Owners can now make more informed decisions about the people they are electing as directors to manage the affairs of their corporation. The Ontario government has introduced new training and disclosure obligations for directors to ensure that condominium properties are effectively managed.

The Protecting Condominium Owners Act (the “New Act”) and associated regulations (the “New Regulations”) redefine the qualification and disqualification criteria for directors. Specifically, s. 29 of the New Act requires directors to comply with new training and disclosure obligations, which came into force on November 1, 2017. Failure to comply will result in the immediate disqualification and removal of a director.

Please note that directors who were elected or appointed prior to November 1, 2017 are exempt from the new training and initial disclosure obligations for the remainder of their term. Any director elected, appointed or re-elected after November 1, 2017 will be subject to all training, initial disclosure and ongoing disclosure requirements imposed by the New Act. All Directors, new and existing, are still required to comply with the ongoing disclosure obligations (discussed in further detail below).

This article will discuss the following questions:

  1. How do directors satisfy the new training obligations?
  2. What are the new disclosure obligations for directors?
  3. When are directors required to provide this information?

How do directors satisfy the new training obligations?

Directors are currently required to complete the Condominium Director Training Program designated by the Condominium Authority of Ontario. This is a free online training program designed to help directors understand their role and responsibilities.

Some of the topics covered in this training program are:

  • Legal framework governing condominium corporations;
  • General rules of conduct for directors at board meetings;
  • Best practices for conducting owners meetings;
  • Obligations regarding corporate records;
  • Role of the board in managing the corporation’s finances;
  • Role of the board in maintaining the condominium property;
  • Information to be shared by the board; and
  • Role of new condominium authorities, including the Condominium Authority of Ontario, the Condominium Authority Tribunal, and the Condominium Management Regulatory Authority of Ontario.

 

In our view, this mandatory training program provides directors with a basic understanding of how condominium corporations and properties should be managed. The CAO advises that there are 21 modules, which “can be completed in any order and at any pace”. The CAO further advises that there will no formal knowledge and understanding assessments in the mandatory training program. Instead directors will be asked to interact with the online module by answering multiple choice questions from time to time. We expect that directors can easily satisfy the new training requirements.

All directors must complete the entire training program within six months of being appointed, elected or re-elected to a board after November 1, 2017. Only directors of a pre-turnover board are exempt from mandatory training, provided that they are not subsequently elected as directors at the turnover meeting.

Directors must also submit a copy of their certificate of completion to the corporation within 15 days of completing their training. This certificate is valid for seven years. The New Act does not require directors to complete any renewal or ongoing training programs. It appears that mandatory training is only imposed on “new” directors as a means of ensuring that all directors have a foundational understanding of their role and responsibilities in managing the corporation and the condominium property.

 

What are the new disclosure obligations for directors?

The New Act requires directors to disclose information that may create a conflict of interest. These mandatory disclosure requirements aim to increase the transparency and accountability of the board. Directors are required to provide the following information so that owners can act as a check on the board’s power.

Directors must disclose:

  • If they are not owners or occupiers of a unit in the corporation;
  • If they are in arrears of their common expense contribution for 60 days or more;
  • If they[1] are a party to any legal action[2] to which the corporation is a party;
  • If they have been convicted of an offence under the Condominium Act within the preceding 10 years;
  • If they have a direct or indirect interest in a contract or transaction to which the corporation, the declarant or declarant affiliate is a party[3], provided that they are not acting as a purchaser, mortgagee, owner or occupier of a unit; and
  • Any other information required by a by-law of the corporation.

All information must be current at the time of disclosure and will be available to all owners. The new disclosure obligations will hopefully get the “right” directors elected.

When are directors required to provide this information?

All persons who wish to be elected, or appointed, as directors are required provide this information in advance of voting, either orally or in writing.[4] The New Act seeks to protect owners by ensuring that all requisite information relating to the potential directors is available for review before any decisions are made on who to elect.

Ongoing disclosure obligations apply for the entire duration of a director’s term. Directors[5] are generally required to make the disclosures prescribed in the New Regulations within 30 days of becoming aware of that information or at the first meeting after becoming aware of that information, whichever is earlier. The new disclosure obligations are onerous given their broad definitions. Accordingly, we recommend that you consult with legal counsel if you have any question about your initial or ongoing disclosure obligations.

Prepared by Emily Ng

© Deacon, Spears, Fedson + Montizambert, 2017. All rights reserved.

 

[1] With respect to information regarding legal actions, the New Regulations require directors to make disclosures about themselves, their spouse, their child or their parent, or the child or parent of their spouse, or the occupier of a unit that they or their spouse own, or the occupier of a unit that the person occupies with the occupier. However, there is no requirement for directors to disclose information about a legal action involving the condominium corporation and another corporation for which the person serves as a director, officer or employee (e.g. when a condominium corporation brings an application for a compliance order against a numbered company who owns a unit in the condominium corporation and rents out the unit on a short term basis).

[2] The New Regulations do not define the term “legal action”, which could be problematic. It is unclear whether directors are required to disclose information regarding all legal proceedings, including applications and tribunal hearings, or simply legal actions as defined in the Rules of Civil Procedures.

[3] Please note that s. 40 of the Condominium Act also requires directors to disclose in writing the particulars of a material direct or indirect interest in a contract or transaction to which the corporation is a party. This new disclosure obligation maintains the requirement for materiality, but requires the same information to be provided to the owners, not just the board.

[4] Directors must sign all disclosures made in writing.

[5] The term “directors” in this instance includes directors elected or appointed prior to November 1, 2017.

Financial management changes under the Protecting Condominium Owners Act