Condo Adviser Episode 39: When, why and how to change condo manager

[MUSIC PLAYING] RODRIGUE ESCAYOLA: Hello. Good evening, everybody. My name is Rod Escayola. And I'm your condominium Lawyer with Gowling WLG. And welcome back to another episode of The Condo Advisor, although it's a little bit later in the month than we're used to. And that is due to the fact that I was away in Greece, if you must ask. And only now am I sobering up from all the Greek fun and sun and ouzo. And so here we are, ready to tackle this topic.

 

And I've decided that-- well, we've decided together-- we work on this with Graeme and my assistant that some of you get to know. We've decided to tackle a very thorny and loaded topic. One that people-- many people thought I would never dare to touch. But you know me, nothing is sacred. So today we're tackling the topic of changing condo managers.

 

Now, managers are your most important ally. A good relationship with your manager will break or make anything else. They are your first responder. They are your subject matter expert. They're your contact with the professionals in the industry. They're your enforcer, your go-to person, your fixer of every problem. They do it all and in return they get the glory and the abuse that comes with the job.

 

Now, seriously-- more seriously, your managers are really-- a good manager is worth their weight in gold. And I think even that is the-- their worth is actually even beyond that now because the industry is short on good managers. There's just not enough to go around. Not that there's too many not good ones, I'm just saying there's not-- there's insufficient managers out there to serve the ever-growing condominium industry.

 

Now, I've said all the good things about them. But sometimes, inevitably, you may get to an intersection when all good things came to an end, and sometimes you may have to part ways. That could be because the manager retired, because they moved on, or more likely because there's been a change in the composition of your board, or maybe the relationships have soured, or maybe there was simply not a fit. And maybe the fit was never there to begin with. So there's all sorts of reasons why at one point, you get to the intersection.

 

I often remember this case where I was approached by a similar condo, similar to mine. And they said, we're looking for the best manager out there. And I said, you know it's Bob. And I really meant it. And Bob was the best manager. And that building was a building that anybody would dream of managing. And within six months, they fired each other. They just couldn't stand each other. They just didn't work. The fit wasn't there. So there it is, these things happen.

 

Now, to tackle this topic, we've rounded up top experts. We've rounded up two managers who somehow accepted the challenge. And also a director, a condo director who successfully-- amongst many things he successfully did-- he successfully replaced management recently. So let me introduce the panel. Let me stop sharing so we can at the same time see their faces.

 

Now, I somehow appear to have managed to bamboozle the poster boy of management in the GTA to meet us again, then to share his time with us again. He's somewhere between a Greek Aristotle and the Roman Minerva. If you look it up, that's the God of wisdom and justice and victory. And so without further ado, we have here from Crossbridge, Murray Johnson. Hi, Murray.

 

MURRAY JOHNSON: Hi.

 

RODRIGUE ESCAYOLA: I can't believe you're still-- you've accepted again to come. And you keep telling me, oh, I love them there. Keep inviting me. And you know me, I have no shame, no shame.

 

MURRAY JOHNSON: It's lots of fun, lots of fun.

 

RODRIGUE ESCAYOLA: Fear not. Murray has an equivalent in Eastern Ontario. Well respected and loved in and out of board meetings. Somewhere between Martha Stewart and maybe Margaret Thatcher. From CMG we have Shelley Seaby. Hello, Shelley.

 

SHELLEY SEABY: Hello. Thank you.

 

RODRIGUE ESCAYOLA: Depending on the day she's had, pulls her to one end of the spectrum or the other. And wait till you hear about this next guest. It's the first time a condo advisor, but we've invited him to speak with-- for the-- at the Condo Directors Group in Ottawa.

 

He's a condo director. He's a law student. He's currently summering with the Legal Aid Clinic, fixing all sorts of problems. But even before going to law school, all sorts of experience, relevant experience which makes him probably the best condo director out there. And we have Leran. Hello, Leran. How's it going?

 

LERAN OIRIK: Good. Now I'm blushing. I feel I'm redder.

 

RODRIGUE ESCAYOLA: So look at that, hey, the bar is very high, but you'll meet the challenge. There's no doubt in my mind. And from Gowling WLG Condo Lawyer extraordinaire in search of a twin, we have Graeme MacPherson. Hello, Graeme.

 

GRAEME MACPHERSON: Hello, hello.

 

RODRIGUE ESCAYOLA: OK. So let's-- Graeme, I'm not sure if the chat is turned on. You may need to do your magic.

