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Are condo *officers* held to a lower standard than directors?

As most of our readers know, the affairs of a condo corporation are managed by a board of directors. But the Condo Act also requires the board to appoint (at least) two officers (the president and the secretary).

Who are these “officers”; who can appoint them and who do they report to?  You may be surprised to learn that they are not submitted to the same level of owner scrutiny and accountability as directors.

What are condo officers?

The Condo Act requires each condo corporation to have (at least) the following officers on the board:

  • A president
  • A secretary

A corporation’s by-law may provide for the appointment of additional officers and we often see condo corporations with a vice-president, a treasurer or other officers.

In addition to officers required under the Condo Act or under your by-laws, the board of directors can appoint additional officers by resolution of the board.

Do office get to vote at board meetings?

The affairs of the corporation are managed by directors, with decisions taken at meetings of directors.  There is no requirement, at law, for officers to be present at these meetings and officers do not get a vote at these meetings (unless they are also a director).

Having said that, it makes sense to have your officers present at most (if not all) meetings of the board.  They usually are allowed to speak and take part in the deliberations but they do not vote.

Who elects officers?

Directors are elected by owners, usually for terms ranging from 1 to 3 years.

Owners do not elect the officers (or at least not directly). They are elected or appointed by the board of directors.

Can the owners remove an officer?

Owners can remove a director before the end of their term if at least 50% of the voting units vote for this removal at a duly called meeting of owners.

Owners cannot vote to remove officers.

Qualifications

The Condo Act provides a list of required qualifications for directors. To qualify, a director must be:

  • an individuals
  • at least 18 years of age
  • not a bankrupt
  • capable of managing property
  • must make the required information disclosure
  • must take the required mandatory training

A condo corporation can adopt by-laws imposing additional qualifications (such as signing a Code of Conduct or having to be an owner or an occupant of the corporation).

None of these qualifications are required of officers.  Literally, anyone can be an officer (although the 18 years of age requirement still generally exist at law below which age individuals lack the required legal capacity to act).

Arrears and liens against the unit

Directors are automatically disqualified if a lien is placed against their unit and is not discharged within 90 days. The same is not true for officers. Theoretically, officers could be in arrears indefinitely without this resulting in their disqualification.

Must officers also be directors?

The President of the board must also be a director but every other officer does not have to be.  On this, the Condo Act expressly provides that:

  • the board must elect a president among themselves
  • the board must elect or appoint a secretary (but does not require this person to be a director).

All this to say that a president must be a director but none of the other officers have to – even though in the vast majority of cases, they are. It would be rather unusual for an officer not to have been elected by owners.

Training

Directors have 6 months from their election or appointment to take a mandatory training.  This training is taken online, at no cost, and is valid for 7 years. This training covers an array of important topics such as:

  • the role of directors
  • effective leadership
  • Board meetings
  • Annual and requisitioned meetings
  • Corporate records
  • Reserve funds; audits, collections and liens
  • Insurance
  • Repairs, maintenance, modifications of common elements
  • The Condo Authority and the Condo Tribunal…

As indicated above, Officers do not have to take this training – although it would be a good idea for them to do so.

Officer disclosure

The Condo Act requires directors to disclose to the ownership certain basic information including:

  • whether they own a unit at the condo
  • whether they occupy their unit
  • whether their unit is in arrears by more than 60 days
  • whether they (or people close to them) are suing the corporation
  • whether they have been convicted of an offence under the Condo Act
  • whether they have a material interest in a contract or transaction involving the condo

Except for the last item, officers do not have to provide this disclosure. Naturally, it’s a good idea for them to do so and we strongly recommend that they do.

Officer do have to disclose the existence of an interest (direct or indirect) in a contract or transaction to which the corporation is a party.

Standard of care

Officers are held to the same standard of care as directors. Indeed, both directors and officers must:

  • Act honestly and in good faith
  • Exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Takeaways

As you can see from above, officers are held to a much lower standard than directors. They are not elected by the owners; they don’t have the same disclosure obligations; they don’t have to take mandatory training; they cannot be removed by the owners and they are not automatically disqualified when their unit falls in arrears…

I suspect most owners would be quite uncomfortable with the above and with what they may perceive to be a less-than-transparent appointment to the board of someone, without any input from them, behind closed doors.

For that reason, it is far preferable, in our view, to appoint officers who are also directors (and have, therefore, been elected by the owners).

We strongly advise against using the appointment of an officer to go around the democratic will of the ownership.  Stated otherwise, a board should not appoint someone to an officer position if that person has lost the election or has been removed by the owners.  In fact, doing so in certain circumstances may breach a director’s statutory standard of care obligations.

Naturally, there are exceptions to that, for instance, where the officer has a specific qualification or skill set that the board needs but, even then, it would be preferable to first advise the ownership that the board is looking to fill such a position and to invite candidates from the ownership (rather than unilaterally impose the board-selected candidate).

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