Defining Customary Authority
Customary authority refers to actions taken by condominium managers that are not explicitly stated in representation agreements but are consistent with established industry practices and client expectations. This authority is implied based on what is generally accepted as necessary for managing condominium affairs effectively.
WHAT YOU'LL LEARN
Defining Customary Authority
How Customary Authority Arises
Risks and Benefits of Relying on Customary Authority
Risk Mitigation Strategies
Relevant reference from the Real Estate Act Rules:
A licensee must "act only within the scope of the authority granted by the client." Customary authority supplements explicit authority but must still comply with client instructions and the REA Rules.
Example of Customary Authority:
Arranging routine maintenance for common areas (e.g., cleaning, snow removal) without seeking explicit board approval, as it is considered standard practice.
How Customary Authority Arises
Customary authority arises when:
Industry Practices: There are established norms within the condominium management industry that licensees follow to address recurring situations.
For example, renewing service contracts for recurring tasks like landscaping based on historical practices.
Client Expectations: Clients, such as condominium boards, implicitly expect managers to act in their best interests and handle routine matters without requiring prior approval for each decision.
A licensee must "exercise reasonable care and skill" in performing their responsibilities, including actions taken under customary authority.
Key Characteristics of Customary Authority:
It must align with the client’s best interests.
It is limited by the terms of the representation agreement.
It must not conflict with specific instructions or exceed the licensee’s legal authority.
Risks and Benefits of Relying on Customary Authority
Benefits of Customary Authority:
Efficiency: Allows managers to handle routine matters quickly without requiring repeated client approvals.
Client Satisfaction: Reduces the administrative burden on condominium boards by streamlining day-to-day operations.
Consistency: Aligns with established industry norms, creating predictability for clients.
Risks of Customary Authority:
Exceeding Scope: Actions taken under customary authority may inadvertently exceed the terms of the representation agreement, leading to breaches of fiduciary duty.
Example: Authorizing a major repair without explicit approval from the board could result in financial liability for the manager.
Disputes: Relying on customary authority without clear documentation may lead to disputes with clients about whether the actions were authorized.
Regulatory Non-Compliance: Customary authority does not override the obligation to comply with the Real Estate Act Rules.
A licensee may face disciplinary action for "conduct deserving of sanction," which includes acting outside the client’s granted authority.
Risk Mitigation Strategies:
Clearly outline the manager’s scope of customary authority in the representation agreement.
Regularly consult with the board to confirm expectations for routine decisions.
Document all actions taken under customary authority to maintain transparency and accountability.
Customary authority plays a crucial role in enabling condominium managers to fulfill their responsibilities efficiently. However, it must always align with the Real Estate Act and Rules, as well as the client’s best interests, to avoid liability and disputes. Careful documentation and communication with the condominium board are essential for mitigating risks and ensuring compliance.
Next Steps:
Reflect on your current understanding of customary authority.
Practice identifying situations where customary authority applies and where explicit approval is required.
Create a checklist to ensure your actions under customary authority comply with legislation and client expectations.