 

GRAEME MACPHERSON: All right. Condo lawyer extraordinaire and IT guy on the side.

 

RODRIGUE ESCAYOLA: That's right. So if you could look into that, if you don't mind. Now, as soon as the chat is open, you'll be able to-- all of you at home you'll be able to share your views and chat it up and heckle Graeme preferably, not the other ones.

 

But if you have a question that you really are dying for us to tackle, put it in the Q&A. We're more likely to see it there and maybe ignore it, but that doesn't matter. If you put it in the chat, we may lose sight of it. And just before we dive in, a bit of housekeeping. You know it. I should ask somebody, one of you at home to just ramble off our usual housekeeping. It's our usual disclaimers.

 

So for those of you watching this webinar, keep in mind that when we refer to legislation or law, we're referring to Ontario. And also keep in mind that we are recording this on May 10, 2023. We'll do our best to provide you with accurate and timely and up-to date information. But if you watch this later on, some of the information may be stale dated. You may need to adapt what you hear.

 

And most importantly, keep in mind that what we're talking about tonight is general in nature. So it may not apply to your situation. You really should seek legal advice or advice, any form of advice, to make sure that you get a solution that meets your actual problem, and not just a theoretical discussion that we're having here. OK, I think I got it all.

 

Yes, this webinar is being recorded, and eventually we post them. The last few times it took us longer than expected to post them up because there was a change in the IT department, and so it took a lot longer. But just give me maybe seven days or so and we'll have it posted again.

 

You'll be able to go to the Condo Advisor website. If you click on Webinar, you'll be able to watch on demand. OK, I think that's everything I needed to do. Graeme, were you successful in-- oh, I see some chat happening so I think you were successful.

 

GRAEME MACPHERSON: No, not yet. You need to make me a co-host then I can do it.

 

RODRIGUE ESCAYOLA: OK, a minute.

 

GRAEME MACPHERSON: Wouldn't be a Zoom meeting without it.

 

RODRIGUE ESCAYOLA: There it is. You are now anointed co-host. OK, so while you're working on that, let's dive in. So as I said, sometimes you get to a point where for all sorts of reasons, it may be time to part ways. That intersection may happen. And you know what? It's not you, it's me kind of, sometimes, break up. And it happens now.

 

Before you pull the trigger-- because we'll talk about the consequences or the trouble or the extra work of pulling the trigger. But once you pull the trigger, it's like crossing the Rubicon. Sometimes there's just no turning back. So you want to make sure that you are, in fact, at that intersection before you cross it.

 

And so I'm going to start by having this general question for everybody around the table. What are the symptoms that the management condo corp relationship needs to be changed? What are the signs that we see out there? I don't know if-- maybe I'll start with you Murray.

 

MURRAY JOHNSON: Well, I think the big one, the elephant in the room is a loss of trust. You have to be able to believe that the manager you have is going to do the job that needs to be done, and that they're going to meet the deadlines and that sort of thing. As that starts to erode, that's the beginning of the divorce.

 

RODRIGUE ESCAYOLA: Right. I like the fact that you've used the expression divorce. Look at that, we're getting married and we don't even know. OK, what about you Shelley from CMG, what would be like a red flag? Because sometimes, by the way, this relationship it's a two way street, obviously.

 

And sometimes the person that's dissatisfied or that finds that the relationship no longer works, sometimes it's the board, sometimes it's the-- it's management. So, Shelley, a red flag or a sign that the relationship is beyond repair.

 

SHELLEY SEABY: It's a breakdown in communications between-- really, between management and the board of directors. When we can no longer communicate on a respectable, efficient level, that's a true indication that something is going South, for sure.

 

RODRIGUE ESCAYOLA: Right. What about you Leran? And I'm not asking you to kiss and tell. I know you as someone who had changed the relationship. So without really some specifics, what have you seen or what led you to that conclusion?

 

LERAN OIRIK: Yeah. I think an important aspect is what are the owners sharing with the board. Are the owners sharing that communication has broke down, that they no longer have trust in management? And they might not have trust in the board by just as a result of that breakdown, so what's the feedback you're getting from owners? And if it's not great, maybe that's another sign that you need a change management as well.

 

RODRIGUE ESCAYOLA: Right. Somebody was recently telling me about-- I think it's called The Tipping Point. And I looked it up. And basically, the analogy is this-- because sometimes it's just going to be something that's just going to-- it's like a vicious circle almost. So you park your car somewhere on a New York street, and for maybe a month, nothing's going to happen.

