Board Minutes for Buyers / Owners

BUY05 - The Basics: Board Minutes for Buyers and Owners

Unfortunately, the Minutes generated by Property Managers of Board Meetings continues to vary in quality. Some are great - some are marginal for the simple reason that they greatly depend on the skill and thoroughness of the person taking the minutes. I’ve seen minutes that were perfect – every issue documented, sufficient detail for readers to understand the issues, and generally give you the impression of being complete. At its worst, I’ve seen minutes that could have been written on a napkin for the lack of detail and omission of details. Why even bother keeping minutes if you’re only going to write 3-4 words per issue? And make it 6 lines long to boot. There’s no way an hour's meeting was limited to that short a conversation….

It’s not unusual for property managers and Boards to purposefully write slightly vague and cryptic minutes for the simple reason that they don’t want to scare away potential buyers who might happen to read the minutes. As such “Water Leak from 5th floor shower diverter migrated its way to 2nd floor causing physical damage and mould” would turn into – “Diverter issue caused damage to 2nd floor”. They’re not lying, but they’re not exactly given you all the pieces of the puzzle either though. As long as they’re forthcoming with the issues if asked for further detail – I get why they’re doing this. Though if you’re a Buyer, you’ll certainly wish they told you all the gory details.

With all that said, properly written minutes are one of the best means of knowing the issues that face a Condo / Strata.   It is critical that you read them and understand what the issues are, whether you are a Buyer, Owner, or Seller. As you read though the set of minutes, here are a few basic things I like to look for:

1)      Get the Monthly meeting minutes, not just the AGM ones.

Depending on the Board, meetings typically occur monthly, along with an Annual General Meeting once a year. Bylaws of the corporation may specify the required meeting interval. Some boards may meet less than monthly or may cancel one if it’s known in advance that Board members are unavailable. As such you should typically see 11 monthly meeting minutes + 1 AGM minutes in when you ask for a “year’s” set of meeting minutes. If a Board only meets quarterly or less than that, I’d question that – Boards need to meet frequently to deal with problems and issues.

Regardless, make sure you are provided with the *monthly* minutes, not just the AGM ones as I’ve seen sometimes. AGM minutes tend to be sanitized, and since they are from the last AGM meeting, could have occurred as long as 11 months ago, making them laughingly out of date. Monthly meeting minutes should reflect last month’s meeting so they are far more recent. Also discussion amongst Board Members tends to be far more detailed at the monthly meetings and the “juicy” bits of discussion happen at the board members only meeting. Not getting the monthly minutes would mean missing out on 80% of the goings on at your condo.

2)      Get 2-3 years worth of minutes? (Monthly and AGM)

When reviewing minutes, it’s useful to have more than one year’s minutes. Problems may take multiple years to resolve and it’s wise to track the progress of their resolution. Only getting one year of minutes may mean missing out on a problem if it’s still in the midst of being resolved.

In addition, getting multiple years minutes means you can get a better sense of how the Board operates – are they quick in resolving problems? Are there are lot of problems cropping up? In short any of the below items I’m going to talk about below will only be better if you have multiple years of minutes to review.

3)      Scan for Problems / Look for Resolution

The obvious thing to do once you’ve finally got a few years of monthly minutes is to look for problems. Which being minutes should be easy as they typically consist of about 90% problems. If you see anything, bucket the problems you note into three categories:

One time problems – try not to get too worried about these as in theory they should be easy to fix. Typically these are operational in nature – like garbage in the hallway, or a messy garbage room.
Recurring problems – these may start off as one time problems, but usually you can judge whether a problem has reared it’s ugly head again by reading through the minutes – hence why the more years of minutes you can get – the better. Problems around security rarely get solved in a single month, often taking a year to resolve
Building Problems – these are the ones you really don’t like to see in minutes. Words like “water leak” or “elevator failure” or “deck rotting”. However, just like your car, constant maintenance and the odd component failure is inevitable. In fact, seeing nothing wrong with the building over many years is suspicious in and of itself. Once you spot a building problem, what you want to see here is a clear resolution of the problem – when was it fixed? Was the fix successful? Who did the work?

For all of the above problems - note whether the issue has been addressed or not. If it has not by the time you’re looking to buy - be sure to ask the property manager what the proposed solution is. If the proposed solution sounds iffy – ask yourself if the recurring problem for a prolonged period would be a nuisance or pose a real problem to your health or enjoyment of the condo. If it’s the latter…think hard about your decision to buy.

