:51 AM

MANAGEMENT

The case for analytics What is the average response

BY ADRIAN TEH time of managers in getting back to residents’ requests? For condo directors or managers that don’t know the answer, this is a must-read. This article will go over what analytics means in the condo management world, but more importantly, why it matters and how it can benefit management companies and condo corporations.

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Analytics is the process of capturing, interpreting and communicating useful information for better decision making.

Done correctly, it’s possible to harness the data that is available today to measure and optimize day-to-day condo management going forward.

Why it matters Peter F. Drucker, who has been called the inventor of modern management, once famously said, “You can’t manage what you don’t measure.” It’s like guessing how much flour to add while baking a cake. Except, in this example, the worst case scenario is an ugly or inedible cake. In condo management, however, there’s more at stake. It can cost management firms and condominium communities alike a lot of time and money.

Here are five reasons to do analytics for condo communities, depicted through a fictional property manager called Bob. Better decision-making Bob needs to figure out when the peak days for package deliveries are so that he can better prepare the concierge to receive them. With analytics, Bob is able to visualize the pattern of peak days through a chart using the data captured from package deliveries over the past 12 months.

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What is analytics?

If a person has high cholesterol, what do they do about it? First of all, how did that person even know he or she has high cholesterol?

Thanks to advances in medical technology, it’s now possible to measure cholesterol levels through blood samples. Now, how does this relate to condo management? They have more in common than one might think.

Data flows through day-to-day condo management operations like blood flows through the body. A person’s blood offers an immense amount of information that can be used to help measure and improve his or her health. So does data for the well-being of condo communities.

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Better management culture With analytics in place, Bob can use the information captured to set achievable goals and show measureable results. As a result, the monthly meetings he leads are now driven by wins such as issue resolution.

For example, with analytics Bob now knows what the average response time is to resolve a work order — his team can now strive to reduce that average response time. This helps Bob build a collaborative culture that facilitates faster, more productive monthly meetings with more consensus among board members.

Four advanced LinkedIn hacks you may not know about

By Steven Chester LinkedIn is an extremely powerful tool for growing your business and personal brand.

Here are my top four lesser-known hacks that will get you more from the platform: 1. You can message people you’re not connected with. Gone are the days of free InMail to people you’re not connected with. But there’s a workaround. In any group you join, you can view the member list, and message those members right from the list.

2. See what your connections and prospects are up to: Go to a member’s profile. Hover your mouse over the arrow next to the Endorse button and click View recent activity. You’ll get a digest of everything your prospect has been reading, sharing, commenting on and liking.

3. Hide your connections from your competition. Worried about connecting to someone who may be a competitor?

Then don’t let them mine your contacts.

To hide your connections, go to the Privacy & Settings section, click the Privacy tab, then click Who can see your connections – select “only you.”

4. Export your connections’ email addresses: Hover over your My Network tab and click Connections.

Click the gear icon in the top right corner. Under Advanced Settings, click Export LinkedIn Connections at top right, choose file type, then export. You can now add those email addresses to your Outlook.

Steven Chester is the Digital Media Director of MediaEdge Communications. With 15 years’ experience in cross-platform communications, Steven helps companies expand their reach through social media and other digital initiatives. To contact him directly, email gosocial@mediaedge.ca.

www.REMInetwork.com | October 2016 41

MANAGEMENT

3

Predict and prevent emergencies When a one-time power outage happens in a single unit, it’s not such a big deal. But when it happens regularly, building-wide, within the span of a few months, it is a big deal.

Bob needs to get on top of the situation pronto before it gets any worse. Analytics let Bob see into the future and take action before major system failures happen.

Lucky for Bob, he is able to fix the aging and leaking watermain, which adverted a huge cost and otherwise would have led to a catastrophe.

visualization of the frequency of issues that has been reported relating to them.

Better AGMs To some, the AGM is a dreaded day — depending on what’s on the agenda. With analytics supported by data captured throughout the year, Bob can confidently present the thousands of service requests that he and his team have resolved, along with the hundreds of works orders that need to be brought forward to this year.