 

Then one day somebody steals a wiper blade. And then from this point forward, you're soon getting to the tipping point. If one blade is gone, then the next one is going to go soon thereafter. Well, and after that is the hubcaps. Then after that somebody just busts a headlight. And then after that you get a graffiti.

 

And so sometimes the same thing happens in a relationship, I find with manager, where there's maybe a ball that's dropped, maybe two, maybe something is late. And then from that point forward, the relationship it's almost like we're looking for fault. And then the more you look for fault, the more you will find fault. And the more you find fault, the more somebody is likely to trip. And so sometimes that's what I see.

 

So we've identified a couple of red flags. Let me then ask this next question, which is-- I mean, some things can be fixed, some things can't be fixed. And so maybe what can be fixed and what can't be fixed? Let's start with that. Maybe Shelley, do you have an example of something that could be fixed or something that can't be fixed.

 

SHELLEY SEABY: And going back to communications, again, I think that that's something that can be fixed. It's something that we could through dialogue and should the board-- if there's a breakdown in communication, that we ask that the board contact the corporate management because the face of the management services is the manager.

 

But to contact corporate to escalate those issues and so that we could open that dialogue again and see, is the issue because the main face of the management services? And if that's the case, perhaps a change in players is the solution moving forward.

 

RODRIGUE ESCAYOLA: Right, right. I often compare this to where when you go to a restaurant. So the restaurant, the best cook, the best person preparing the menu, the chef and all that, that's what you have at the back office. The delivering the meal is the manager. And so if you have an awful waiter, the meal can't be good enough. I mean, it doesn't matter. I mean, if you get the soup on your lap, if the service is not friendly, you're going to leave that place thinking that it was an awful experience.

 

So sometimes it's the waiter that needs to be changed. And in this case-- and I don't want to minimize the role of a manager when say the waiter, but they're really the interface between the customer and all the service providers behind them. The controller, the accountant, like, all of that good stuff. What about you, Murray? Something that could be fixed and something that can't be fixed.

 

MURRAY JOHNSON: Yeah, let's start with the negative and get better. The back end-- if the back end isn't working, if you're not getting accurate financial statements, if the manager isn't getting the support they need to deliver the product, that's probably a red flag that says, you know what? We need to change the company.

 

But I do think that even if it's a clash of personalities with the manager delivering the service, I think that the thing to do is not wait until it's beyond repair. At the first indication that something doesn't seem right, escalate it up.

 

Go to the regional manager or up to the principal, depending on the company, and have that open discussion. What are you feeling? What are you sensing? And sometimes, yeah, it's a clash of personalities. And we can put another person in there, and then hopefully it gets better.

 

But I think don't jump to conclusions too quickly because this is a big, big decision that affects not just the board, but the service providers and all of the residents in the building. So you have to approach this very carefully.

 

RODRIGUE ESCAYOLA: Yeah. So, Leran, I assume that before you pull the trigger, I assume-- and I know that because we discussed that yesterday or two days ago-- I assume that, first, you try to fix the problem, I guess. Can you tell us maybe more about that and what that means?

 

LERAN OIRIK: Yeah. So I think what's important is-- I mean, so our board meets once a month, and it's let's outline our expectations during the board meeting. And let's hear how the property manager responds to that. And let's document it in our minutes as well. There's a record of it, these are our concerns, and they're there so that they can continue to be worked on.

 

I think what's important is we establish our priorities. What would we like the manager to work on, here's a list. And I think what's really important also is the manager's response. How do they respond to your concerns?

 

Eventually we elevated those concerns once we felt that they weren't being met, we changed managers. And there came a time where it just wasn't getting a better-- I think there was a loss of both-- I think both sides had had breakdown in relationship. We probably didn't want them, they probably didn't want us at a point. And so the question came, well, what are our options? And ultimately a really big consideration for us is, do we have the ability to change managers?

 

So do we have time to engage in the process? And does the-- to me when you change property management companies, you actually put work on the board, a fair amount of work because there's this knowledge that the board has that a new manager won't have. For example, which HVAC contractor deals with something. So the board needs to have capacity to, first of all, engage in the process of a getting proposals and hiring a new company, but also for the next few months onboarding the new management company.

 

RODRIGUE ESCAYOLA: Right, right. And we're going to talk about that, the process and the shouldering the process and all that. And I think you've all touched upon it. It's important to do a proper analysis. It's improper to remove the subjectivity from it.

