PART 2: Governing the Profession
In our previous entry, we outlined the types of condominium manager license provided for under the recently proposed draft regulations under the Condominium Management Services Act, 2015 (hereafter, the “CMSA”). But setting out licenses and qualifications isn’t all that the proposed regulations do. In addition, they contain some key provisions that serve to govern the conduct of the condominium management profession. In this entry, we examine those provisions.
Some of those provisions are relatively straightforward. Section 36, for example, lists an array of records that each licensee must keep. There is nothing in the list that is either extraordinary or unusual. In essence, the licensee must retain records that demonstrate having met and maintained the qualifications for licensing, that represent appropriate management of employees and delegates of the licensee, and that represent all the fundamental terms of the licensee’s contracts with clients.
Certain other provisions, however, give rise to some matters worthy of comment.
Proxies
It would be the rare individual involved in condominium law or management who has not heard the term “proxy war”. Unfortunately, it is not just the directors of condominiums that sully their hands with this sort of behavior, but several managers at times – whether to save their own contracts or because they genuinely and in good faith take one or another side in a condominium dispute – also engage in it. Section 53 of the CMSA puts a stop to some of that. It states,
A licensee, or any person acting on behalf of a licensee, shall not solicit an instrument appointing
a proxy for a meeting of owners where the subject matter of the meeting includes, (a) any matter directly
related to the licensee; (b) the removal or the election of one or more of the directors of the client;
or (c) any other prescribed matter.
So far, rather than prescribe other matters for which the manager may not solicit proxies, the draft regulations instead define “solicit” to clarify that what is being prohibited is a manager petitioning for, or trying to directly obtain, a proxy. What is not prohibited are “collecting or holding” proxies, “notifying or reminding owners or mortgagees to submit” proxies if not attending the meeting, providing information on how to submit a proxy, providing proxy forms as part of a notice package or similar communication, or providing proxies upon request.
These clarifications will likely help avoid a number of troublesome and unnecessary accusations, but it is nearly impossible to write perfect laws that adequately define every circumstance. Some line-crossing might still occur (as between, say, “trying to directly obtain” a proxy and trying to obtain a particular vote on a proxy, or between providing information about how to submit a proxy and providing submission requirements that are deliberately made difficult for specific owners to satisfy); so it will remain important for managers to consciously and conscientiously act in an ethical manner by choice and not solely by virtue of legislative restraint.
Disclosure
The draft regulations cover two different issues about which disclosure by a manager is necessary. First, is disclosure of an interest in a contract or transaction; second, is disclosure of insurance.
The latter is straight-forward. Before entering into a contract with a client, the manager is required to disclose the type and amount of insurance coverage that the manager has, and to disclose when that information changes.
The fact that the option exists for the disclosure to indicate the manager has no such insurance suggests that, at this stage at least, the government is not considering making such insurance mandatory (though the CMSA has provisions that would allow for this to happen). It is important for condominiums to know whether that added layer of protection exists.
In regard to disclosure of an interest, the fact that such disclosure is required is not new information. Section 52 of the CMSA already requires this. The purpose of the regulations, according to the CMSA, should be to expand on the form and manner of the disclosure. Instead, what the draft regulations actually do is reiterate and expand the obligation.
The expansion is that, if an obligation to disclose exists, then the manager is not permitted to cause the client to enter into the contract unless such disclosure has occurred and the client has given express written approval to proceed. Such written approval is required regardless of whether authority to enter contracts of the type in question has been formally delegated to the manager. Also, as with a director’s conflicts of interest, the manager who has an interest cannot be present while the proposed agreement or transaction is being discussed.
These are good provisions, of course, but, once again, we recognize that they might only be as effective as a manager is honest. If a manager’s interest is, for example, in the form of a “kick-back” from a contract, which is a dishonest practice in the first place, should we anticipate that the manager in question is going to disclose this fact? In effect, the legislative requirements will more often than not merely help protect an honest manager from suffering undue accusations, while a dishonest one might simply proceed according to his or her status quo.
It may also be noted that the draft regulations do not make any effort to define the type of interest that qualifies for disclosure, leaving it open to the broadest interpretation. Basically, the rule for managers should be: When in doubt, disclose.
Transfer of Records on Termination
Section 37 of the draft regulations is another reiteration and expansion on a provision in the CMSA.
Section 54 of the CMSA already requires that, on termination of the management contract, the manager must “immediately” return all documents and records of the client to the client. Sections 37(1) and (2) of the draft regulations clarify that “immediately” means “no later than 10 days after the termination” in the case of existing documents, and “no later than one month after the termination” with respect to any records that are not in existence that the manager is required to provide.
The balance of section 37 seeks to ensure that managers who make and keep copies of client documents and records after termination (for their own record-keeping purposes) shall keep them secure and confidential.
What stands out in both these provisions and section 54 of the CMSA is that something not dealt with clearly is the transfer, on termination of a contract, of the client’s property, such as keys and financial assets. While it will remain the obvious obligation of the manager not to retain such against the client’s wishes or well-being, it is a little surprising that nothing to this effect gets set out in the legislation.
Complaints
Lastly, Part III of the draft regulations is devoted to the topic of complaints. Again, nothing extraordinary, unusual or otherwise surprising is set out here.
The regulations essentially require that when any complaint or related investigation or action is undertaken with respect to a licensee, the principal condominium manager of the applicable condominium management provider (i.e., company), or the board of directors if the manager is directly employed by a condominium corporation, must be informed.
The regulations further provide that not only shall a manager not do anything to prevent a person from making a complaint, the manager who is under complaint must also not interfere in any way with a person who is required to provide information relating to the complaint to any of the Registrar, the director of the authority that governs licensed managers, the condominium corporation, its board of directors, or the condominium management provider.
In regard to this last point, two issues should be discussed.
First, a manager would be wise not only not to interfere with a potential complainant, but oftentimes should encourage the complaint. Not only will entering the complaint process potentially offer some relief to all parties, particularly as the complainant gets his or her issues “off his/her chest” and transfers responsibility to the Authority to handle, but encouraging a complaint also (a) demonstrates confidence about one’s own conduct and (b) demonstrates confidence in the integrity of the complaint handling process.
Second, directors of corporations should note that the manager subject of the complaint is required not to interfere with the board, but the regulations do not say the manager must cooperate with respect to an individual director. Whether intentional or not, this is consistent with the understanding that individual board members do not have individual authority but must always and only act in accordance with board resolutions. A manager might not be faulted for “interference” if he or she discourages an individual board member from communicating with the investigative authority without the formal assent and authority of the board.
In our next installment, “But what about…?” Answers to key questions about manager licensing.