CPA Retirement: Should you join a condo board?
In an ongoing series about retirement planning for CPAs, a look at the pros and cons of joining a condominium board
IF you’re like a lot of CPAs, the number one topic on your mind is retirement. Perhaps you’re thinking of selling your house into a hot housing market and downsizing to a condo. If so, what are the pros and cons of joining a condo board? Is it a worthwhile way to spend your retirement years as a (retired) CPA?
It’s no secret that Canada’s population is aging and baby boomers are retiring en masse.
In 2017, for the first time, Canada has more people over the age of 65 than under 15. And this trend is particularly acute in the accounting profession, which traditionally skews older than the general workforce, and where succession planning is a hot topic among practitioners.
Canadian Accountant will explore various aspects of retirement planning over the coming year. In this article, we explore the social and financial implications of volunteering as a board member in a condo (Ontario), a strata council member (B.C.), or as the syndicate of a divided co-property (copropriété divisée, Quebec).
Why do it?
According to Michael Clifton, a partner with Ontario law firm Clifton Kok, which practises real property and condominium law, “for all its virtues, board membership is a difficult, thankless and usually completely voluntary job.”
The adjective “thankless” is a word one often hears from board members. “Being a director is a thankless job,” says Marilyn Lincoln, who writes the Condo Culture column for the PostMedia Network. “However, we need volunteer directors who are able to communicate, help owners when they need assistance with problems, make sure the condo fees are collected and up to date, ensure reserve fund studies are up to par, oversee contractors regarding repairs and replacements, etc.”
Most unit owners expect the building to run smoothly and will only be heard from when things go wrong. “There’s something inherently wrong with the system — and I say this with humour,” says Rodrigue (Rod) Escayola, a partner in Gowling WLG's Ottawa office, who has been on the board of directors at his condo for years.
Escayola points out that people who downsize to condos have, by definition, decided they no longer want to be responsible for the extensive maintenance of their homes. Yet board members suddenly find, “I have to deal with fire drills and elevator maintenance and chillers and risers and pipers … why even do it?
“You do it, I think, because you truly want to make a difference, you truly want to help. Sometimes it’s misguided. [People] want to organize the Christmas party or have their say in the colour scheme of the plants outside. But that discussion lasts about five minutes and then you need to focus on reserve funds, insurance, compliance and governance.”
Yet, in joining a condo board, you take an active role in how your community is managed, from infrastructure repairs to interior design and decoration to social events. “If I’m not going to do it,” says Escayola, “who is going to? Year after year, we have great difficulty filling in the ranks. Nobody lines up to get on the board.”
Why (not) do it?
Paramount among the reasons for joining one’s board is to protect one’s asset. “That is maybe the most important consideration,” says Escayola. “I want to make sure the reserve fund is properly funded, the maintenance is properly done, and I know I have the knowledge, the expertise and the energy.”
Marilyn Lincoln concurs. “In short , most condo owners want to become directors so they can oversee their investment. Most want a say in how their condominium is managed [ … ] so they get on board to try to improve things that they are not happy with. Some join a board because they feel they will have more power or control over their property.”
Accounting, finance and, in some cases, negotiation skills, are highly valued. As a financial custodian, board members get an inside look at the budget, expenses and contracts with maintenance, property management, and third-party vendors and contractors. You get an opportunity to determine where to focus the board’s priorities and resources. And you learn about your building and all its aspects in ways that other owners will never see.
In personal terms, condo board experience is often seen as a first step towards more personally rewarding board experience and directorship positions, especially in the not-for-profit sector. If you envision a retirement rich with board positions at not-for-profits, your own condo board is a good place to start the process.
Finally, aside from all logistical factors, there’s the social aspect of joining a board. Under ideal circumstances, board members get to know their fellow directors very well and can form bonds that last throughout their retirement years. The best condo buildings have a sense of community that is typically driven at the board level. Board members, especially retirees, can find the experience immensely rewarding.
Lincoln, however, sounds a note of caution. "If anything, a new director usually is more likely to distance themselves from many owners. This is because the owners see a new director in a different light. This owner is wearing two hats now, owner hat and director hat. Many other owners just see the director hat."
Will I be paid?
In a word, no. “Although remuneration in the sense of a cash payment is quite rare,” explains Michael Clifton, “there are actually many condominiums that seek to reward directors by means of an annual dinner or some such demonstration of appreciation.” In all cases, according to Clifton, such benefits need to be established by bylaw.
“What I’ve heard people sometimes do,” says Escayola, “is give a ‘break’ on some of the common expenses, the condo fees. Either way, if you’re going to provide any form of compensation, there needs to be a bylaw adopted at the corporation level.”
Lisa Frey, a real estate lawyer and associate in the Vancouver office of Gowling WLG, confirms that “Yes, remuneration for strata council members in B.C. is [also] very rare.” Says Frey, “That strata council members are volunteers and spend countless stressful hours without any financial reward is so common that it is almost a cliché!”
Condominum legislation across Canada includes detailed procedures regarding the disclosure of any conflict of interest by a director or officer of a condominium corporation. As several recent, high-profile cases in Ontario have made clear, mismanagement or outright fraud may occur when board members are managing multi-million dollar budgets and contracting with property management companies and third-party vendors. A CPA designation and the code of professional conduct provides assurance of good governance when running for a seat on the board.
How does new condo legislation in Ontario affect CPAs?
Ontario’s new Protecting Condominium Owners Act, 2015, will come into force later this year, replacing the Condominium Act of 1998.
While there does not appear to be any change to board remuneration under the new Act and its regulations, directors will receive mandatory training and there are new requirements for directors to disclose information such as potential conflicts. “I think this will be a huge improvement […] because too many directors are not as informed or educated as they should be regarding the Condominium Act of Ontario,” says Lincoln.
Chartered Professional Accountants, however, are exempt from a new regulation under the Act that prohibits anyone from providing condominium management services unless they are licensed as either a condo manager or managemement services provider — as long as those services are within the scope of a CPA's professional services. As Michael Clifton points out, this would not apply to a CPA who was hired as a property manager — that individual would still require licensing — but CPAs do not require a licence to provide management services.
What are management services?
Says Escayola, “The definition of condo management includes steps that may otherwise be taken by professionals, for instance, collecting funds. So if you’re collecting common expenses or you’re providing an opinion on the reserve fund, all of these things are steps that would otherwise fall under condo management. So we carve out this exception.”
What happens if you’re not in management but on the board?
“Directors are also exempt. Even directors who receive compensation. So [if] you’re being compensated as a director for doing director stuff you don’t need to be licensed. But if somehow you’re compensation is linked to condo management, you need to be licensed.”
Escayola simplifies further: “If you’re a director and you’re managing for free, you don’t need to be licensed. If you’re a director and you’re being paid but are not managing, that’s OK. If you’re a director and you’re being paid and you’re managing, you need to be licensed.
“The minute the compensation is linked to management, you need to be licensed.” That said, as we have seen, remuneration for condo directors is rare in Canada. It’s not only acceptable but desirable for a CPA to use his or her professional skills and expertise in a board position as long as there’s a clear line drawn between governance and management.
Says Lincoln, “What most people don't understand is that managers are there to help guide the directors regarding their final decisions on each and every issue. In most cases the directors act as if they are working for the management company when it is the other way around. The management is working for the directors and are being paid by the condo corporation for their expertise and experience to help guide the directors.
“In the end, the directors are responsible for any final decisions that affect the condominium corporation.”
Colin Ellis is the editor-in-chief of Canadian Accountant.