A closer look at the Report on Governance Issues for Stratas: Should the Strata Property Act establish statutory qualifications for council members?


5 March 2019

By Kevin Zakreski

This post is the part of a series highlighting key recommendations in the Report on Governance Issues for Stratas. For other entries in the series, click here.

Brief description of the issue

The Strata Property Act’s provision on “eligibility for council” only limits strata-council members to “(a) owners; (b) individuals representing corporate owners; [and] (c) tenants who . . . have been assigned a landlord’s right to stand for council.”

Given the responsibilities of strata-council members, should the act establish qualifications the must be met by a person who wants to be a council member?

Discussion of options for reform

Setting out statutory qualifications for strata-council members was one part of a major set of reforms proposed in Ontario’s Condominium Act review. The review’s final report (at page 41) set out the following reasons for this recommendation:

Because condo owners come from all walks of life, many have little or no experience serving on a board of directors or dealing with the issues that a board must address. Board inexperience creates risks for condo communities. It can lead to poor decisions on repairs, investments or insurance coverage. It can also make directors vulnerable to more savvy managers, lawyers, contractors or even other directors who may try to take advantage of their inexperience.

Statutory qualifications can also protect strata corporations from having unscrupulous people take positions on their councils.

Ontario accepted this recommendation and included a provision on statutory qualifications in its Protecting Condominium Owners Act, 2015. When the bulk of the provisions of that act came into force on 1 November 2017, this provision became a part of Ontario’s Condominium Act, 1998:

Qualifications

  1. (1) No person shall be a director if,

(a)     the person is not an individual;

(b)     the person is under 18 years of age;

(c)     the person has the status of bankrupt;

(d)     the person has been found, under the Substitute Decisions Act, 1992 or the Mental Health Act, to be incapable of managing property;

(e)     subject to the regulations, the person has been found to be incapable by any court in Canada or elsewhere; or

(f)     the person has not complied with the prescribed disclosure obligations within the prescribed time.

Disqualification

(2)     A person immediately ceases to be a director if,

(a)     the person has the status of bankrupt;

(b)     the person has been found, under the Substitute Decisions Act, 1992 or the Mental Health Act, to be incapable of managing property;

(c)     subject to the regulations, the person has been found to be incapable by any court in Canada or elsewhere;

(d)     a certificate of lien has been registered under subsection 85 (2) against a unit owned by the person and the person does not obtain a discharge of the lien under subsection 85 (7) within 90 days of the registration of the certificate of lien;

(e)     the person has not completed the prescribed training within the prescribed time; or

(f)     the person has not complied with the prescribed disclosure obligations within the prescribed time.

While the Ontario provision breaks new ground for strata corporations, similar provisions are commonly found in Canadian for-profit and not-for-profit corporate statutes.

The main disadvantage of such statutory qualifications is that they can make it that much harder to recruit people to serve on council. And, as the stage-two report for Ontario’s Condominium Act review noted at page 41, “there is also a risk of making the role of a director so demanding that owners are discouraged from standing for office.”

The committee’s recommendation for reform

The committee was aware of needing to walk a fine line on this issue. The absence of statutory qualifications for strata-council members opens the door to a host of potential problems for strata-corporation governance. But a too-ambitious set of qualifications would likely impair the recruitment of council members, which would cause its own set of concerns. For the committee, the balance is best struck by taking a cautious approach and using established criteria from other British Columbia corporate statutes. In this vein, the committee has modelled its proposals on the qualifications for directors found in the recently enacted Societies Act.

The vast majority of consultation respondents agreed with the committee’s tentative recommendation on this issue.

The committee recommends:

The Strata Property Act should require that a strata-council member (a) must be an individual who is at least 18 years of age, and (b) despite item (a), an individual is not qualified to be a strata-council member if the individual is (i) found by any court, in Canada or elsewhere, to be incapable of managing the individual’s own affairs, (ii) an undischarged bankrupt, or (iii) convicted in or out of British Columbia of an offence in connection with the promotion, formation, or management of a corporation or unincorporated entity, or of an offence involving fraud.

The committee is aware that implementing this proposal would likely require a consequential amendment that made it clear that section 9 (2) of the Schedule of Standard Bylaws is subject to compliance with the statutory qualifications for council members.

For more information, visit the Strata Property Law—Phase Two Project webpage or read the Report on Governance Issues for Stratas.

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