CAT Says Being Self-Managed is Not an Excuse

[caption id="attachment_9728" align="alignnone" width="1158"] Photo by Matthias Oben on[/caption] In a recent decision the Condominium Authority Tribunal (CAT) was asked to rule on an owner's request for records. The owner requested several records, including audited financial statements, budgets, board meeting minutes, AGM minutes, the most recent PIC, by-laws, employment agreements with any directors, and management contract. The condominium suggested that many of the issues raised by the owner were due to the condominium being self-managed. Spoiler: this was not a reasonable excuse for not providing records. The member quickly determined that the owner was entitled to examine the records. At paragraph 10:
None of the records requested by [the owner] should have given the Corporation pause when considering entitlement as they are all listed in s. 55 (1) of the Act and Reg 48/01 as records the corporation is required to maintain, and no exceptions as per s. 55 (4) apply. Some of the records requested, such as the Board meeting minutes may have been subject to redaction, but as set out below, these records do not exist. In not providing the records, [the Corporation] has refused [the Owner] records to which he is entitled.
The member then had to decide if the condominium had a reasonable excuse for not providing the records. The member rejected the following reasons:
  • The 2018 financial statements were delayed because the head of the auditing company had a heart attack. "The Board could have worked with a different accountant in the same company or hired a different accounting company."
  • Minutes did not exist because the corporation was "self-managed" and no formal board meetings were held. While the member was careful not to provide an opinion on the appropriateness of the Board's choice to make decisions without holding meetings (as this is beyond the jurisdiction of the CAT), the member had some good general comments for self-managed condominiums. The Act does not outline any exceptions or exemptions for self-managed corporations. The list of records in the Act and regulations establish a minimum standard. One of the records is minutes of board meetings. Maintaining records and providing them to owners is "a fundamental factor in providing the openness, transparency and accountability to which owners are entitled." The member commented that maintaining minutes "is also an expression of the board's good faith, care and diligence in regard to corporate record keeping."
  • AGM minutes did not exist because AGMs were not held since 2014.  "In my view, the non-existence of minutes arising from what appears to be a clear failure to hold annual general meetings for several years, which is contrary to the requirements of the Act, cannot constitute a reasonable excuse for not providing those minutes."
As a result, the member found that there was no reasonable excuse for failing to provide most of the records and ordered the condominium to provide various records. The member awarded the owner the maximum penalty of $5,000 plus costs of $200. There was no evidence to suggest that the Corporation was "aware, understands, or takes seriously its responsibilities to maintain proper records and provide owners with the records they are entitled to under the Act." In doing so, the member made note of several worrisome actions or positions of the condominium, including:
  • "Large swaths of records simply do not exist" because of serious non-compliance with the Act
  • The condominium refused to provide a contract on the grounds that it did not exist, only to admit later that it does exist
  • Attempting to blame shortcomings on its "self-management". "Being self-managed does not excuse the Board from these responsibilities..."
There were some other interesting comments in the decision. First, the member confirmed that the CAT does not have jurisdiction to order access to information. The owner requested information about the term of directors and next election dates, but the member found that it could not order this information to be provided. Second, the member did not penalize the condominium for failing to provide a record when the owner's record request form was not clear. Once the issue was cleared up during the CAT process it became clearer and the member ordered the condominium to provide the record. Third, the member commented on various accusations made by both the owner and the directors about the poor conduct and harassing behaviour of the other. "I can only address this behaviour and evidence insofar as it relates to the issue of records...Whether or not the Board was unhappy with [the Owner's] behaviour, does not change the entitlement to the records under the Act." This case serves as an excellent reminder for condominiums and directors to fulfill their obligations to maintain adequate records and produce them to owners upon request, subject to the exemptions in s.55(4) or necessary redactions. Being self-managed is not an excuse for non-compliance with the Act. If directors are not capable or willing to fulfill their duties and comply with the Act they should hire outside management to assist them. Several companies are now providing partial management service contracts for accounting and other compliance issues. This can be a great option if a full management services contract is cost prohibitive.