4)      How are they funding problems?

So… just above we talk about looking for the resolution to problems found in minutes. Almost as important is determining how the resolution will be funded. For instance, if the Board has determined that cameras are needed to address security problems, look to see how they have funded it? Unless it a replacement of existing cameras, it’s almost certainly not to be a part of your reserve fund. Operating budgets sure as hell can’t absorb the cost of new cameras, a cost typically in the thousands of dollars for a simple system. That leaves the dreaded special assessment. Things get even more dicey when you start talking about expensive building work. In one set of minutes I reviewed, it spoke to a series of balcony repairs that were needed at multiple units in a building. The operating budget was barely at break even, and the corporation only had minimal surpluses in previous years – so no money there to do the repairs. How would they afford these repairs?

Turns out the Board’s plan was to raid the Reserve Fund, after which they would have been woefully underfunded.   And it’s not just for current problems – look back at past problems to see how they’ve been funded. For this same condo – a look back at past problems showed a similar bad decision to dip into the reserve fund for some unexpected repairs that left their reserve fund underfunded in the first place. The past is often a predictor of the future in these things….

5)      How is the Board functioning?

Minutes are often “sanitized” by whomever is taking them to leave out some of the “juicy” bits that emerge when two or more people disagree on an issue…Well written minutes of meetings (at least from the buyer’s perspective) will capture at least some the nuances of these discussions and give you the read the ability to sense how functional (or dysfunctional) a Board is. Major decisions made by a Board are put to a vote and the mintues should reflect the voting record. This may be enlightening in itself – a recurring pattern of close and contentious votes may signal that a Board is split and may have problems making decisions. A closer examination of the issues is best – it’s one thing to squabble over major renovations or bylaw changes. But if its over smaller operational things like the garbage pickup schedule – that may signal other Board rifts. Not that you want to see everything passing unanimously - just like a democracy, an effective opposition is a good thing to have. What you want to see is a group of people having a balanced and rational discussion on matters, addressing all angles of a problem. Just like government right? (yeah……)

6)      What’s the overall quality of the minutes?

I’ve talked previously about the general nature to have minutes “sanltized” for public consumption so I wont’ dwell too much on that. What you typically want to see are minutes that “speak in full sentences”, that let you the reader get a sense of the issue and the resolution. A series of bullet points 5 words long each really isn’t going to give you that. For example this is just an example of how you’d like to see an issue documented

Good:

Board discussed the matter of 5 balconies required preventative waterproofing repairs to be made. 3 quotes received and low cost one from ABC Roofing selected for $6,500. Board discussed funding matter. Board member X raised concerns about whether current operating budget would be able to fund this. Motion made by Board Member Y to defer previously planned painting work in order to do this critical work. Seconded by Board Member Z. Approved by majority vote, with Board Members X and A voting no.

Bad:

Balcony repairs approved.

(yeah, I’ve seen some that short. I think the entire hour long meeting was condensed into about 10 bullet points like the above. At least they had that – missing minutes suggest a less than stellar recordkeeping operation, which probably is in violation of either a bylaw or property management agreement).

7) The Owner’s Perspective on Minutes

Most of this article has been written from the prospective new Buyer’s point of view – in which you’re trying to get as much information as humanly possible so you can make the most informed decision possible. You want to know if the Board fighting, and you want to know about every problem with the place, minor or major.

As an Owner, you should be that way as well – after all, you’re an investor and a resident. (you may not wish to, but that’s certainly your prerogative). However, as a potential seller, your motives change of course, and your desire to air “all of your dirty laundry” is reduced of course so that prospective buyers aren’t “scared” off.

And that dear readers means for the age old word… compromise. The person taking minutes must walk a line between telling too many non critical details of problems, yet still telling the reader about materially important issues that a potential buyer is legally entitled to know. In my opinion underlying issues should always be disclosed in the minutes – however, to address the concerns of potential buyers – you must also disclose the resolution of the problem at the same time, or in the next month. If matters take longer to resolve updates should be minuted every month. There’s nothing worse that reading about a problem in the January minutes and not seeing a resolution until November - or not at all. These are the things that scare away potential buyers.

~CondoSensei

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