The potential debate over converting the billiards room into a party room is rendered Prioritize for better unnecessary by stats. Bob shares that the planning billiards room was booked a mere three Bob has 101 things times over the past 12 months — in other to do each day, so he words, it’s hardly used. ne e d s to s p en d his Numbers keep condominium corporations l i m i t e d t i m e w i s e l y. and their managers moving towards With analytics, he is able common goals. They also keep people on to pr ioritize the le ak ing water m ain the same page, whether it’s board members 1 2016-10-17 over theLionheart_Condo_October_2016_FINAL.pdf slow elevator b ase d on a or residents at large.3:08 ThisPMunity is really what

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analytics is all about. It ensures communities are well managed and maintained based on facts and figures. 1 Adrian Teh is co-founder and CTO of condo management software Evercondo. com with analytics to capture, measure and optimize day-to-day condo management operations. He is an entrepreneur, software engineer and business process optimization consultant with years of experience in optimizing business processes using data and technology.

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Why do pre-winter roof inspections Just l ike other pa r ts of the bu i ld ing, t he roof requ i res o n g o i n g m a i nt e n a n c e a n d

BY NUNO TORRES

preventative repairs. Studies have shown that a roof that has not been well-maintained will, on average, last for half the length of the manufacturer material warranty. Proper maintenance and care maximizes the life expectancy of roofs, which means savings in the long run.

When should roofs be inspected and maintained?

It is recommended that roofs be inspected in the fall before the winter and then again in the spring. That’s because the harsh elements of snow, rain, ice and cold temperatures common to Canadian winters

44 CONDOBUSINESS | Part of the REMI Network

can put a lot of wear-and-tear on the diverse components of roofs. Therefore, roofs should be inspected and maintained both to ensure that they’re prepared to take on the harsh winter months and to see how they held up to the winter that just passed.

MAINTENANCE

Why is it important to do pre-winter roof inspections and maintenance?

Many property owners and supervisors do not think of their roofs until it is too late. Leak repairs can be very expensive in the winter months because repairs become harder to complete, take longer to fix, and in many situations can be very dangerous.

It’s better when roof work can be done in dry and safe conditions. Hence, it may be more efficient, and therefore more cost-effective, to do roof inspections and maintenance before winter arrives.

Who can perform pre-winter roof inspections and maintenance?

A seasoned roofing contractor or professional roofing consultant should be hired to inspect roof conditions and carry out any required roof maintenance and repairs. A qualified roofing professional will be prepared with the necessary tools and experience to identify any faulty roof components where leakage may occur in the future. The roofing contractor will be able to patch roofing membranes, clean drains and eaves trough

systems, fix rubber and metal flashings, and re-apply necessary sealants and mastics that have failed.

What should the property owner/ supervisor expect from roof inspections and maintenance?

Expect the roofing contractor to provide a written roof inspection report. The report will point out any deficiencies and defects identified on the roof. Usually, the report includes photos with captions. These descriptions explain the repairs that need to be done and are usually written in easyto-understand language. The cost for the roof repairs and maintenance will usually be outlined on the first or last page of the report.

Once an agreement is made between the building owner/supervisor and the roofing contractor, the roofing contractor will use his/her roofing tools and expertise to repair and maintain the roof. The great thing about the written report is that it is a great reference point for the owner/ supervisor of the building to visually see

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what took place before and after the roof maintenance and repair. The inspection and maintenance report is also a great document to keep and refer back to, to see what areas of the roof need periodic attention.

Carrying out a proper pre-winter roof inspection and maintenance in the fall can proactively save property owners a lot of money in the long term. Identifying minor roof deficiencies before they become undetected roof failures can prevent headaches in the future. If there is one takeaway from this article, it’s that roofs age just like other building components, and that they also need preventative care to last longer. 1 Nuno Torres is manager and foreman at Luso Roofing & Sheet Metal. Located in Toronto, the family-owned and operated company specializes in installations and repair services, provided by roofers who, in most cases, have more than 30 years of experience. For more information, call 647.866.6213 or visit www.LusoRoofing.com.

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www.REMInetwork.com | October 2016 45

MAINTENANCE

A guide to roof inspections A t l e a s t t w i c e p e r y e a r, p r o p e r t y m a n a g e r s s ho u l d inspect and conduct maintenance on their roofs. An

BY DALE KERR

inspection in the spring will identify any damage that occurred over the winter months, and an inspection in the fall will ensure the roof is ready for harsh winter conditions.

