Property Management
Short Answer
Management of the
condominium property (units, common elements and assets) and usually also
referencing management or governance of the condominium corporation.
Definition
The term “property management” in relation to condominium corporations, usually pertains to management of all of the condominium corporation’s physical, financial, and administrative affairs, although it primarily ensures the proper maintenance and upkeep of the condominium property.
Property management of a condominium property is first and foremost the obligation of the condominium corporation’s board of directors. In fact, the Condominium Act, 1998, (“the Act”) makes almost no mention of professional managers, other than to make note of the fact that a condominium corporation may hire one (see section 111 of the Act). Typically, however, since effective and responsible self-management of a condominium can impose significant burdens of time, effort and liability on volunteer directors, most corporations (other than small ones that may not be able to afford the fees) hire professional condominium property managers to assist the board in all or virtually all affairs.
Property management of a condominium property is first and foremost the obligation of the condominium corporation’s board of directors. In fact, the Condominium Act, 1998, (“the Act”) makes almost no mention of professional managers, other than to make note of the fact that a condominium corporation may hire one (see section 111 of the Act). Typically, however, since effective and responsible self-management of a condominium can impose significant burdens of time, effort and liability on volunteer directors, most corporations (other than small ones that may not be able to afford the fees) hire professional condominium property managers to assist the board in all or virtually all affairs.
New legislation introduced in Spring 2015 - namely, the Protecting Condominium Owners Act, 2015, which includes the proposed Condominium Management Services Act, 2015 - provides for standards, licensing and governance of professional condominium managers. In an interim summary report of the the review process leading up to the drafting of this new legislation, the following conclusions and recommendations were set out:
The qualifications of condominium managers are another common concern given the knowledge and experience required to provide effective administration and informed advice to board members that oversee large budgets. Owners complained about being charged exorbitant fees and paying for unnecessary building work, as well as being victims of management fraud, such as contract kickbacks. Another issue is the potential conflict of interest arising from the management of both residential and commercial space. While some managers may be legitimately overworked, others experience relationship breakdowns with boards that are either unresponsive or quick to replace management companies that disagree with their decisions.
Recommendations
· Regulate condominium management companies and license managers to establish and enforce professional standards of practice.
· Consider establishing qualification standards and making existing training programs mandatory.
· Establish stronger rules and regulations regarding contracts and reserve fund expenditures approved by condominium managers.
This article will be updated as needed prior to such new law coming into effect.
What you need to know…
|
…as a Unit Owner
The default rule under the Act is that unit owners are responsible for the maintenance of their own units, and the condominium corporation is responsible to maintain and repair the common elements and to repair the units after damage. However, the Act allows for various provisions in a condominium’s declaration that can make the corporatino responsible to maintain all or part of each unit, or make unit owners responsible to repair their own units after damage, to maintain some or all of the common elements, and/or to maintain and repair after damage those portions (if any) of the common elements over which they have exclusive use. A condominium corporation can also enact by-laws that set out maintenance standards. As a result, maintenance and repair obligations can differ from condominium to condominium and owners need to know the obligations that are set out in their condominium’s governing documents. Where professional property management has been hired, the manager may assist the board of directors in enforcing, and assist owners in understanding and fulfilling, such obligations. Managers generally also assist the board of directors in responding to unit owner requests. |
…as a Board Member
Ultimately, the board of directors is where the “buck stops”. Although professional management may be hired, the manager never takes the place of the board as the directing mind and will of the corporation. Boards of directors who fail to thoughtfully hire and oversee the activities of their managers, fail to satisfy the standards of conduct set out in section 37 of the Act: in particular, they fail to satisfy the duty to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. However, it is not unreasonable for the board of directors to rely upon qualified, competent professional management to advise it in the carrying out of its duties, and where such advice is reasonably relied upon, the liability for it may be borne by the manager. Condominium managers may be responsible for a wide range of matters pertaining to the governance of the condominium corporation and maintenance and repair of the condominium property. Since the Act does not currently specify any of the duties of a condominium manager, the obligations of the manager should be set out clearly in a written agreement