 

I've seen firsthand a board who decided that the manager was simply not the right fit for whatever reason, but they were unable to sit down and to even make a list of the shortcomings. It was just as bad. It's bad they do nothing that's in the contract.

 

In fact, the whole thing is bad. But when you-- they were pushed to come up with a precise list of clear deliverables and of clear failures, they weren't able to do that. It was just a decision that it's bad, it's not working.

 

Well, so you need to really take that subjectivity out of the equation. And you need-- and I think that's what you've all touched upon, you need to identify, OK, so what are the clear deliverables that we want? And make a running list, and see how quickly you're able to put a check mark beside it. And provide a clear sort of marching orders, I would say.

 

It's almost like you're dealing with-- I was going to say like maybe a romantic relationship, but I prefer a work related employer employee relationship where you have to escalate it. You have to sort of-- you can't go from zero to 100 in one step.

 

You have to tell them-- and, Leran, would you'd know about that from your past life, you really need to document the issues. And you really need to identify, OK, well, we're asking you to fix this. Tell them once and twice and three times, and give them the tools to get to fix that before you just throw the baby out with the bath water. Anything to add there, Murray? I see that you're kind of opining here.

 

MURRAY JOHNSON: Yeah, my mind is just going like crazy here. I remember back when I was learning my trade and I was managing townhouse sites, people would phone me up in the winter time and complain about the snow plow. They didn't clear the snow yet. And so I would look at the contract, and, well, they don't have to clear the snow until two hours after it stops snowing.

 

So I would say the same thing to the board, you need to look at the management agreement or what I've been calling the agency agreement, because that lays out all the responsibilities. If you're asking the manager or the management company to do something outside of the terms of the contract, then you're being unreasonable.

 

So measure the performance against the contract. I think that when you select a management company, somebody is selling you the management package. And so you have to look at that contract and make sure that you're being reasonable in what you're asking for.

 

RODRIGUE ESCAYOLA: OK, before I change topics, anything to add, anybody? I'm looking around. No? OK, perfect. The other thing I'm going to say is this. If you're on your sixth manager, ask yourself a question. So you've tried two managers, let's say from a management firm A. And so the first one didn't work. The second one doesn't work. You turf the management firm altogether. You go to another one, that one is also full of duds. Then you go to the third one, and they're not delivering.

 

If the entire regiment is out of step, are you in step? That's the question. Ask yourself that question. OK, anyways, does the board have the ability to face the change? And I think, Leran, you spoke about that a bit when you said it's going to be a lot of extra work. And we're going to talk about the RFP process in a minute.

 

But I take it-- well, there's never a good time to split. And, oh, it's close to Christmas, oh, it's too late in the fiscal year, it's too early in the fiscal year, we have the AGM coming up. There's never a good time to split. But, I mean, at one point-- at what point do you pull the trigger? So do you take stock of what's ongoing, what's coming down the pike? How do you pick the timing for that?

 

LERAN OIRIK: Yeah. So for us it was we didn't have any like capital projects going on or something that would really require a property manager to be on site every single day. So that was a good time to do it. Another good time is for us we did it at the end of our fiscal year. So we were able to say that one management company will close the fiscal year, the other one gets to start fresh, which avoided financial issues or audit issues.

 

And then, of course, there's how much time does a member or a couple members on the board have? And, I mean, maybe when the relationship broke down it felt like I was working two 40 hour a week jobs, but there has to be a recognition that when you start with a new company, you are going to spend at least 10 hours a week helping them out. You can't expect them to just know everything about a condo they've never run. So it's being able to have that time and dedicate some of your own resources to that onboarding process.

 

RODRIGUE ESCAYOLA: Right. So let me ask this question then to the other two, to the managers. What are the downsides of pulling the plug? Or what are some of the considerations? I mean, you need to walk in this with your eyes wide open. There's no magic wand where you're just going to snap your fingers and then you'll have the perfect manager fully-- running on all pistons. So what are the downsides or the considerations to keep in mind when you're going to pull the plug? Who wants to jump in?

 

SHELLEY SEABY: I can jump in on that one. I'd say it's important to note that the management contract is-- and the management services, the manager is kind of the conduit for all the contractors, the owners, stakeholders, the board of directors, the conduit within your corporation. Changing the manager is a huge decision.