46 CONDOBUSINESS | Part of the REMI Network

MAINTENANCE

ROOF SAFETY A roof can be a dangerous place. Do not conduct roofing inspections in high winds, and never walk backwards on a roof; always watch where you are going. Unless the roof has a parapet at least 42 inches (1070 millimetres) high or a fixed guardrail, the Occupational Health and Safety Act requires that you do not get closer to the edge than two metres (six feet, six inches). If it is necessary to get close to the edge, to inspect the parapet flashing for example, retain the services of someone trained and certified in the use of safety harnesses and travel restraint systems. Also be aware of the location of skylights, as there have been cases of deaths due to falls through skylights.

is not water on the roof at the time of the inspection, there may be stains that indicate previous ponding. Walk the roof and note any areas that feel spongy.

Remove any debris on the roof, such as branches, as it could potentially puncture the roofing membrane. Check the roof drains and remove debris from the drains if necessary.

Areas most prone to problems are penetrations through the roof, such as vent stacks. The penetrations are usually installed through a sheet metal sleeve that is flashed into the roof membrane and that is filled with a mastic material, referred to as a “pitch pocket.” The mastic can dry up over time, so check the pitch pockets and add mastic if necessary.

CONDOMINIUM INSURANCE PROGRAM

THERE IS NOW AN ALTERNATIVE When conducting the inspection, take a plan of the roof and note the locations of any anomalous conditions. The results of previous inspections can be used to determine whether the roof has deteriorated since the last inspection. Photographs can also be used to document changes in the condition of the roof over time.

Here is an overview of what to look for and fix when inspecting low-scope, conventional and inverted roofs: Low-slope roofs A low-slope roof — more commonly though not entirely accurately referred to as a flat roof — relies on a waterproof membrane to prevent water penetration through the roof.

Even a “flat roof” has some slope to direct water to drains.

For all types of low-slope roofs, note areas of ponded water, as standing water on a roof can accelerate deterioration of the roofing membrane. Even if there

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MAINTENANCE

Have a look at the roof perimeter (see the sidebar on roof safety) where the roof membrane turns up onto the parapet, which is the extension of the walls above the roof level. A metal flashing is used to protect the membrane at the parapet. With a low parapet, the flashing may extend over the top of the parapet. With a high parapet, the membrane flashing may terminate in a “reglet” and there will be separate flashing for the top of the parapet. Check the sealant at the reglet to ensure it remains flexible and fully adhered. Check the flashing to ensure it is not rusted or damaged.

Another type of roofing membrane that is typically used in a conventional system is PVC, which is a vinyl sheet roofing system SIGNS OF that is typically white, though it can be other DETERIORATION IN colours. The white colour provides some A BUILT-UP ROOF energy efficiency by reflecting UV radiation and thereby reducing summer cooling loads.

Blisters or blueberries: spongy The seams of the PVC are welded together bubbles in the surface with heat.

When examining a PVC roof, check the Ridges: long ripples in the membrane seams for fishmouths — gaps where the strips of membrane are not welded properly, Splits: cracks in the membrane resulting in an unsealed bubble. Also check for splits or punctures in the membrane.

Alligatoring: a cracking pattern that Over time, the PVC can become dirty, resembles an alligator’s skin Conventional roofing systems which limits its energy efficiency. Therefore, In a “conventional” roofing system, the it is recommended that the membrane be waterproofing membrane is installed on top washed every one to three years, depending of the roof’s insulation. The most common on its condition. The roof must be washed type of conventional roof is a built-up roof, or annually for it to qualify for the City of COMMUNICATION SOLUTIONS EFFICIENCY RESULTS BUR. A built-up roof consists of three or INNOVATION four Toronto’s “Cool Roof” incentive program. alternating layers of felt and asphalt, ending There are roofing companies and roofing with a layer of gravel to help protectBY the material suppliers that provide this service.

DRIVEN CORE VALUES roofing membrane from UV radiation. Signs An SBS modified bitumen membrane may of deterioration in a BUR include: blisters or also be used. This roofing material comes in COMMUNICATION SOLUTIONS EFFICIENCY INNOVATION RESULTS blueberries, ridges, splits and alligatoring sheets that adhere to the roof structure. A DRIVEN(see

BY CORE VALUES sidebar for descriptions). torch is typically used to heat the membrane,

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MAINTENANCE

which then bonds to the roof when the bitumen cools. Two layers are commonly installed, with the top layer having a granular surface to protect it from UV radiation. For this type of roof, look for loss of granules, bubbles, blisters, ridges and splitting of the membrane.

