Making Condominiums Democratic

I’d like to discuss how to make condominiums democratic.  This can be handled easily, with easy amendments to the Condominium Act.

Let’s discuss those changes:

1)      Limit or remove proxies.  While I would like to say that proxies should be eliminated totally, it is practical to limit the number of proxies that a single person may hold.  This allows owners who legitimately cannot attend a meeting to still be represented.  But this still stops a small group of people from controlling the outcome of a meeting.  I am suggesting a limit of one proxy per person for a condominium under 100 units and two proxies per person above this.  Why the difference?  Simple, in a smaller condominium fewer owners means that if one person has three votes (their vote and two proxies) means that the person has more influence over the final vote.   But in a larger condominium, more owners can attend in person which means that the two ‘extra’ votes do not have as much influence.

2)      Reduce the requirement to remove a director.  Currently, Section 33(1) of the Condominium Act requires a majority vote of all unit owners.  That means owners representing more than half of the units must vote yes.  This is simply not practical.  Any unit not represented is a therefore a no vote.  Also, if less than 50% of the owners show up, the meeting is pointless even if quorum (25% of the units) is met.  The owners who take the time to show up should make the decision so my recommendation is to make this a vote based on a 2/3 majority of votes casts.  This means that any unit that does not vote will not affect the final total.

3)      Reduce the requirement to approve/alter/change a By-law.  Currently, Section 56(10) requires owners of the majority of units to approve the change.  This is the same requirement as with the removal of a director, and should be changed to a 2/3 majority of votes cast.  Also, under the current Act, the Board must first approve a motion before the owners can do so.  This is something that must also change – this means that a term limit by-law will never be passed by a condominium because the Board is not likely to pass a by-law that will limit their ability to rule the condominium.

4)  Term limits for directors.  Instead of leaving it up to a condominium, the Act should be changed to provide for term limits for directors.  You can serve three terms and then you must step down for a term.

5)  The owners should have the ultimate power to decide the fate of the condominium.  In other words, while the Board should have power over certain issues – such as selecting a contractor for Reserve Fund work or passing the Budget.  However, most issues can be, and should be, open to the ultimate decision of the owners.  For example, if the owners are unsatisfied with the performance of the property management company, then the owners should have the power to instruct the Board to end the management contract when the term ends (most contracts allow either ‘party’ to inform the other party that it will not be renewing the contract, usually with 60 days notice) and to start the process of hiring a new property management company.

6)  Committees.  Under the current Act, the only committee that is referred to is an Audit Committee (Section 68) although the owners are ultimately responsible for the approval of the Audited Statements and the Audit Committee is to be comprised of Board members, the last people you want reviewing their own work.  In situations of condominiums sharing joint common elements (normally condominiums registered prior to 2001 when the current Act came into force), they may have a joint “Management Committee.”  Again here, the Committee is comprised of Board members only, so the Committee will not be accountable to anyone but the Board itself.

My recommendation is that the right to an Audit Committee be removed from the Act, and that information about joint ‘Management Committees’ be changed so that a) it is easier for condominiums located on the same property be able to amalgamate, and b) that any ‘Management Committee’ be comprised of directors and owners/residents, but that directors shall not comprise a ‘majority of the membership of the committee’ thus keeping the power of the committee in the hands of the owners.  These representatives will be elected by the owners at the AGM, not the Board.  This means that the people representing each condominium will actually represent the position of the owners of the condominium.

7)  Amalgamation of condominiums.  While the current Act allows two or more condominiums to amalgamate, prior to 2001 it was impossible for ‘phased’ condominiums.  ‘Phased condominiums’ are condominiums where a developer puts up more than one condominium tower in a development, but can register the entire property as one condominium.  Prior to 2001 each highrise would have to be registered as a condominium once a specific number of units were sold.  That meant that one property could see two or more condominiums.  My recommendation is that the requirement for amalgamation be reduced from written approval of 90% of each condominium (Section 120) to written approval of 60% of the units, as long as the condominiums are located on the same property.  You might be asking why, but the reason is that there should not be such a high threshold, especially as it makes sense for condominiums on the same property to amalgamate.

8)  Budget Meetings.  Currently, only one meeting every year must be held, the AGM.  However, I am also suggesting that a Budget Information Meeting be obligated for a condominium so that the owners have a chance to question the Board on the Budget that they have set.  Also, if the the proposed increase to the maintenance fees are more than double the current inflation rate (as determined by Statistics Canada) then the condominium must hold a vote of the owners to approve the increase in the maintenance fees.  The rationale for this is to hold the Board accountable.  Increases to the maintenance fees thanks to inflation is obvious, but if increases are too much over, it suggests that the Board needs at least one very good reason, or several, to justify the increase.  For example, if the increase is to help pay for cosmetic work such as hallway renovations, then the owners should decide on either or not they want a large maintenance fee increase to cover the costs.

8)  Contingency Fund.  Currently, the Act only allows surpluses to be spent placed into the Reserve Fund or used to offset increases in the maintenance fees (Section 84(2).)  However, a contingency fund can be used to offset non-reserve fund repairs, or operating costs above the revenues of the condominium (i.e. the maintenance fees, interest, party room rentals, etc.)  Any interest earned on money in the contingency fund must be applied to the contingency fund.  This helps stops the vote required in #7 above if the Board knows about a large, generally legitimate, increase in operating expenses (such as a large increase in utility costs.)

9)  Uniform Declarations.  Currently, Declarations between condominiums, even ‘sister condominiums (i.e. those built on the same property, but separately registered) can have different Declarations.  My recommendation is that Declarations for condominiums be made uniform through a fill in the blank form style to be used in creation of the Declaration.

10)  Maintenance Fees improvements.  As with #9 above, where the schedule for maintenance fees are found, the maintenance fees should be applied to divide up costs based on how they are incurred, not just on either square footage (the ‘default position’) or on the number of units.  This means that costs such as management fees, legal fees, Auditor’s fee, etc. that are based on the number of units or where the person/people work equally for all owners are divided up equally amongst all the owners.  Costs, such as heating and air conditioning, that would be affected by square footage of the unit would therefore be divided up according to the size of each unit (i.e. larger units would take more heat to warm up, so naturally a larger unit should pay more maintenance fees to cover these costs.)  However, in most cases costs can be divided up by a per unit method rather than square footage unless the size of units differ by more than 10%.  Also, as each unit only has one vote, in most cases it is fair that expenses are divided up the same way (i.e. if there are 150 units, then each unit would pay 1/150th of the expenses.)

11)  Ombudsman’s Office.  The best thing that can occur to improve the democracy to condominiums is to have an Ombudsman’s Office, as this would hold Boards accountable for their actions.  Owners who have an issue will no longer have to go through mediation, arbitration, and the courts.  Owners would be able to go straight to the Ombudsman’s Office, with people who are experienced in condominiums, for assistance.  This would also have a place for condominiums to send their approved Audited Statements, and copies of their Declaration, By-laws, and Rules to.  This gives the Office something to work with, before contacting the condominium to help deal with any issues, and to make sure that Audited Statements have been approved and that everything is legitimate (although most documents, such as the By-laws, have to be registered with the land registry office before taking effect.)  So, an Ombudsman’s Office would make things more efficient, yet also assist owners in the operation of their condominium.

So, let’s hope democracy comes to condominiums in the near future.

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