Question: I'm a director for a new condo. What do I need to know?
Being a director for a recently registered condominium is hard work, but it can be very rewarding. It reminds me of being the parent or caregiver for a newborn. At first, babies need constant attention and a high level of assistance to satisfy even their most basic needs. As they grow older they become more independent and are capable of satisfying their basic needs without much assistance from adults. A condominium is similar. Those first year or so after registration the directors will be very busy and face many challenges, but as the condominium ages it should get easier. In addition to their ordinary duties (i.e. to manage the affairs of the condominium and ensure the owners comply with the Act and the condominium's documents), the directors for a new condominium should pay special attention to the following:
- Performance Audit - The performance audit is an inspection performed by an engineer or architect to determine if there are any deficiencies that could give rise to a claim for payment from Tarion. The performance audit is mandatory for all residential condominiums, even if a claim to Tarion is not possible like in the case of conversion condominiums. The performance audit must be completed within the 6 to 10 months following registration and must be submitted to Tarion before the end of the 11th month following registration.
- Reserve Fund Study - A reserve fund study is a planning document that helps the board estimate current and future cash requirements for major repairs and replacements of the common elements and assets of the corporation. It must be completed within the first year of registration. The condominium may save some time and money by having the engineer performing the performance audit complete the reserve fund study around the same time.
- First Year Budget Deficit - Many budget statements prepared by declarants are grossly inadequate for the proper operation of the condominium. The fees are kept unreasonably low and/or expenses are estimated at unrealistic amounts. Luckily for condominiums and owners, the Act states that the declarant is accountable for the budget statement for one year following registration. This means the condominium can recover a first year deficit, if any, from the declarant. The condominium must notify the declarant of the deficit within 30 days of receiving the audited financial statements. The declarant is obligated to pay the deficit within 30 days of notice from the condominium. If a dispute arises about the deficit, the parties must mediate the dispute, and if necessary, use binding arbitration to resolve it.
- Agreements entered into by the Declarant - Some agreements entered into by the declarant on behalf of the condominium may be terminated by the new board:
- Management Agreements - with 60 days written notice.
- Agreements for goods, services, facilities, or leases of common elements for business purposes - with 60 days written notice if terminated within 12 months of the turnover meeting.
- Mutual Use / Shared Facilities Agreements - court may order that the agreement be terminated or amended within 12 months of the turnover meeting.
- Insurance Trust Agreements - with 60 days written notice.