 

It's not like a decision-- and I won't discount our snow contractors because they're very important-- but it's those services are a little quite bit different from management services. And it shouldn't be discounted. Pulling the plug is a major decision to be made.

 

And like Leran has mentioned that it is a big undertaking for the board of directors. So it's are you in the position to dedicate the time? And where exactly are you in your year? So are there major projects that are happening? Is there something that's going to be dropped as far as communication goes to home owners? A project that's in the works? So you really have to time it out well.

 

RODRIGUE ESCAYOLA: And I think that-- Murray.

 

MURRAY JOHNSON: Yeah. I think it's important. I mean, what I've experienced over the years and as a rule of thumb is that the manager doesn't have complete ownership of that condominium as being their home until they've gone through an audit, a budget, and an AGM. And so you can expect that until they hit those milestones, you as a board are going to be backing them up, you're going to be the first people that the manager has to call in order to get an answer to a question.

 

So if you understand that-- I mean, if I go in and you already have-- it's in mid time in your year, I have to put my head into somebody else's budget. When the auditor calls me to ask me questions, I wasn't there. I don't have the answers.

 

And so setting up the AGM, I don't know what you typically do so I'm going to come to you to ask you those things. But by the time you do all three of those, it's the budget I prepared for you, it's the AGM I set up for you, and it's the audit that I can answer questions to.

 

RODRIGUE ESCAYOLA: And yesterday one of the considerations that one of you raised was one of the considerations that you have to consider is, am I really only needing to fix two or three problems? And if that's the case, is it best to fix these two or three problems with the current manager versus having really to start from scratch on all of the items?

 

Again, I don't want to necessarily lead anybody to conclude that you should never change management. In fact, sometimes it may be a healthy exercise for everybody involved. But still, I mean, you have to think carefully about it because you are going to be flying on instrument for a while if-- once you get rid of your manager. OK, how long would-- in a one sentence or less, how long does it take for the new manager to be firing on all pistons? To be fully performing? Shelley.

 

SHELLEY SEABY: One sentence or less, OK. Goes up my sentence. So, again, it's very dependable-- dependent on the type of the community, the complexity of the community, the projects that are underway, and the onboarding of the community. If the onboarding is quite a task, let's say, depending on the records at hand, the tasks that you are undertaking, it could take anywhere from six months to 18 months.

 

RODRIGUE ESCAYOLA: Right, Murray.

 

MURRAY JOHNSON: I completely agree with that. And if you fit in the budget, the AGM, and the audit in that, it's, I think, a year before they're on all cylinders, but probably six months before they're starting to be effective and starting to take the load off the board.

 

RODRIGUE ESCAYOLA: How does that match your experience, Leran?

 

LERAN OIRIK: Yeah, I'd say our transition went really well, and they were up-- they were fully up and running within six months. Within that six months my second 40 hour a week job went down to me just working for the city and sidelining on the condo.

 

RODRIGUE ESCAYOLA: Yes, nice. OK, let's talk about one last thing. And we didn't discuss that yesterday, but I saw that in the questions and I think it's a fantastic question. Somebody asked, what if you have joint amenities or shared amenities? What if you have a sister corporation and you're-- and you had the same manager? Shelley or Murray, I mean, is it possible to be managed by two-- if you're joint at the hip, is it possible to be managed by two different managers? Does that work?

 

MURRAY JOHNSON: It can. It can work. I think managers are, more today than ever before, are a lot more professional with the licensing and so forth. And so I think, yeah, it can work. I've had clients where it's one office, two desks, two different management companies. So we made it work. You find a way to make it work.

 

RODRIGUE ESCAYOLA: Shelley.

 

SHELLEY SEABY: I agree. You could make it work, two different companies. It's about professional courtesy between both management firms. I'd say that the-- and probably Murray could shake his head whenever I say this is the most trickiest part in-- is the joint use agreements that are governing both condominium corporations or a three or four condominium corporations. And that's where it can get confusing.

 

RODRIGUE ESCAYOLA: Yeah. Well, I'm going to talk about the elephant in the room. I'm going to tell you that in some cases, it's disastrous. And I've seen cases where, in fact, they ended up needing three managers because the relationship between the two corporations were so awful that one had A manager and the other one had B manager. And they couldn't agree on who would manage the shared amenities or facilities, and so they had to have manager C to deal with that.

 

And there's also all sorts of extra layers where I often see things fall through the cracks where somebody says, well, that actually is the other manager that deals with that. That's the other corporation. Well, that's a joint amenity. Well, this has to-- the emergency generator is on Shelley's building, but the light that's not turning on with this generator is on the Murray's-- in Murray's building.

