Romantic relationship could create board conflict

There is a rumour that one of our board members and our superintendent are in an amorous relationship. Does that create a conflict for the board member in voting on matters that would affect the superintendent?

If a matter such as the renewal of the superintendent’s contract comes before the board for a vote, and if the board determines that the amorous relationship exists and constitutes a material direct or indirect interest of the director in the contract extension — which is questionable — the director must disclose the situation. This must be done at the meeting when the contract is first considered. The director cannot be present when the board discusses the contract. Our management company has pretty much hijacked our board of directors, to the extent that the manager runs the corporation’s affairs. The manager now insists on first receiving all communications intended for the directors from condo owners. But the messages do not reach the board. What can we do?

The Condominium Act specifies that the board shall manage the affairs of the corporation. The manager’s role is to advise the board and to carry out its instructions.

The directors should be advised that, in failing to manage the corporation, they are in breach of the act and in breach of the requirement that they act honestly and in good faith.

If the board fails to take steps to rectify the situation, a unit owner could make a court application under section 134 of the condo act re- questing an order requiring the board to take such steps. Alternatively an owner could make a court application for the appointment of an administrator under section 131 of the act for the purpose of reclaiming the management of the corporation.

Afurther possibility would be for at least 15 per cent of the owners to requisition an owners’ meeting for a vote on the removal of those directors who are not willing to reestablish the board’s management authority. Removal of a director requires an affirmative vote of owners of more than 50 per cent of the units. Our condo corporation has a mortgage, but the budget prepared by the board only reflects the interest payments. Our audited financial statements will show principal and interest payments of $120,000 for the current year, but the budget will show only the interest portion of approximately one-half of that amount. Is this satisfactory?

The budget should show both the principal and interest payments. The common-expense contributions col- lected from the owners will likely be insufficient to meet the corporation’s financial obligations if the contributions are based on a budget which does not correctly show the total obligation. If reserve fund expenditures diminish the fund to an amount that is less than the amount required, as indicated by the reserve fund study, should the deficiency be made up by a special assessment or by an increase in future common expense contributions? Can special assessments be paid in a number of annual installments?

The deficiency can be made up either by a special assessment or by a common-expense contribution increase provided that the latter method will produce the funds necessary to meet expected reserve-fund expenditures when required. Lawyer Gerry Hyman is a former president of the Canadian Condominium Institute and author of Condominium Handbook. Send questions to gerry@gerryhyman.com or fax to his attention at 416-925-8492.