The big news story in Ontario politics lately is the premier’s decision to step down and prorogue the legislature until a leadership convention is held to choose a new party leader. That leadership convention will take place in late January, just under three months from now. Until then, the legislature and its work is suspended and proposed legislation is effectively dead. Some have called the growing use of prorogation as an affront to democracy.
While prorogation has no immediately comparable concept in the condominium world, the failure to hold a condo annual general meeting (“AGM”) comes pretty close. There are few or no other things a condo board can do to thwart or frustrate unit owners’ democratic rights than deny the owners their statutory right to meet and receive the financial statements, appoint auditors and elect directors on a regular basis.
Holding condo AGMs is required by statute. Section 45(2) of the Condominium Act, 1998 (“the Act”) provides:
The board shall hold a general meeting of owners not more than three months after the registration of the declaration and description and subsequently within six months of the end of each fiscal year of the corporation.
The corporation’s obligation to hold an AGM within this timeframe is absolute. While there may be a legitimate reason why this timeframe cannot be met in any given year, delays should be the rare exception rather than the rule. As a best practice, any delay in holding the AGM should be preceded by providing the unit owners with a cogent explanation for the delay and a commitment to hold the AGM soon and by a certain fixed date.
One of the more common scenarios that might necessitate a short delay in holding an AGM is where the condominium’s auditor has not completed the audit or delivered the financial statements and report required by sections 66 and 67 of the Act. Those statements and report are a critical part of the AGM because section 69 provides as follows:
Delivery of statements
69. (1) The board shall place before each annual general meeting,
(a) the financial statements as approved by the board;
(b) the auditor’s report; and
(c) all further information respecting the financial position of the corporation that the by-laws of the corporation require.
Copy with notice of meeting
(2) The corporation shall attach to the notice of the annual general meeting a copy of the financial statements and the auditor’s report.
Where the auditor cannot deliver financial statement and reports in time for the meeting to be held within 6 months of fiscal year-end, the board or management should ask the auditor for a written explanation for the delay and an estimate as to when the statements and report will be complete. This would be the least information any unit owner should expect to receive where the delay in holding the AGM relates to the delivery of the financial statements and auditor’s report. Besides, if the auditor is the cause of the delay, there is no sense in the board or management taking the heat unnecessarily. On the other hand, if the auditor’s work is held up or obstructed by the board or management, the responsible party should own up to the resulting delay in convening the AGM.
A delay in the auditor completing its work, which would ordinarily create a delay of a few short weeks, is one of the very few legitimate reasons for an AGM to be delayed beyond the statutory deadline. In fact, unusually long delays (being 3 months or more beyond 6 months after fiscal year-end) are rare and should be viewed as a serious warning sign. This is because holding AGMs is among the most fundamental and important parts of condominium democracy. Indeed, the AGM is where the board accounts for itself and receives its mandate from the owners. Given the critical role of the AGM and the statutory obligation to hold it within a certain period of time, refusing or failing to call and hold an AGM in a timely way gives the strong impression of impropriety and destroys the presumption of a board’s innocence and good faith. It is, after all, a breach of the law, and thus it may be proper for the board’s feet to be put to the fire for a needless delay.
Without a compelling reason communicated in a timely way, it is understandable and perhaps even prudent for any right-minded condo unit owner to view a board’s failure to hold an AGM within 12-16 months of the previous meeting as a clear signal that the board has no appreciation of its role and obligations, or any regard for the owners’ democratic rights or, even worse, that the board is deliberately concealing theft or fraud, its gross ineptitude, indecision or arrogance. Any of these things justify taking steps to change the composition of the board. This usually requires requisitioning a meeting for the AGM business to be held or, alternatively, to remove and replace the directors.
The board’s response to such requisitions is revealing of its motives and the directors’ view of democracy. When a board seems to be “holding on too tightly” to power and creates improper arguments or obstacles to holding a meeting, owners are correct to become suspicious and to obtain legal advice to help them enforce their rights using the Condo Act processes or, in extreme cases, the courts. Boards that recognize the importance of owners' rights will convene a requisitioned meeting without delay and present themselves to the owners to give their explanation and to receive the owners' verdict of their performance.
While the buck always stops with the board for any decision it makes, condominium managers or lawyers that condone or facilitate a condo board’s improper denial of owners’ democratic rights place themselves in harm’s way and likely deserve to be dismissed by a new board. It is true that managers and lawyers have an obligation to follow a condo board’s instructions, but they must also give the board good advice, having regard to all applicable legal requirements and the fact that the rights of the ownership as a whole must be respected. If they choose not to resign, managers or lawyers receiving instructions from a board which may be contrary to the law or common sense should state their objections to those instructions in writing and insist that the board acknowledge the objection and confirm the offending instructions.
Although it is no excuse, one factor that increases the likelihood of a condo board choosing not to hold regular AGMs is the perception that the unit owners do not care. When owners don’t attend AGMs, file proxies or stand for election, one can see how a board could get the impression that the owners have abrogated their democratic rights, do not care about their condominium and are content to be ruled in a dictatorial manner. It is often said that we Canadians “get the government that we deserve.” That concept seems to ring true. If unit owners expect to enjoy their democratic rights, their muscles must be regularly exercised by attending meetings, filing proxies, voting, standing for election and by remaining eternally vigilant. When those rights are infringed, offenders should be made to understand that such acts are unwelcome and will not stand.
Like other levels of government, boards of condominiums that suspend, interfere with or obstruct how democratic processes function should be shown the door.