 

What if you need a phobe? So I'm going to need to tell my superintendent to tell Shelley that I need a new phobe, but the phobe system is in Murray's building. So Shelley will eventually tell Murray, Murray will tell the super, the super will program the phobe, the phobe will go back to Murray and then back to Shelley and back to Rod. In the meantime, I'm outside with my food getting cold, waiting to get in. I'm exaggerating but barely. So you have to keep that in mind.

 

MURRAY JOHNSON: That takes it back to Shelley's very first sentence, it's a breakdown in communication. And it ends up being what I call the corporate salute that looks like this.

 

RODRIGUE ESCAYOLA: I love it. OK, so the RFP process, Leran, tell us a bit about how do you tackle that. And there was a question about that, actually. How do you come up with a matrix? How do you tackle that?

 

LERAN OIRIK: Yeah. So the first thing we did is we identified our three biggest concerns. And we went ahead and we emailed five property management companies and we said, we're interested in getting a proposal. This is about our building. Here are three main concerns, and here's the time period. We're doing interviews. We'd like proposals by this day. We're doing interviews these two weeks, second round interviews at this time. And we'd like the transition to happen on-- I don't know-- January 1.

 

So I think, first, the board has to figure out what they want. Put it in an email if you're like me, and you send it out to all these companies. We get all these proposals from the companies, and we decided to create a chart, compare them. Look at stuff like costs, financials, maintenance, emergency on call process. How does the company get quotes? What's their-- what's the management experience? Do they usually deal with portfolio similar to ours? In our case it's a luxury high rise.

 

And then you schedule your interviews with these companies. So they give their sales pitch, and the board asked them questions to try to get a grasp. Once we spoke to all of them, we then-- Daisy, shhh. That's my dog.

 

Once we spoke to all of them, we created a short list of two or three companies and requested, can we speak to the property manager that would be managing our building? And that gave us a sense of to see their personality, what their specific experience is, and what they can deliver to us.

 

And then, again, you look at you have to make a decision. You have to decide which company do you like the best and figure out what points are most important to you. Something that was important to us was improving communication, financials, leveraging technology. And ultimately we found a company we liked. We actually found a few companies we liked but we said, which one do we think would best serve us? And we offered them the contract.

 

RODRIGUE ESCAYOLA: Mhm. And before I let you go, what would you improve on that process? Now that you know what you know, is there something you do different?

 

LERAN OIRIK: I don't know. I liked it. I think I did pretty good. No, I think where I would improve it is maybe not necessarily the-- it related to the RFP, but how we communicated with the previous manager, so the outgoing team. I think we might have engaged a little differently with them in terms of the timeline, but minor.

 

RODRIGUE ESCAYOLA: OK, OK. What about you, Shelley, what makes a successful RFP process?

 

SHELLEY SEABY: I agree with all the points that Leran had made. The one point that I would want to stress is a realistic timeline. So if the board does put out an RFP that, OK, well, we want proposals by such and such date interviews, da, da, da, and we want to switch the management company by the end of the month. Well, it's the tenth of the month now, that could be a recipe for disaster.

 

So it's not setting up for success. Transferring to a new management company is a process. It's not a turn of a key and we can do it. So I definitely think that the timeline to be realistic is very important.

 

RODRIGUE ESCAYOLA: Mhm. I don't know if you're able to answer that Leran. From the day the board said, yeah, we need to change, to the first day that you had new boots on the ground, what's the-- how long does that take?

 

LERAN OIRIK: We went with-- we looked at our contract, we had to give 60 days notice. We gave notice, sent out the RFP process. You don't necessarily have-- yeah, you don't have to do it in that order, but we did terminate one day. And I think it was the same day that we sent out the emails.

 

RODRIGUE ESCAYOLA: That's interesting. So you just jumped and you built your wings on the way down? I mean--

 

LERAN OIRIK: Yeah, 60 days is, I think, a good timeline.

 

RODRIGUE ESCAYOLA: OK, OK, nice. What about you, Murray, what makes a successful RFP process a successful one?

 

MURRAY JOHNSON: Well, I'm going to get to that, but there's one caution I want to give you, and that's the way the market is today. I think the ratio today is about 4.5 condominiums to every manager. So it's not always going to be possible to interview the manager that will be placed in your site at the beginning of the process. It'll be-- it probably going to be later in the process.

