Remuneration By-law
There is growing interest in providing compensation or remuneration to directors serving on condominium’s board of directors. It is often suggested as a way of attracting more candidates to the board of directors. In Ontario, a director can only receive compensation for sitting on the board of directors if a by-law is passed according to the Condominium Act, 1998 (the “Act”).
The by-law must first be approved by the board of directors at a properly constituted board meeting. Once approved by the board, the board must call a meeting of owners to allow them to vote on it. A copy of the by-law must be included in the Notice of Meeting package. A majority of the voting units in the condominium must vote in favour of the by-law for the by-law to be approved. Lastly, once approved by the owners, the board must sign the certificate page and the condominium’s lawyer will register it on title to the units.
It should be noted that subsection 56(2) of the Act states that the by-law must “fix the remuneration” and the remuneration period shall not exceed three years. Thus, a new remuneration by-law should be approved every three years if the condominium would like to continue to provide remuneration to its directors.
A remuneration by-law is typically used most often with self-managed condominiums where the directors are performing the services that a manager would normally provide to the condominium. In these cases, it is important to structure the arrangement properly to avoid trouble with the mandatory licensing requirement for individuals providing condominium management services. Directors must not receive compensation for providing condominium management services, but they can be paid for fulfilling duties as directors for the condominium.
Another situation where you might see a remuneration by-law used is where one or more of the directors go above and beyond what is usually expected for a director. For example, a director involved in overseeing a large repair project or contributing to a complex legal action on behalf of the condominium are doing more than what is typically expected of a director and the owners may wish to provide them compensation for their time.
