Condo manager licensing and regulation is the focus of our first in-depth examination of the changes proposed in Bill 106 (Protecting Condominium Owners Act, 2015). This is a natural choice considering that manager licensing and regulation constitutes the largest change in our condominium law since 1967, in terms of how condominiums in Ontario are operated, the credentials of the people who operate them and the protections afforded to unit owners.
Of all of the proposed changes set out in Bill 106, none are nearly as profound or as desperately-needed as establishing mandatory qualifications, licensing and regulation for condo managers.
This post kicks off the first of a multi-part series. We start with the current state of affairs in condominium management and why the time has come for substantial change.
Considering the high values of the properties they manage and the vast sums of money moving under their control daily, it’s damned peculiar that condo managers and management firms are not and have never been subject to any mandatory qualifications or regulation.
It is astonishing but true that hot dog vendors on street corners are far more heavily-regulated than condo managers responsible for overseeing the largest asset that most Ontarians will ever own. The hot dog vendor’s acts or omissions might lead to a few cases of food poisoning or the odd death but the condo manager’s mistakes or misdeeds can easily lead to calamity of a greater magnitude for a larger number of people. The gaping hole in the condominium sector compared to our otherwise well-regulated daily existence is blatantly obvious.
While the majority of condo managers do good work every day, there are people and firms managing condominiums in Ontario who have no business doing so. Be they well-meaning but inept, capable but unethical or experienced but lacking current knowledge, too many condo managers are poorly-equipped to serve condo corporations and unit owners. Let’s explore a few major features of the status quo and why the public interest demands change.
First: There are presently no legal restrictions against minors, undischarged bankrupts or mentally incapable individuals managing condominiums while condo directors have been subject to these three critical qualifications since day 1 of condominiums in Ontario. A bankrupt individual managing condominiums is a fox in the henhouse. This exact scenario played itself out in Toronto in 2009, where a bankrupt manager defrauded a dozen small condominiums in Toronto, including our client MTCC 764, of over a million dollars collectively. It is a travesty that this can happen and too many unit owners have paid the price.
Second: Experience tells us that police do not and cannot perform the functions of a regulator. It is a mistake to believe that law enforcement prevents crime and it is equally naïve to expect police to stop thieves or facilitate recovery of financial losses. And even if a rogue manager is caught, charged and convicted (none of which is assured in any case), there is no effective safeguard to prevent that individual from re-entering the condo management field and re-offending.
Most schools and organizations that serve children require workers and volunteers to undergo police checks for relevant criminal convictions and individuals with criminal pasts or questionable character are stopped at the gates of many professions, including lawyers. But not for condominiums, whether managers or directors. Giving ex-cons a second chance to make an honest living managing condos is a leap of faith that can fall short with costly consequences. Similarly, rogue operators can run firms into the ground and then reappear with fresh corporate identities that shroud their true owners and controlling minds.
There is presently no way for the public to know who actually stands behind a management firm and whether an individual manager has major financial problems or criminal convictions. How can anyone trust a person or firm without having access to a reliable source of essential background information and knowledge that someone is performing basic screening?
Third: The world of condominiums today is vastly more complex than 50 years ago or even 10 years ago. Condo boards and managers today grapple with human rights, occupational health and safety, employee and taxation issues, construction and technical specifications, Internet-educated consumers and much more, all requiring a solid educational foundation and continuous specialized learning to deal with this stuff effectively. We condo lawyers make our living in large part cleaning up messes arising from condo boards and managers making poor choices based on faulty knowledge, so we can instantly draw the link between superior knowledge and better decisions and performance. A better-educated manager is a better manager, period.
Fourth: Condo directors are often better-insured than their condo manager and management firm, even though the latter are more likely than the board to make a costly mistake that could be remedied by having adequate insurance coverage. It is also sadly predictable in many fraud cases to see a management contract specifically requiring the manager to carry fidelity insurance but that no such policy has been obtained or kept and no one ever bothered to check. This leaves condo corporations improperly insured and therefore exposed to losses that could have been recoverable through insurance.
Fifth: At the moment, a shady condo board can hire and fire management firms until they find one that will gladly carry out improper or illegal instructions. Not all managers and management firms abide by a code of conduct, obey the law or pledge their primary loyalty and obligation to the ownership at large.
For these reasons and others, there can be no debate as to the dire need for minimum mandatory standards, licensing and regulation for condo managers. The concept is decades overdue and the time for action is unquestionably NOW.