 

But I think that if it's a straightforward, a standard condominium corporation, there's no big issues going on, yeah, we can do exactly what we've heard here. But you touched on it, Rod, we're starting to see much more complicated shared facility agreements and reciprocal agreements. We're seeing two, three, four, five way agreements in each corporation now.

 

And so when it's complicated like that and you feel like this is a big thing to grab a hold of, it doesn't hurt to go to an industry consultant and have the consultant share with you-- the consultant will interview you, what do you really need? Here's some companies that I think can provide that. What's good, what's bad. You're getting a this third impartial opinion given to you. It can sometimes streamline and simplify the process for the volunteer directors.

 

RODRIGUE ESCAYOLA: Right, that's interesting, actually. I know of a condo corp who what they had done to help them build the RFP, they had used the existing contract. The irony, of course, was that they were terribly dissatisfied with the existing contract. So I'm thinking you're kind of fishing in the same pond here. You're just going to recreate the same situation. But, what can I say? You can't teach smart sometimes, so it is what it is.

 

How many interviews-- I think Leran said that he had two in his process, or maybe more. How many interviews do you-- are you're used to seeing now? Murray or Shelley, are you called for two or three or one or--

 

MURRAY JOHNSON: Generally it's two. The first one is the sales pitch, that's the pre-screening that the board does. And then they do the shortlist. And sometimes there'll be a third one once we identify who the site personnel will be.

 

RODRIGUE ESCAYOLA: Sure. And, Shelley, who should be at the interview? If I'm going to call in the interview, who do I want to have in the room with us, the board?

 

SHELLEY SEABY: The main point of contact in many cases has been the salesperson who has been initially contacted, who has been the main point of contact for the board of directors. So that definitely is a person that should be in the room, as well as somebody from corporate to speak about corporate's support. So financial support, what do we-- what's offered as far as accounts receivables, payables, whatever else. But what is the back office support for the manager.

 

And then, again, as Murray has said, if manager is available, whether it be for the first meeting or if there's a second meeting, is to have the actual manager that's going to be managing because that is the face. And it is extremely important that you have the right fit, the right personality to meet with that board. And it's, like you said, it's kind of like a marriage.

 

RODRIGUE ESCAYOLA: Yeah. Is a site visit important, Murray?

 

MURRAY JOHNSON: Oh, absolutely. There's two things that I think are really important. The initial contact, the manager-- the prospective management firm should do a telephone interview with you, at least. What was the problem? Why are you changing? So that they understand where to put the focus at the beginning.

 

But then I think you can't really give a proper proposal if you haven't walked the site. And so I think the board, whoever's on the committee doing the hiring, they should set up as part of the interview a tour of the building, the facilities, the mechanical facilities, whatever it may be.

 

RODRIGUE ESCAYOLA: So somebody, Murray, is asking, maybe if you can give us a sentence or two more about these industry consultants. Who are these people? How do you get to these people to help you put together the RFP? Because, obviously, you can't go to your current manager to ask them to prepare the RFP to replace them.

 

MURRAY JOHNSON: Yeah. And I'm in downtown, Toronto, so that's where I understand all of these stuff from. And there's a few of them there. But they tend to be regional. And so does Eastern Ontario have one? And how would you find out who they are or who he or she is?

 

I'm on LinkedIn quite a bit, and I see that you just recently in Eastern Ontario had your condo conference. And that's the kind of place to go to. You're talking to the industry experts, you just-- you're just doing a little fishing, give me some names, and a lot of people will steer you in the right direction and give you the information you need.

 

RODRIGUE ESCAYOLA: For sure. Here in Ottawa we have what's called the condo directors group, which is a group by and for condo directors which I've set up it's 10 years ago, I guess now. And we have our own private chat forum where people are able to type up, I'm looking to change management.

 

Any ideas? Any suggestions? Or we're about to give the gig to whatever, Leran Management Inc. Is that a good guy? Have you worked with him? And so on and so forth. So, I mean, there's all sorts of ways to get to the finish line.

 

OK, before we run out of time here, you've been wondering where is Graeme? I mean, he's been awfully quiet. Well, that's because we're about to now finally turn to the legal side of the discussion. And so, Graeme, I'm going to turn to you.

 

And I'm going to ask you to tell us a bit about-- I mean, so we've concluded that we need to do a change, we're prepared to go to do the RFP. Leran told us that he just gave the notice, and he was confident that he'd get to the finish line before the 59th day. So tell us about how we go about to terminate a contract, Graeme.

