Boards can Always get Second Opinion

Gerry Hyman has another article for the Toronto Star.  Let’s discuss some of the questions raised:

QUESTION:  Is the board of directors obligated to accept the conclusions of a Reserve Fund Study?

ANSWER:  The board, within 15 days of receiving such a study, must propose a plan for the future financing of the reserve fund. The plan must ensure that, in accordance with the Condominium Act and regulations, the fund will be adequate to provide sufficient moneys for the major repairs and replacements of the common elements and assets of the corporation. These are calculated on the basis of the expected repair and replacement costs and the life expectancy of the common elements and assets.

Provided that the proposed plan meets those requirements, the plan may vary from the study. Within 15 days of preparing the plan, the board must send a notice to the owners containing a summary of the plan and a statement indicating the areas in which the plan differs from the study.

Mr. Hyman’s response is correct, with regards to how to fund the reserve fund.  However, his response misses the question completely.  The Board is under no requirement to accept Reserve Fund Study itself.  If the Board finds the study to be inadequate, the Board has two options:

  1.  The Board can request the Engineering firm correct issues with the Study.  For example, if the elevators have been replaced/overhauled in the last five years, then it is unlikely that they will need major work five years from now.  The Engineering firm may not have taken into account when the last major work was undertaken, or the Board’s maintenance programme which will allow work to be held off for a longer period of time.  As such, the Board should ask for those corrections to be taken into account and a new Study prepared.
  2.  The Board can hire another firm to undertake a Reserve Fund Study.

The second option is the best option, and the one that the Board can undertake.  Of course, it should be noted that as the Engineering firm is working on the Study that the Board should insist on receiving a draft copy of the Study for review.  Then any issues the Board may have can be dealt with – and when done it should mean that Option #1 above should never be required.

Another question raised was:

QUESTION:  During the summer months, my elderly mother and several other women sit on benches outside their condo buildings and enjoy each other’s company. In cooler weather, they move inside to the lobby. They have now been told by management that they are not allowed to congregate there and should move to the party room. Are the ladies permitted to meet in the lobby, since it is a common element?

ANSWER:  Owners have the right to make reasonable use of the common elements subject to the Condominium Act, the declaration, bylaws and rules. In the absence of a rule prohibiting owners congregating in the lobby, they should be entitled to do so.

If there is such a rule it must be reasonable in order to be valid. A court, however, will not override the decision of the board on the reasonableness of a rule unless the court determines that the rule is clearly unreasonable.

If the board considers such meetings of owners in the lobby to be esthetically undesirable and perhaps objectionable to many other owners and given the availability of a party room, the rule is not likely clearly unreasonable and will be found to be valid.

I love how Mr. Hyman suggests that the Board may consider these ‘meetings’ to be ‘esthetically undesirable’.  When did the Board suddenly own the condominium and what gives them the right to decide what is ‘esthetically undesirable’ or not?  If they are receiving complaints from other owners, then I understand that the Board has to deal with the issue.  Even then, it should be done as a suggestion, and not an order.  Perhaps, the Board should point out, if other owners find these meetings objectionable, that this is the case, and that the Board would appreciate the owners moving to the party room.

The Board could even look into how to make the party room more comfortable for owners to use if necessary – and even look at setting up a Social Committee to handle things like coffee groups, card afternoons/evenings, etc. in the party room.  From what I get from the question, it sounds like these owners are looking at being social and interacting with each other.  And this should be encouraged, not discouraged.

Lastly, I’d like to discuss this question:

QUESTION:  Can homeowners ask for the removal of a director because he or she has moved and is no longer a unit owner in the condo?

ANSWER:  Asking for the removal will not suffice. An affirmative vote for the director’s removal by more than 50 per cent of all of the owners in the condominium must be obtained.

Owners of at least 15 per cent of the condominium units may submit a requisition to the board requiring the board to call and hold a meeting for the vote. The requisition must state a reason for the requested removal. There are no guidelines as to the nature of the reason to be stated so that any reason should suffice except perhaps a reason that is contrary to public policy — such as a removal based on the religion of the director.

Stating that the reason is the non-residency of the director should be satisfactory notwithstanding that the bylaws do not require directors to be residents.

Of course, the owners are free to ask the director to resign.  While nothing in the Condominium Act requires the director to resign simply because he/she is no longer an owner or resident, the By-laws could be amended to require this.  Unless the person has some skills or knowledge that can be beneficial to the condominium, it is normally better to have a director with a vested interest in the condominium (i.e. an owner or resident), but at the same time there is nothing wrong with this situation.

Of course, it is hard to force removal thanks to the high requirement for the vote – the easier option is to simply wait until the annual meeting and then vote for a new person to be a director.  But, at the same time the Condominium Act should be amended to allow for the owners to remove a director by a two-thirds vote of votes cast – in other words if two out of three owners who bother to show up at a meeting want the director removed, then that is sufficient.

About Edward Brain

I am a long time condo activist and have a background in Business Administration.
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