Condominium Act Update On Stage Two Recommendations – Governance

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NYCTOThe Stage 2 Solutions Report on the Condominium Act review (the “Report”) identifies five key areas for improvement relating to condo governance.  The key areas and recommendations are summarized below:

I.             ACCESS TO RECORDS

One of the most common disputes found in condo corporations relates to owners’ access to records.

The Report outlines the need to balance the rights of owners to have easy access to corporate documents, while at the same time guarding against frivolous demands for documents.  As such, it is recommended that standardized request and response forms be created to facilitate this process.  It is further recommended that access to common corporate documents would be provided for free.  For those documents where a fee is chargeable, the fee should be reasonable and an estimate should be provided in advance so that owners are fully informed of the cost before the request is processed.

The Report also calls for minimum retention periods for corporate documents.  In addition, the Report recommends that the Act should authorize boards to pass by-laws to expand the retention periods.  Where possible, corporations are also encouraged to convert these documents to electronic format, which is smart considering that many older corporations no longer have their corporate records because the documents are not typically housed in one location (i.e. the documents are usually held by management), and management/board members will inevitably change throughout the years.  The electronic storage of these documents would hopefully solve that problem.

II.           MEETINGS

There are some corporations that run very smooth and efficient meetings and there are others (and everyone has seen at least one of these) that adhere to the rules of the Wild West.

One of the major issues regarding meetings is the use of proxies.  Firstly, the Report recommends that proxies be submitted a day in advance of the meeting, which makes sense, especially for larger corporations, where managers madly rush to register the proxies on time so that the meeting can start, when scheduled.  To avoid tampering, anyone voting by proxy must sign next to each candidate or by-law they are endorsing.  Also, the person giving a proxy should be permitted to write in a name rather than merely voting for one of the pre-printed names on the proxy form.

Due to low participation rates, it is often difficult to reach the minimum quorum for meetings.  As such, the Report recommends that the 25% quorum requirement would be applicable for the first two meetings called to discuss a specific issue; however, should attendance fall below that level at the two meetings, quorum would be deemed to be met and the third meeting could proceed with those present either in person or by proxy.  This recommendation attempts to address voter apathy, which is found in many condo corporations.

With respect to by-laws, the Report recommends that the threshold to pass by-laws be lowered, but the appropriate formula/percentage will require further review.

Since many owners complain that boards do not communicate with owners (this is actually the complaint I hear most often at AGMs), the Report recommends that the Act require corporations to communicate with owners on a quarterly basis if the information relates to certain financial matters, the reserve fund or outstanding legal proceedings.

The Report also considers owners’ abilities to raise concerns on meeting agendas and discussed ways to give owners more of a voice at owners meetings.

III.          DIRECTORS AND OFFICERS

Many directors have very little or no experience serving on a board of any kind, let alone a condo board.  As such, you could have individuals making decisions for condo corporations that have multi-million dollar budgets, even though those individuals may have limited exposure and knowledge as to how boards and condos work.  For this reason, the Report recommends mandatory training requirements for first-time directors.  The course would be approximately three hours in length and would be required to be completed within six months of being elected.  If the first-time director does not complete the course within the aforementioned timeframe, he/she could be disqualified.

With respect to board member conduct, the Report recommends creating a code of ethics that is enshrined in law and if board members breach the code of ethics, they could be disqualified.

As for the owner-occupied position, the Report recommends getting rid of it, which I’m sure not many people will lose sleep over.

IV.          USE OF FINES

The Report considers whether boards should have the authority to levy fines against owners for numerous reasons, but due to the possible abuses that could occur, there does not appear to be an appetite for such change.  That said, the Report does give consideration as to whether a disciplinary function of the Condo Office could impose fines.  It appears that no clear-cut decisions have been made on this issue, to date.

V.           OWNERS’ AND DIRECTORS’ RIGHTS AND RESPONSIBILITIES

Many owners and directors seem to be confused as to their respective rights and responsibilities.  As such, the Report recommends that a basic summary of these rights and responsibilities be drafted and incorporated in the Act.  The Report recommends that this document be posted in condo lobbies and attached to status certificates.

This review of the governance section of the Report obviously does not outline every nitty gritty detail, but it does highlight some of the important recommendations.  Stay tuned for summaries on other sections of the Report.

You can provide feedback here on the Report and on the recommendations until November 8, 2013.