NOT ONLY IN FLORIDA
Article Courtesy of The Toronto Star
Posted December 18, 2005
Recognize anyone you know?
If you've ever served on a condo board or two, or have been a property manager, you may have run up against a condo commando.
No, not all boards have one. But those that do can suffer from paralysis, bad decision-making — or worse.
When one person — often the president — is so intimidating that other board members are too afraid to challenge him or her, things can quickly degenerate, driving away good property management and jeopardizing property values.
Think about it: A typical 200-unit building has an insured value of about $50 million, not including land value. Should one person be allowed to put that at risk?
A condominium corporation is a legal entity and its directors have a responsibility to shareholders — that's you, the owners — to act in good faith, ethically and honestly, and democratically.
Power and ego drive condo commandos, who feel they "have the authority to do what they want, when they want and treat whoever they want how they want," says John Oakes, president of Brookfield Management Services Ltd., which governs about 45,000 units spread among 245 corporations in the Greater Toronto Area.
"It's like the prime minister or premier completely controlling cabinet," he says. "There has to be leadership and consensus."
Oakes is quick to point out there are many good, dedicated directors out there.
But, he cautions, a commando dominating a spineless board can quickly send a condo corporation into a negative cycle. For example, not raising condo fees as necessary may lead to a special assessment down the road, earning the ire of owners, who may in turn turf out the board at the next annual general meeting.
One former condo president likens the challenge to the dilemma politicians face regarding tax hikes.
"When people ask about raising condo fees, I say it doesn't take courage to lower taxes, it takes courage to raise them."
That statement was his most effective tool in dealing with the sticky issue, he says.
"If you raise (fees) a little bit, regularly, people grumble, but when something big comes along that costs you and you have the money, they cheer."
All buildings age, so a lack of money combined with a big expense creates two crises, he says. Being fiscally prudent means there's no crisis, because you have the money to deal with whatever arises.
Board members should face down a condo commando, but few have the strength to do so, says Peter Dubyk, president of Andrejs Management Inc.
He knows of one board that staged a successful "intervention." The board members asked for the president's resignation or said they would force her out. She resigned.
The long-standing president of another board "threw a tantrum" when the directors wanted to appoint a new leader upon re-election. The directors stuck by their guns — and he quit.
(Owners elect directors at the annual meeting; directors then choose a president from among themselves).
A browbeaten board can take action by drawing up a petition to force a member's removal. It must name the person and the reason, and be supported by 15 per cent of the owners. (Owners can also do this on their own, but it's usually an acrimonious affair).
Within 30 days, the board must call and hold a meeting. A vote of 51 per cent of unit owners in favour of removal carries.
Let's face it: Board members are going to disagree. It's part of having a full and frank airing of issues. If a director vehemently disagrees with a decision, he or she should state it on the record and have it recorded in the minutes.
Once a decision has been made, however, directors should present a common front. If a director can't live with a decision, he or she should resign, rather than badmouthing the board.
"If you undermine your board, usually you are undermining your community," says Dubyk, who has been in the business for about 25 years and whose company manages about 60 condo corporations, with a combined 10,000 units.
If no one on the board reins in the commando — who often micro-manages day-to-day affairs — a good property manager will bail out. A revolving door on the property manager's office is a sign there isn't a good working relationship with the board.
When boards understand their role as a team of overseers, it goes a long way toward the smooth running of the building.
Oakes compares it to directors on a hospital board.
"You better know what the patients think of your hospital. You better know that you've got a good staff and what the staff is doing and have a pretty good understanding of what's going on in your hospital," he says. "But you're not going to be standing in the operating room telling the doctor to take out this particular kidney."
In other words, condo boards should step back and let property managers do their jobs.
Inspecting units after a flood or directing cleaning and security staff are all jobs for the manager. When liens or powers of sales must be registered, that, too, is the manager's job. Not getting personally involved means everyone gets treated equally under the law.
Having good practices in place can also give peace of mind to boards that have been burned by bad management before. For example, make sure contracts are properly tendered for maintenance and repair. Accepted wisdom is that any expenditure over $1,000 requires three quotes from companies with proper references.
When directors "go fishing" for quotes but don't follow through after a manager has interviewed potential contractors, they may find themselves out of luck in the future. Good companies will stop bidding.
With 26 years' experience in property management, Ray Wilson, president of Wilson, Blanchard Management Inc., says managers usually have a list of preferred suppliers. This can help avoid conflicts of interest — such as when a director recommends a "friend" who turns out to be less than honourable. As in politics, it's best to avoid even the appearance of a conflict.
Wilson, whose firm manages 245 condo corporations with a combined 15,000 units, says once a firm is selected, it is the directors who are responsible for signing contracts.
Speaking of contracts, Wilson says it's imperative that new board members familiarize themselves with their own management agreements, service contracts, financial statements and minutes. Ditto for their corporation's bylaws, rules and declaration.
It's heady stuff, but necessary when running the financial affairs of what can be a multi-million-dollar corporation. Help is available at the Canadian Condominium Institute, which offers courses for directors. (Go to http://www.cci.ca and follow the links to your area chapter.)
A good property manager can be the board's best ally, guiding directors through the difficult tasks they face. Although the manager answers to the board, Oakes says they also have an obligation to lead the board.
For example, say a board has a reserve fund study done, but refuses to implement a plan because the board members disagree with the study or are afraid of having to levy a special assessment or raise fees substantially. A good property manager will remind them of their liabilities under the Condo Act. (Legally, they can't refuse to implement the plan, unless they get another study done.)
Directors bear heavy responsibility these days. They're unpaid, under-appreciated and can face the wrath of their neighbors while trapped in an elevator or parking their car.
It's not a job for everyone.
After taking the tough decisions — such as a balcony or crumbling garage repair, or stickhandling a long, complicated lawsuit — it's tough to face heat over carpet stains or dead flowers. Scarier still is when someone is either not aware of the big picture or, with malicious intent, whips up the owners to unseat hard-working board members — and then runs and gets elected.
One former president's prudent advice? "You want people on the board who don't want to be on the board."
Ignore that advice at your building's peril.