Being a director for a recently registered condominium is hard work, but it can be very rewarding. The first year or so after registration the directors will be very busy and face many challenges.
In addition to their ordinary duties (i.e. to manage the affairs of the condominium and ensure the owners comply with the Act and the condominium’s documents), the directors for a new condominium should pay special attention to the following:
1. Performance Audit – The performance audit is an inspection performed by an engineer or architect to determine if there are any deficiencies that could give rise to a claim through Tarion. The performance audit is mandatory for all residential condominiums, even if a claim to Tarion is not possible like in the case of conversion condominiums. The performance audit must be completed within the 6 to 10 months following registration and must be submitted to Tarion before the end of the 11th month following registration.
2. Reserve Fund Study – A reserve fund study is a planning document that helps the board estimate current and future cash requirements for major repairs and replacements of the common elements and assets of the corporation. It must be completed within the first year of registration. The condominium may save some time and money by having the engineer perform the performance audit and the reserve fund study around the same time.
3. First Year Budget Deficit – Many budget statements prepared by Declarant (the developer) are inadequate for the proper operation of the condominium. In some instances the fees are kept unreasonably low and/or expenses are estimated at unrealistic amounts. In other cases, determining operating costs on items such as a garage ramp heating system can run higher than anticipated if weather conditions are colder than anticipate. Luckily for condominiums and owners, the Act states that the Declarant is accountable for the budget statement for one year following registration. This means the condominium can recover a first year deficit, if any, from the Declarant. The condominium must notify the Declarant of the deficit within 30 days of receiving the audited financial statements. The Declarant is obligated to pay the deficit within 30 days of notice from the condominium. If a dispute arises about the deficit, the parties must mediate the dispute, and if necessary, use binding arbitration to resolve it.
4. Agreements entered into by the Declarant – Some agreements entered into by the Declarant on behalf of the condominium may be terminated by the new board, such as the Property Management Agreement (which allows for termination with 60 days written notice). Additionally, agreements for goods, services, facilities, or leases of common elements for business purposes – with 60 days written notice if terminated within 12 months of the turnover meeting. Mutual Use / Shared Facilities Agreements – court may order that the agreement be terminated or amended within 12 months of the turnover meeting. Insurance Trust Agreements – with 60 days written notice.
This list is not exhaustive. The list above includes the most time-sensitive obligations that could cause significant problems for the condominium, directors and owners if they are not completed on time.
You should consult your condominium property manager, or the corporations legal representative for more detailed information.