April 20th, 2016
This article was published in CCI Review a publication of Canadian Condominium Insitute.
In examining the topic of removal of directors under the Condominium Act, 1998, it is important to first review the responsibility and role of the board of directors of a condominium corporation.
The board of directors is mandated to “manage the affairs of the corporation”. To “manage” is to exercise a supervisory and administrative role in the operations of the corporation. The board is to direct, and others perform to the direction.
Practically speaking, the task of managing condominium affairs will vary from condominium to condominium depending upon the complexity of the property, assets and operations, including whether or not the corporation has engaged professional property management.
The board, then, is the body primarily responsible for ensuring the provisions of the Condominium Act, the declaration, by-laws and rules are respected, and as such the board will be the focal point for dissatisfaction of any and all owners.
Other that the first board's term of office, which is dependent upon the turnover of the condominium by the declarant, all board members elected at and after the turnover meeting will hold office for three years or, if the by-laws so prescribe, a lesser period. By-laws can provide for staggered terms for directors or the allocation of directors positions amongst certain units, provided the one owner one vote rule prevails.
A director's position on the board will automatically terminate upon the end of that director's term in office, if a certificate of lien is registered against a unit owned by the director that is not discharged within 90 days of the lien being registered, or upon the director's bankruptcy or inability to manage property. What happens, though, if someone, or a group of people, wish to remove the director without one of these events being triggered?
Any director can be removed from office by a vote of the unit owners. In the case of a director elected under section 51(6) by owner-occupants, the director may be removed by a vote of more than 50% of the owner-occupants. Other directors may be removed where the owners of more than 50% of all the units in the corporation vote in favour of removal. Section 33 makes it clear that the 50% plus 1 requirement is not merely a quorum requirement, as courts have held under the previous section 15(8), but instead the owners of more than 50% of all the voting units in the condominium corporation must vote in favour of removal.
A new director may or may not be elected at the same meeting to replace a director who has been removed. Any director elected as a replacement for a director who was removed would complete the term of the director so removed.
The only legal way to remove a director is by following the procedures of the Condominium Act.
In many cases a vote to remove a director is held at a meeting requisitioned by unit owners, and not called by the board. Any owner, or group of owners, who own not less than 15% of the units, who are listed on the corporation's records as owners and who are entitled to vote, may requisition a meeting of the owners to deal with the business set out in the requisition. The requisition must be in writing and signed by the requisitionists, state the nature of the business to be presented in the meeting and be delivered personally or by registered mail to the president or secretary of the board or deposited at the address for service of the corporation.
If the business of the meeting, though, is to include the removal of a director, the requisition must state, for each director to be voted on at the meeting, the name of the applicable director, whether or not the director was elected by owner-occupants, and specific reasons for removal. Proxy voting is permitted, however, it is important to remember the requirement that any instrument appointing a proxy for the election or removal of a director must state the name of the directors for and against whom the proxy is to vote.
A condominium can impose further requirements related to the qualification, nomination, election, resignation, removal or term of office of directors by way of a by-law, approved in accordance with the Condominium Act. Any term of the by-law, however, that is contrary to the Condominium Act will be null and void, and the provisions of the Act will govern.
Some of the above will also change once the provisions of the Protecting Condominium Owners Act, 2015, come into force.
Removing a director should not be taken lightly, by either the board or unit owners. Before any steps to remove a director are taken, or if a director or a board finds itself the subject of a removal action, it is important to review the provisions of the Condominium Act and the corporation's by-laws applicable to the matter at hand, and, as always, consultation with a lawyer is highly recommended.
Matthew Wilson, a lawyer at the London, Ontario office of Lerners LLP, represents condominium corporations, property managers, developers and home buyers throughout Ontario. An active member of the local community, he was named one of London's 20 Under 40 for 2013. Matthew can be reached at email@example.com or 519-640-6357.