Fiduciary Duties of a Condominium Manager
What is a Fiduciary Duty?
A fiduciary duty is a legal and ethical obligation requiring an individual to act in the best interests of another party.
In condominium management, this means managers must prioritize the interests of the condominium corporation above their own personal or financial interests.
The Three Key Fiduciary Responsibilities
1. Act Honestly and in Good Faith
Managers must always make decisions that benefit the condominium corporation, not themselves or third parties.
They must avoid deceit, misrepresentation, or conflicts of interest that could harm the corporation.
Example: A condominium manager must not favor a contractor they personally know if a different contractor offers better services at a lower price.
2. Exercise Care, Diligence, and Skill
Managers must perform their duties with the same level of competence that a reasonably skilled professional would in similar circumstances.
This includes staying informed about Alberta’s condominium laws, ensuring financial responsibility, and making sound decisions.
Example: Before recommending a major roofing project, a condominium manager must conduct proper research, obtain multiple quotes, and verify contractor credentials.
3. Maintain Transparency Through Full Disclosure
Managers must provide all relevant information that could impact the board’s decisions.
Hiding or withholding material facts or conflicts of interest is a breach of fiduciary duty.
Example: If a condominium manager personally owns shares in a cleaning company, they must disclose this before recommending that company for a contract.
Disclosure Requirements in Condominium Management
Why is Disclosure Important?
Prevents conflicts of interest.
Ensures fair decision-making.
Protects the financial and legal interests of the condominium corporation.
Builds trust between managers, boards, and owners.
What Must Condominium Managers Disclose?
Conflicts of Interest
A conflict of interest occurs when a manager’s personal interests may interfere with their duty to act in the best interests of the condominium corporation.
Examples of Conflicts of Interest:
Recommending a service provider owned by a family member without disclosure.
Accepting personal gifts or incentives from a contractor.
Owning shares in a company bidding on a contract for the condominium.
Best Practice: Immediately disclose any conflicts of interest in writing to the condominium board before any decisions are made.
Material Facts
A material fact is any information that could affect the board’s decision-making process.
Examples of Material Facts That Must Be Disclosed:
A vendor has a history of poor performance or legal disputes.
A contract includes hidden fees or penalties.
A budget deficit is likely to affect future maintenance projects.
According to the Real Estate Act Rules, condominium managers must refuse to provide services if a client asks them to withhold legally required disclosures.
Licensees must refuse to provide further services to or on behalf of a client who instructs him to withhold a disclosure required by the Act, Regulations, Rules, Bylaws, or any other laws.
Practical Steps to Uphold Fiduciary Duties and Ensure Transparency
To fulfill fiduciary responsibilities, condominium managers should implement best practices in daily operations.
Conduct Regular Assessments
Review contracts and financial statements to identify potential conflicts.
Ensure vendors are selected fairly and transparently.
Conduct audits to confirm compliance with Alberta’s condominium laws.
Example: Before renewing a long-term service contract, a manager should compare competitor quotes and provide a detailed report to the board.
Maintain Open Communication with the Board and Owners
Always provide accurate, timely, and complete information.
Create a system for reporting concerns about potential conflicts of interest.
Keep detailed records of meetings, decisions, and financial transactions.
Example: If a building repair costs more than expected, the manager should immediately notify the board, explain why, and provide alternative solutions.
Establish Clear Policies and Procedures for Disclosure
Create a written disclosure policy outlining when and how conflicts must be reported.
Require all vendors and contractors to disclose any relationships with board members or managers.
Ensure all significant financial transactions are well-documented and board-approved.
Example: A management company implements a policy requiring all managers to submit annual conflict of interest declarations.
Provide Ongoing Training for Board Members and Management Staff
Regularly update all stakeholders on legal obligations under the Real Estate Act and Condominium Property Act.
Offer training on ethical decision-making and conflict resolution.
Educate board members on how to spot potential conflicts of interest.
Example: A condominium management company holds annual legal compliance workshops for board members.
