Proxies Abuse is Alive in Condominiums

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

QUESTION:  Myself and another candidate recently ran for election to the board against two incumbent directors. The incumbents won, and one of the scrutineers advised me that we would have won based on the votes of those present at the meeting. The incumbent directors won because many of the owners named a director as their proxy and the named director voted for the incumbent directors. The proxy forms sent out to the owners contained the printed name of a director as each owner’s choice of proxy. Was the proxy vote legitimate?

ANSWER:  The Condominium Act states that a proxy form shall be in the prescribed form: a blank for the unit owner to insert the name of the owner’s choice of proxy.

A proxy form in which the board has inserted the name of a director would appear not to be in the prescribed form.

Further, the prescribed form requires the unit owner who appoints the proxy to also name the candidate — or candidates — for whom the proxy is to vote. The proxy form states that the proxy “may only vote for the individuals whose names are set out above.”

A proxy form that does not name a proxy chosen by the unit owner signing the proxy form, and pursuant to which a proxy named by the board votes for persons not named in the proxy by the unit owner, would appear to be improper, and those votes should have been disregarded.

Again, the people at the meeting wanted the two candidates who were not the incumbents.  The owners wanted change.  But because the Board used proxies, and in a questionable way, they (the Board) were able to ensure that there friends would be re-elected, regardless of what the owners truly wanted!

If the Government wanted to fix condominiums then they need to deal with proxy use and abuse.

There are two easy ways to fix this:

  1.  My preferred option is to limit proxies.  Change the Condominium Act to require that no individual can hold more than two proxies, or better yet that everyone from a specific unit can only hold a total of two proxies (basically a married couple can come down with two proxies, not four.)  This limits how many proxies will be used at a meeting, but still allows people to send in a proxy if they cannot attend  meeting.  This seems the fairest option.
  2. The other option is to allow proxies only to be used towards quorum – that means the Board can still ensure that quorum is met but it stops the Board from forcing their decisions through.  While this is not as fair for owners who cannot attend a meeting and thus do not get a vote at a meeting, however unless their vote is based on their own opinions and not based on one sided information provided to them at the door by the person soliciting the proxy, the vote is tainted and not necessarily the way the owner would have voted if he/she knew all the facts.

We need to make condominiums democratic, but as long as the Board can use proxies to get their way at an owners’ meeting, we do not have democracy in condominiums.

Now you may be asking, “But how do we remove directors or pass/amend By-laws with a restriction on the number of proxies that will be handed in?”  The answer is simple: reduce the requirement to either option to a 2/3 majority of votes cast.  The means it still takes more than a simple majority to remove a director or make a change to the By-laws, but it means that the people who actually attend the meeting will make the final decision.  And guess what, if the people who attend the meetings are the ones making the decisions then more owners may end up attending the meetings when they know their opinions matter!

The other question raised was:

QUESTION:  I live in a condominium townhouse development with 32 units. The owners are subject to municipal taxes and common expenses which are, in my opinion, outrageous and which frighten away prospective unit purchasers. Is it possible for the unit owners to convert the 32 units to freehold? I suspect common expenses could be greatly reduced, permitting the units to sell more quickly.

ANSWER:  Terminating the government of the condominium under the Condominium Act requires an affirmative vote of the owners of 80 per cent of the units — in other words, a vote of owners in no fewer than 26 of the 32 units. Once that is accomplished, the Condominium Act would no longer apply to the property and the units would no longer exist as legal entities.

The current unit owners would no longer be owners of units but would be tenants in common of the entire condominium property. No owner would have a unit to sell and proceeds of a sale, which would likely require the approval of all of the tenants in common, would belong not to the former unit owner but to all of the tenants in common. Each owner’s share of those proceeds would require an agreement between all of the tenants in common, as would all other decisions relating to the property — including the manner of sharing expenses, which were previously common-expense obligations of the condominium corporation.

You might wish to discuss with a condo lawyer the specific ramifications for unit owners of your condominium as the result of the termination of the government of the condominium under the Condominium Act.

The obvious issue that I see here is that municipal governments do not know how to handle condominiums.  For example, there are less public sidewalks to maintain, it is easier to collect garbage and recycling from a single location on the property, etc. many municipalities still charge the same rate for property taxes.

At the same time, if there are issues selling units in the condominium, it appears there is more going on.  Is the property being maintained?  Where is it located – beside an airport or near a lake?  There are many factors that may affect why units are not selling better.  Some may be external (location, municipal tax rate, how the real estate market is doing, etc.) and cannot easily be changed especially by the condominium, but other issues may be internal and can be changed – for example, maybe the lobby and hallways need to be renovated or work needs to be done on the garage.

Perhaps local real estate agents who are selling units in the condominium could attend an information meeting with the Board to discuss issues that are going on in the condominium.  For example, perhaps the maintenance fees have increased  recently due to planned work on the garage in two years.  It could be pointed out to potential owners that the slightly higher rates are to try and ensure a special assessment will not be required down the road and will may not increase as much in the future once the work is finished.  Or perhaps the agents will give the Board ideas on how to improve the condominium to get better sales.  Like I said there could be several factors as to why the units are not selling faster.

About Edward Brain

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