Understanding Condominium Management Service Models
A condominium management service model determines how a condominium corporation is managed and what level of responsibility is placed on the manager. There are two main types:
Self-Managed Condominiums
In this model, the condominium corporation operates without a professional third-party management company. The board of directors assumes direct responsibility for administration, maintenance, and financial management.
Impact on Agency Responsibilities:
The board acts as the decision-making body and directly handles operations.
The board may delegate specific tasks to employees, volunteers, or external contractors, but the overall responsibility remains with the board.
There is no formal agency relationship with a licensed condominium manager.
Third-Party Managed Condominiums
The condominium corporation hires a licensed condominium management company to oversee operations. The management company, in turn, assigns a condominium manager to handle day-to-day responsibilities.
Impact on Agency Responsibilities:
The management company and assigned manager act as agents of the condominium corporation.
Managers must comply with agency obligations outlined in the Real Estate Act Rules and the Ministerial Regulation.
The board retains overall decision-making power but delegates authority to the manager within the scope of the management agreement.
Advantages and Disadvantages of Self-Managed vs. Third-Party Managed Condominiums
Self-Managed Condominiums
Advantages:
Lower management fees as there is no third-party management company.
Greater control by the board over day-to-day operations.
Potential for cost savings if board members have the necessary expertise.
Disadvantages:
High time commitment for board members.
Lack of professional expertise in managing legal, financial, and maintenance matters.
Increased risk of errors and liability exposure for the board.
Third-Party Managed Condominiums
Advantages:
Access to professional expertise in legal compliance, financial management, and maintenance.
Reduced burden on board members, allowing them to focus on governance.
Clear agency relationship with defined responsibilities in the management agreement.
Disadvantages:
Higher costs due to management fees.
Potential for misalignment between board expectations and management execution.
Reliance on the quality and effectiveness of the chosen management company.
Comparing Authority and Decision-Making Power Under Different Service Agreements
The level of authority and decision-making power a condominium manager has depends on the management service agreement between the condominium corporation and the management company.
Standard Condominium Management Agreements
Clearly define the manager’s responsibilities and scope of authority.
The condominium manager acts as an agent and must comply with the Real Estate Act Rules.
The board retains decision-making power and must approve major financial or operational decisions.
Limited-Authority Agreements
The manager provides advisory services only and does not have the authority to make financial commitments or policy decisions.
The board directly oversees all management functions.
Full-Service Agreements
The manager is delegated significant authority to make operational decisions, process payments, and oversee contractors.
The manager must still act in the best interest of the condominium corporation and report major issues to the board.
These agreements require strict fiduciary responsibility and compliance with legislative requirements.
Legislative Reference: A condominium manager must act honestly, exercise reasonable care and skill, and always place the condominium corporation’s interests above their own.
Developing a Guideline for Selecting an Appropriate Management Service Model
When determining which management model is best for a condominium corporation, the board should consider the following factors:
Size and Complexity of the Condominium
Small, low-maintenance condominiums may be able to self-manage.
Larger or more complex properties typically require professional management.
Expertise and Availability of the Board
A board with financial, legal, and maintenance knowledge may be able to self-manage.
If board members have limited time or expertise, third-party management is recommended.
Budget and Financial Considerations
Self-management can reduce costs but may lead to inefficiencies.
Professional management involves fees but ensures compliance and operational efficiency.
Long-Term Sustainability
Self-management may work in the short term but can be challenging to sustain as properties age.
A third-party manager provides consistency and long-term oversight.
Recommended Best Practice
For most medium to large condominium corporations, a third-party managed model with a clearly defined management agreement is the best option.