Inverted roofs The other type of roof is an “inverted” or protected membrane roof. In these roofs, the membrane is located under the roof’s insulation. To keep the insulation in place, it is covered with a filter fabric and “ballast” — a heavy material — typically rounded river stone — to hold the insulation down.

While it is not possible to directly observe the condition of the roofing membrane, the roof should still be inspected to ensure that the insulation is completely covered with ballast. The wind can shift the ballast, particularly at the corners and edges of the roof. Often heavier patio stones are used along the edges of the roof to avoid this “wind scour.” If the ballast has shifted, carefully redistribute to prevent damage to the filter fabric and to prevent stones or debris getting between the boards of

insulation, where it could migrate downwards and puncture the roofing membrane.

Any membrane type can be used for an inverted system, including EPDM. EPDM is a rubberized system that is typically loose-laid on the roof, meaning that it is not adhered to the roof structure, but is simply fastened at the perimeter. For this reason, it is typically used in an inverted system with the ballast helping to hold it in place. The membrane can shrink over time, so look for “tenting” at the roof perimeter, which refers to the appearance of the membrane as it pulls away from the perimeter of the roof where it is fastened.

Roof anchors Fall protection anchor points, more commonly referred to as roof anchors, are used as a tie off point for window washing or wall repair activities. A plan of the layout of the roof anchors must be posted near the entrance to the roof. As roof anchors are an important safety component, annual inspections are required. In addition, all roof anchors must be load tested at least once every five years. Often a number of

roof anchors are tested every year so that over the course of five years, all anchors are tested. A record must be kept of the inspection and it must be signed and sealed by a professional engineer. For convenience, schedule the roof anchor inspection at the same time as either the regular spring or fall roof inspection.

By conducting regular bi-annual roofing inspections and maintenance as required, it may be possible for a roof to last past its normal life expectancy. 1 Dale D. Kerr, M.Eng., P.Eng., BSSO, ACCI, is a principal of GRG Building Consultants. Dale can be reached at GRG’s Newmarket office at (800) 838-8183.

Find more maintenance tips at

www.REMInetwork.com | October 2016 49

TECHNOLOGY

Sensor solutions poised to transform property management 2016 is an exciting time to be

BY NICHOLAS GILL involved in residential property management. Technolog y is developing rapidly and

permanently altering the residential landscape for managers, staff, and residents. Several companies are invested in developing the next generation of

innovative tools for residential property management. Sensor technologies in particular are bound to make huge waves in the future.

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TECHNOLOGY

One of these solutions is currently in beta testing in the fitness centres of high-end residential buildings in New York City. Over the next few months, there are plans to expand the solution to several other cities, including Toronto.

These fitness centres use a network of smart sensors to determine which exercise machines are currently occupied while monitoring the temperature and humidity in various par ts of the facilit y. Residents can view availabilit y of exercise equipment — down to a specific treadmill, elliptical machine, or stationar y bike. By tracking usage statistics proper t y managers are equipped with the knowledge to m ake infor me d d e c isions on u p c oming e quipment purchases, which equipment is being underutilized and which require service. Management and residents can easily access these and other usage details via a dashboard or mobile apps.

O ther sens o r s o lu ti o ns in d evel o p m ent c o ul d hel p revolutionize residential living and operations in other areas as well: noise complaints, leak detection, parking space availability, mail arrival, and elevator operations.

Nearly every building has to deal with noise complaint quarrels AtrensCounsel_Condo_April_2016_FINAL.pdf bet ween its residents. Imagine a1 net work of 2016-04-07

sensors that can detect where loud noises are coming from and that can also measure their decibel levels.

Leaks are another persistent and seemingly unavoidable issue in residential buildings. Sensor technology could help discover leaks early, minimizing severe damage and costly clean-ups. Sensors can not only detect water dripping down a wall, but even detect atmospheric moisture levels helping to determine if a leak is imminent. Imagine sensors placed in common problem areas, such as under kitchen sinks and in bathrooms that could detect a pinhole leak before it becomes a major flood. Sensors could also measure water flow in pipes to determine irregularities and notify management of these issues. The potential cost savings to corporations, owners and insurance companies is huge.

For the most part, parking lot sensors have been limited to high - end retail centres, but will soon be available in re s i d e nt i a l b u i l d i n g s . C o n s i d e r t h e c o nve n i e n c e a n d customer service improvements in residential environments if sensors could easily detect parking space availability.

