Canada: Board Must Guard Against Conflict Of Interest

Last Updated: October 21 2014
Article by Robert Noce

Q: Our condominium board has recently learned that an owner in our townhouse complex has been renting out rooms to boarders. This is against our bylaws. Two of the three boarders have moved out, but one remains. The owner has now advised the board that the remaining boarder is family. What can we do?

A: Retain a lawyer to determine whether you are interpreting your bylaws correctly. Then you can figure out whether or not the owner is in fact breaching the bylaw. You must be careful about how "family" is defined in your bylaws.

Helpful hint: Boards are entitled to gather information to determine whether or not an owner is in fact in breach of a bylaw. However, you have to do it with respect and in accordance with the law.

Q: As a board member submitting an issue about my unit to the property manager, I am being excluded from discussions on this issue with the larger board, due to conflict of interest. Normally, I would excuse myself in voting on the issue but not from the discussion. Is this normal?

A: Yes; if you are a board member and there is a matter before the board in which you have an interest, not only should you not vote on the matter, but you should leave the meeting room and allow the board to debate the issue without you in the room. I find that approach totally acceptable.

Helpful hint: Leaving the meeting room avoids any perception that you influenced the voting process.

Q: Our condo board, without notice or discussion with owners, just passed a $560,000 special assessment to replace the roof and elevators. We have been given six months to pay it all, with no voting by the owners. Can the board do this for that amount of money without concurrence of the majority of the owners?

A: Boards are entitled to make decisions with respect to the repair and replacement of corporation property, subject to your bylaws. The bigger issue for me, however, is the fact that the condominium corporation may be poorly managed in that it has failed to put money aside for these major expenditures on a monthly basis as part of the condo fees. When corporations issue special assessments it is because they have tried to keep condo fees low and hope that when issues arise, they will simply ask people to pay a one-time amount.

Helpful hint: Condominium corporations really need to budget properly to ensure that monthly condo fees not only cover their operating expenses but also set money aside for future needs. These types of special assessments hurt owners significantly and put a lot of pressure on people to pay.

Q: When we purchased our condo, we were aware of a special assessment that had been declared earlier that year. We received confirmation from the board that the special assessment had been paid as required by the unit owner at the time. A couple months later, the board decided that the assessment had been too high and declared a refund, to be paid only to the unit owners that had paid. We have indicated that we should receive the assessment refund, not the previous owner. Is this correct?

A: It is difficult to answer your question because I do not know whether or not the purchase price of your unit reflected the payment of the special assessment. My initial reaction would be that the condominium corporation is doing the right thing in that it is refunding the money to the person who actually paid the money. If you wanted to make sure that you, as the new owner, were to receive the money, then the purchase agreement between you and the seller should have reflected that fact. Since you have not indicated that your purchase agreement had any such clause, I would suggest that the condominium corporation is acting appropriately.

Helpful hint: Written agreements are put together to provide people with an understanding as to what should happen if a particular situation were to arise.

Q: Our bylaws state that owners renting out their units must provide the board with a $900 deposit and a complete tenant information form that includes the tenants' names and signatures acknowledging that they have read and understand the bylaws. A lot of owners who rent their units have not complied. Is the board within its right to impose fines on these owners for each month that goes by that they still have not complied? Our bylaws state that we can impose fines if an owner contravenes a bylaw. Can we evict the tenants?

A: First, the Condominium Property Act says that the maximum amount of the deposit cannot exceed the monthly rent that the tenant pays the owner. If the tenant pays $700 per month, then the amount of $900 is illegal. Having a blanket amount may not comply with the Condominium Property Act. Therefore, further investigation is required. Second, I would need to review your bylaws to determine whether or not this is in fact something for which a fine can be issued. Finally, if there is non-compliance with the Condominium Property Act, specifically the deposit, you could make an application in the Court of Queen's Bench getting an order compelling the owner to comply with your requirements.

Helpful hint: Owners are required to provide information to the condominium corporation about their tenants, and condominium corporations can demand a damage deposit. Owners must comply.

Originally published in The Edmonton Journal

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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