Fiduciary Obligations of Condominium Managers Under the CPA
What is a Fiduciary Obligation?
A fiduciary obligation is a legal duty to act in the best interests of another party. In the condominium context, managers owe fiduciary duties to the condominium corporation, meaning they must:
Act Honestly and in Good Faith: Managers must prioritize the corporation’s best interests over their personal or financial gain.
Example: A manager must disclose any personal business connections with contractors hired by the condominium corporation.
Avoid Conflicts of Interest: Managers must disclose any conflicts of interest when engaging with vendors, contractors, or financial transactions.
Example: A manager cannot approve a maintenance contract for a company owned by a family member without board disclosure and approval.
Exercise Due Diligence: Managers must act with reasonable care and skill, ensuring they comply with CPA requirements in financial and operational matters.
Example: A manager must properly verify invoices and contract terms before processing payments.
Financial Management Requirements Under the CPA
Financial oversight is a core responsibility of condominium managers. Non-compliance can lead to legal consequences, financial loss, or board liability.
1. Reserve Funds Management
Every condominium corporation must maintain a reserve fund for major repairs and replacement of common property.
The fund must be held in a separate trust account and used only for its intended purpose.
Example: A condominium corporation cannot use reserve fund money to cover daily operating expenses.
2. Budgeting and Financial Transparency
The CPA requires boards to prepare and disclose annual budgets to owners.
Managers must ensure accurate record-keeping for all financial transactions.
Example: A condominium manager must present an annual financial report to the board and owners as per CPA guidelines.
3. Handling Special Assessments
If additional funds are required, special assessments must be levied in compliance with the CPA.
Owners must be provided with clear justifications for assessments.
Example: A special assessment cannot be imposed without proper notice to owners, outlining why the extra funds are necessary.
Handling Condominium Records & Owner Requests
1. What Records Must Be Kept?
The CPA mandates that condominium corporations must maintain key documents, including:
Reserve fund study reports.
Annual budgets and financial statements.
Board meeting minutes.
Registered bylaws and insurance policies.
2. Owners’ Right to Access Records
Owners have the legal right to inspect certain condominium documents upon written request.
The manager must provide requested records within the timeframe outlined in the CPA.
Example: If an owner requests a copy of the corporation’s budget, the manager must comply with disclosure requirements.
3. Exceptions to Record Requests
Some records may not be accessible to owners, such as:
Personal information about other owners.
Information subject to legal privilege.
Employment records of corporation staff.
Case Study Evaluation
Scenario:
A condominium owner requests to inspect the reserve fund study, but the manager denies the request, stating that it is confidential information.
Your Task:
Determine whether this action complies with the CPA.
Identify what corrective actions should be taken.
Draft a response that the manager should provide to the owner.
Correct Answer:
The CPA requires the reserve fund study to be accessible to owners upon request.
The manager’s denial violates CPA compliance.
The proper response should include granting access to the document while following privacy guidelines.