Sensors would save residents and their guests the hassle and frustration of physically checking availabilit y in the garage only to find out that no spaces are available.

2:31parking PM Im agine the improvement to customer ser v ic e if the concierge staff were provided with a dashboard that could provide both the availability and exact location of the parking spot?.

Today many buildings are now using software to manage packages and automate the notification process, but what about mail delivery? It can be pain for residents to keep checking to see if that important envelope has arrived. An easier way? Use sensors to keep residents posted in real time. A sensor at the back of the mailbox that pings when mail has arrived could be posted to an app and/or trigger a text notification, providing real-time updates and eliminating needless trips to the mailroom.

Sensors could also help clear up murky areas such as elevator operations. Imagine placing a group of sensors at the bottom of an elevator shaft. They could easily measure the distance from the shaft to the elevator’s current location, making it possible to determine which floor the elevator is on, for how long, and at what times. Residents could decide whether to wait or take the stairs, while managers could easily view usage trends.

As technology improves and new ideas emerge, expect to se e m o re se ns o r s o lu ti o ns in re si d e nti al b u il d in g management. Sensor technology is poised to become a massively influential tool in improving residential building operations in the near future. 1 N i c h o l a s G i l l i s d i re c to r o f s a l e s a n d m a rketi n g at BuildingLink Canada. He can be reached at ngill@buildinglink. com or 416-570- 4570.

52 CONDOBUSINESS | Part of the REMI Network

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FINANCE

Four common audit issues — and how to avoid them W it h f e w e x c e p t ion s , t h e BY JOHN ABEDRABBO Condominium Act of Ontario (the act) requires an independent auditor to perform an

annual audit of the financial statements of a condominium corporation. Sections 60 and 71 underline the rights and responsibilities of an independent auditor.

54 CONDOBUSINESS | Part of the REMI Network

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FINANCE

It’s important for unit owners to understand that an independent auditor does not prepare the financial statements, nor is he or she responsible for the daily bookkeeping and management activities. These activities are the responsibility of management and the board. The auditor’s responsibility is to provide an independent opinion as to whether the financial statements are fairly stated in accordance with the applicable accounting standards (in Ontario, these would be the Canadian accounting standards for not-for-profit organizations).

However, during an audit, an auditor may come across certain issues related to financial or operational matters that may need to be highlighted to management and the board, and in some circumstances to unit owners as well. These issues are not misrepresentations nor errors that would cause the financial statements to be false or misleading. In fact, if the statements have material errors then the auditor may have to qualify his or her report, or even worse, issue an adverse audit opinion.

This article addresses some issues that don’t necessarily cause the financial

statements to be false or misleading, but quite frequently come up during an audit and would typically be brought to management, the board and unit owners’ attention.

1. Reserve fund qualifying expenses Section 93(2) of the act states that the reserve fund shall be used solely for the purpose of major repairs of the corporation’s common elements and assets if the corporation has the obligation to repair or replace these items.

Quite often there is some ambiguity about what constitutes a replacement.

Would replacing carpet flooring with a ceramic flooring qualify as a replacement?

Would replacing certain equipment with technologically more advanced equipment qualify? There is no simple answer here and every situation should be evaluated individually. Obviously, when evaluating each situation, one must consider the reserve fund study, technological advances, statutory requirements and the incremental cost.

Another issue that comes up frequently is whether the corporation has an obligation to repair or replace an item. One recent

example that hit the news is the Kitec plumbing issue. The Toronto Star reported on this topic a year ago, stating that one condominium corporation anticipated a retrofit cost of $5,000 to $6,500 per unit.

Further, the article stated that owners must pay for this retrofit directly (i.e. those expenses cannot be charged to the reserve fund).

The management and board should consult with professionals, such as engineers, lawyers and auditors, before making a decision in case of an ambiguity.

2. Reserve fund study delays This is a somewhat simple issue but commonly occurs. The act states that a reserve fund study must be conducted within three years of the preceding study.

Auditors frequently find that the corporation has simply not commissioned a new study within the prescribed period. There should be no reason to delay the study past the three years. This should be considered as important as a person’s annual check-up at the doctor, except the corporation only has to do its financial check-up every three years.