executed by the manager and the board of directors. The board may restrict its manager to carrying out only particular duties and may manage other matters directly. For example, a manager may be hired to handle only physical maintenance and repair issues while a board member or hired bookkeeper handles the corporation’s finances. (It should be noted that whoever receives and handles contributions to the common expenses and other funds of the corporation - whether a professional property manager, board member or other person - does so as a trustee and is expected to meet the high standards of care, honesty and integrity that are suggested by that title.) When selecting a property manager, the board should consider the nature and type of condominium and carefully select the specific management duties expected of the property manager. Amongst the many factors a board may take into consideration when choosing a property manager are the following typical duties:
Where there is no professional property manager in place, the total obligation to manage the affairs and property of the corporation rest solely with the board of directors. It is typically the view of condominium lawyers in Ontario that a change from self-management to professional management, or vice versa, is a change in the services of the corporation subject to the provisions of section 97 of the Act. |
…as a Manager
The court in Ontario has specified certain minimum standards of competence for professional condominium property managers as follows: "A professional condominium property manager must be familiar with the requirements of all applicable legislation and must advise the board of directors of a condominium regarding its obligations under the condominium legislation. It must keep abreast of changes and advise its client of new requirements. … It is the responsibility of the property manager to advise a board on its obligations under the legislation and to resign if the board demands that the manager violate the law. This is the standard of care required of every competent professional property manager." (In Larlyn Property Management Ltd. v. Waterloo North Condominium Corp. No. 71, et al., [2007] O.J. No. 1044.)
A manager should not act outside of the mandate established by the management agreement or in any manner that is inconsistent with the Act and the governing documents of the condominium corporation in question.
Although many tasks may be delegated to the property manager, the actual authority of the board of directors is not, or should not be, delegated by any means. Accordingly, board approval will be required for various matters. Typically, for minor matters (such a routine maintenance and inspections) and emergencies (such as major flood damage or fire), such approval is inherent in the management agreement, where a manager may be permitted to bind the corporation to contracts up to specified maximum amounts or in particular circumstances. Property managers are generally invited to attend all board meetings (except, for example, where their performance or contracts are under discussion) and provide detailed reports to the board on a regular basis. Commonly, professional property managers will assist the board in respect of its responsibilities pertaining to collecting monthly contributions to the common expenses, payroll for onsite staff, drafting the annual budget, arranging for audits, and creating monthly and annual financial statements. In such cases, management should be required to bring complete financial data to each board meeting and ensure that proper accounting principles and adequate documentary security practices are applied. It is also usual for the professional manager to assist the board in enforcing the rules (and other governing documents) of the condominium. Enforcement can include simple matters such as letters to unit owners who have breached such rules, and couldo entail more serious steps such as retaining and instructing legal counsel and communicating with the board and unit owners with respect to mediation, arbitration and court proceedings and lien collection measures. Typically, the property manager is not an employee of the condominium corporation, but an independent contractor who may service numerous different condominiums. If a manager is hired to work solely for one corporation, however, it is possible the manager will be designated an employee for taxation and employment law purposes. |
…as a Declarant
When developing the condominium, the declarant should consider who (as between the corporation and the unit owners) should be responsible for maintenance and repair of various components of the property. This consideration can influence the determination of which components are to be designated as units or as common elements, and, as to the latter category, which (if any) of those should be designated for an owner’s exclusive use. The outcome of such considerations should be coherently reflected in the condominium’s proposed declaration and by-laws (particularly referencing the standard unit definition and maintenance standards by-laws, if any). A declarant may wish to involve an experienced property manager prior to registration of the condominium corporation. Managers can be effective in helping ensure the declarant establishes a reasonable initial operating budget for the condominium. The manager can also be hired to assist with purchasers’ needs and concerns during any period of interim occupancy and through the transition to turn-over. Note that if management contract is put in place by the declarant prior to turn-over, and is intended to continue after turn-over, the new, owner-elected board of directors may terminate that agreement at any time on 60 days’ notice. (See section 111 of the Act.) |