Post by: Meghan MacDonald
We have noticed lately that it is becoming difficult to obtain the required quorum of unit owners at condominium turnover meetings. The purpose of the turnover meeting is for the Declarant of the condominium to hand over control of the condominium to the unit owners and in particular, elect a new board of directors to replace the directors appointed by the Declarant. This meeting must take place once the Declarant ceases to own a majority of the units in the condominium pursuant to Section 43 of the Condominium Act, 1998.
This lack of attendance at turnover meetings by unit owners may be due to the fact that more and more condominium units are being purchased by investors who are not as concerned about the day to day operations of the condominium as the owners who live in the condominium.
In order to have a valid meeting, there must be a quorum at the meeting. Quorum simply means the number of owners that must be present in person or represented by proxy at the meeting. For meetings of owners, this is usually 25%. In some cases this threshold is varied by by-law so you should be sure to confirm this with legal counsel but for the purposes of this blog, we will assume quorum is 25%. If quorum is not achieved, the meeting is not valid and any actions taken at the meeting are of no force or effect.
Once you have obtained quorum, you may think that your problems are over. Sadly, this is not the case. The Condominium Act has another requirement that can cause significant headaches. This is the requirement that all questions proposed for consideration of the owners at a meeting of owners must be determined by a majority of the votes cast by owners present at the meeting in person or by proxy.
What does this mean? We think that the wording of the Act means, with respect to the election of the new board, that every director must be elected by a majority of the votes cast at the meeting.
For example, if we have 40 units in a condominium we need 10 unit owners represented in person or by proxies to achieve quorum.
Applying the requirement for a majority vote and assuming just 10 owners are present in person or by proxy, for a director to be elected in this example, he or she needs to obtain 6 votes. That means at least 6 owners must be present in person or 6 proxies allow their proxy to vote for that person or there is some combination thereof. If the proxies each name different candidates it may be difficult to get a majority of those present in person or by proxy to vote in favour of the same candidates.
As one can see, there are some fairly significant hurdles to getting the new board elected. We think that simply putting directors in place by acclamation where the number of candidates equals the number of vacant positions may not be supported by the Act. James Davidson has a good article on that point.
If a new board is not elected at the turnover meeting of a phased condominium this could affect the Declarant’s ability to register a subsequent phase of the condominium.
What is apparent is that all efforts must be made to encourage owners to attend meetings of owners. Further, proxies must be solicited from those owners who will not attend and that there is consensus on the directors to be elected in order to achieve the majority vote. Legal counsel can assist with this process.
We hope that in the proposed amendments to the Condominium Act the requirements for quorum at turnover meetings is relaxed and some of the issues with respect to voting are clarified so that lack of quorum and issues of majority voting even if there are only enough candidates to fill the vacant positions can be avoided because it’s important for the condominium board to be turned over to the unit owners as soon as possible. The unit owners and not the Declarant should be managing the affairs of the condominium once a majority of the units are sold.