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FINANCE

3. Borrowing money “unintentionally” This issue frequently catches boards and management by surprise and usually after the fact. Essentially, a condominium corporation may not borrow money unless it passes a special bylaw (with support from a majority of unit owners) to authorize borrowing. Boards and management may get caught in situations where the supplier provides long-term financing, which may be considered borrowing if it meets certain criteria, such as implied or explicit interest on the financing.

Thus, the board and management should always check the specifics of the financing arrangements and consult with an accountant before signing these contracts. If a borrowing bylaw is required, consult legal counsel, as well.

4. Bank and investment accounts Every condominium corporation in the province must maintain at least two bank accounts with an eligible financial institution in Ontario. One account should be used for the operating activities and the other for the reserve fund activities. Further, these two

■ ■ ■ ■ ■ ■ ■ ■

accounts must be under the corporation’s own name and must be designated as operating and reserve fund bank accounts.

Thus, not meeting any of the above mentioned guidelines would be an issue that the auditor would typically highlight.

Obviously, the solution is to follow these guidelines.

The one issue that auditors frequently encounter, however, is the comingling of cash. Or, more specifically, the corporation is using cash in the reserve fund bank account to finance operating activities. This commonly happens when a corporation has a large operating deficit and uses its reserve fund assets to finance its deficit.

The solution to this issue is proper cash flow management and budgeting, which includes deficit recovery budgeting.

As for investments, the act specifies what a condominium corporation may invest in — what are defined as “eligible investments.”

For obvious reasons, the act allows low-risk investments, such as guaranteed investment certificates, term deposits and some bonds.

The act also requires that the corporation establish an investment plan for the

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John AbedRabbo, CPA, CA, CPA (Illinois) is a chartered public accountant and has more than 15 years of experience in accounting, audit and tax services. John is a partner at Polyzotis & Co. LLP, Chartered Accountants, a Toronto-based firm. John’s practice is focused on providing audit services to more than 90 condominium corporations. He can be reached at 416-360-4310, ext. 240 or by e-mail at: john@polyzotis.com.

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reserve investments. This is essential to ensure liquidity and to safeguard the assets. Frequently, auditors find that condominium corporations don’t have a formal investment plan. This is a simple process and should be based on the reserve fund study.

To avoid these common audit issues, the board should retain the services of a reputable management company that understands the industry and the act, and is willing to work with other professionals.

Upfront consultation is always cheaper than settling the legal issues that may result from not following the act. 1

SENSIBLE RESULTS

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Matthew J. Williams President & CEO C: 905-379-7568 TF: 1(888)-982-6084 E: matthew@penninesecuritysolutions.com Twitter: @penninesecurity www.penninesecuritysolutions.com

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SMART IDEAS

Going with the grain A family business has unlocked the potential to transform condominium doors with an old European art. Wood-graining gives surfaces the look of oak with brush strokes Liz Taylor has plied her trade for more than 30 years, giving doors the appearance of oak with brush strokes.

It was only recently that she unlocked the potential of wood-graining, as the old European art is known, to transform condominiums.

Taylor was referred by her paint store to a corporation that was trying to have difficult-to-match scratches fixed.

She suggested that she wood-grain the superintendent’s room door, which led to work wood-graining the boardroom door, which led to work wood-graining all 23 floors of the building’s suite doors.

“It’s unbelievable what it did to it,” she said. “Instead of just basically painted doors — those industrial-looking doors — they all of a sudden became like hotel doors.”

Taylor learned the art from her father, Albert (Ted), a master builder who began the business after immigrating to Canada from England in the 1970s.

As the story goes, her father offered to wood-grain an opposite neighbour’s purple door on spec. The neighbour liked it, paid him for it, and the business

58 CONDOBUSINESS | Part of the REMI Network

grew organically from there, on a word-of-mouth basis. It probably didn’t hurt when Liz wood-grained her car, which attracted attention wherever she went.

The technique can be applied to any exterior or interior surface that can be painted, whether that’s a garage door, suite door or utility door. The process involves preparing the surface, applying a primer, brushing on the stain and putting in figuring by hand.

Stain colours can be custom-matched to other colours or to bricks and roofs. Taylor has completed purple and white stain wood-graining, among some of the most unusual choices. Mahogany and walnut stains have been more common. And teak stain, which was popular in the 1980s, appears to be making a comeback, she said.

Taylor doesn’t do as much of the work herself these days. She is passing the torch — er, brush — to her son Jesse.

For more information, visit http://www.woodgrainingbyliztaylor.webs.com/.

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