In the normal life of an Ontario-based condominium corporation, there is an annual general meeting (AGM) of owners, and part of every AGM agenda is the election of directors. Terms expire and existing directors seek re-election, or new candidates put their names forward to participate in the day-to-day operations of the community. This process typically ensures a smooth transition between condo boards. The directors whose terms aren’t up, or whom retain their seats, can bring new directors up to speed on the corporation’s recent history so its business can continue on without interruption.
There are two scenarios that have the potential to cause major upheaval in a condominium’s governance: owners vote in their first elected board at a turnover meeting for a new building, or a successful petition by 15 per cent or more of the owners prompts a meeting at which a majority of owners vote to remove the existing board and re-elect a new board. In either case, careful planning and transparent communication can help smooth the transition.
Scenario 1: A new board is elected at turnover
In new communities, once the developer is no longer the majority owner of units, Ontario’s Condominium Act requires that a meeting of owners be held to ‘turn over’ the operation of the condominium from the declarant board to a new owner-elected board. Owners, who were essentially tenants of the declarant until that point, get a chance to vote for the candidates they believe are best qualified to run the community.
Following turnover, the main struggle is for the three to five strangers elected to the board to operate through the growing pains of establishing a successful working relationship. With time, these kinks work themselves out, but the first two years in new communities are crucial in establishing policies and procedures, completing the performance audit process and setting the budget plan.
Establishing an effective group dynamic doesn’t need to wait until after the turnover meeting. Interested volunteers (who likely want to run for a seat on the owner-elected board) can strike a steering committee as a vehicle for working with the declarant board and property management. The committee’s activities may include attending board meetings and assisting with the development of policies and procedures.
Then, when it comes time to vote in their first elected board, owners can be confident that committee members already have some real community experience. And, assuming some or all of the committee’s members are elected at turnover, their early team work will help to alleviate the new board’s growing pains when its focus should be on maintaining a successful community and communicating positive messages to residents.
A professional management company can support new owner-elected boards by providing consistency during the changeover, ensuring the continuation of existing operations and offering integral insight into the performance audit process.
Scenario 2: A board of directors resigns or is removed
In existing condominiums, the resignation or removal of an entire board can be chaos for the community. These situations often stem from — and perpetuate — the spread of rumours, involvement of lawyers and loss of owners’ confidence. The board is put on the defensive for reasons that may or may not be valid. And, if there has been a breach of faith, property values may decrease and sales may grind to a halt while the upheaval is happening. The condo becomes high risk and the impact reaches beyond the board and into neighbouring communities, potentially tarnishing the reputation of the entire neighbourhood.
If a majority of the board has resigned, a meeting of owners must be called to elect new members. In the interim, no further decisions can be made by the remaining board members (if any) or management.
Or, if the owners are not satisfied that the sitting board of directors is representing them in a fair and reasonable manner, they can circulate a petition. The signatures of more than 15 per cent of owners are needed to prompt a meeting. If a majority of owners vote to remove the board, an election takes place and an entire new board takes over.
In this case, a new board will need to rely on its property management team, lawyer, auditor and engineer to get caught up to speed on the corporation’s recent history. (Hopefully the board has not removed all of these external stakeholders.)
One common reason owners want sweeping change in governance is due to lack of trust. The key to recovering from these situations — and avoiding them in the future — is transparency. Regular communication with residents is essential to good governance; so is the maintenance of proper records, a task the management company will perform on behalf of the condominium. It’s important that owners be able to obtain access to these records upon reasonable request.
However an entirely new board is elected, owners who have had the opportunity to participate in a fair election process should be satisfied that the best candidates have been chosen to represent the community. Directors in transition face difficulties in the short term, but with careful planning and open communication, they can move toward realizing the ultimate reward of their volunteer position: keeping a majority of residents in their community satisfied.
Tania Haluk, BA, RCM, is the vice president, operations, start-up team for FirstService Residential. She can be reached at tania.haluk@fsresidential.com or 416-847-2339.