 

GRAEME MACPHERSON: Well, management contracts all come with termination provisions. And the standard in the industry is that there's usually two ways it can be done. Either you give written notice to the manager first. And that's typically-- I think you had the slide up there. But what we've seen across the industry is that the written notice period in these contracts tends to be about 60 days. That's what Leran said as well for his own experience.

 

And so if you're going to rely on that 60 days notice provision, you can terminate usually for any reason. You don't even have to give a reason. It's just, we're terminating. Here's your 60 days notice. And, likewise, the next provision there in this example we've got up says that normally these contracts come with an automatic renewal. And so if you don't want that to be triggered, you have to let them know 60 days in advance.

 

Now your other option if you want to terminate the contract immediately is that you can do so if it's some variation of the language there under paragraph three that the manager has for-- has failed to uphold its obligations under the agreement or breached the terms of the agreement, or something along those lines.

 

And so there's, I guess, pros and cons to each. But in general, taking option via the forthwith termination immediately is a pretty drastic step. It invites arguments, it invites potential litigation. And, frankly, it might stick the corporation in a situation where very suddenly there's just no manager and there's no smooth transition.

 

I guess, there's a time and a place for everything, so it might be that in certain circumstances, that's the route you have to take. But in general, it does leave you more open to risk. It leaves you more open to having to incur legal fees. It leaves you open to being stuck without a manager and having a rocky transition from one to the other.

 

RODRIGUE ESCAYOLA: OK. So a lot to unpack here. But, certainly, the first step is to have a look at your contract. You need to have a look at the contract to determine what is the termination provision, and whether you can terminate on 60 days or 30 days-- God forbid-- or 90 days. I think 60 is fairly standard, but even preparing for today's webinar, the first precedent I pulled was 90 days.

 

And so you need to have a look. And as Graeme indicated, you're looking for, is there a clause that allows me to terminate for convenience, basically? So it's with clause or without cause. In this case it's without cause. Listen, it's not you, it's me. You don't need to tell them they're a bad kisser. You just need to say, listen, I'm out. And that's just the way it is. That's fine.

 

So look for that provision, and make sure that you meet that deadline or that provision. But sometimes your contract may not allow that. And if it does not allow that, then maybe it only allows a termination for cause. And as Graeme indicated, that's much more difficult to meet. I mean, if you need to find your manager with their hands in the cookie jar on their repeated basis, to be able to pull that, I think.

 

So have a look at the termination clause to make sure when and how quickly you can terminate. What I like about Graeme having put the second clause on the screen is that that's the second clause that often confuses people. There may be a clause that says, listen, if you don't give us 60 days notice before the end of the contract, it's going to automatically renew for a whole year.

 

And so some people are thinking, oh, my goodness, am I now stuck in this relationship for a whole year because I missed the 60 day warning shot? And the answer is no. Well, depending on what your contract says. But in this example, that 60 day termination clause continues to exist. So even if you didn't tell them, we're parting ways 60 days before the end of the contract, you're in the new contract for a year but then you can terminate it based on that 60 day provision. Clear as mud, I'm sure.

 

So just make sure that before you pull the trigger, you have a look at your contract and speak to your favorite condo lawyer to make sure that you don't end up in a situation where you've soured the source and gave notice, that now you're stuck with not being able to part ways or maybe a lawsuit because you didn't provide the 60 days notice. Anything to add to this, Graeme?

 

GRAEME MACPHERSON: No, I don't think so, not on the termination clause provisions.

 

RODRIGUE ESCAYOLA: OK. Now I'd like to talk about some-- yes.

 

MURRAY JOHNSON: There's one thing I think the boards need to consider, and that's the professional courtesies between management companies. Typically with the 60 day notice, around about a month into that, your existing management firm is going to start transferring information to the new firm.

 

The new firm needs time to set up bank accounts, get their accounting program up and running, find the right manager, and so forth. So if you're looking to cancel or terminate the contract immediately or even within 30 days, it's unrealistic for the incoming company.

 

RODRIGUE ESCAYOLA: Right, right, right, OK. Totally different topic, still on the legal front. What about these famous restrictive covenants, Graeme? Do you want to try to tackle that? I mean, we could do a whole episode on that, but--

 

GRAEME MACPHERSON: Yeah, I'll try and be brief on this. But a restrictive covenant is essentially more colloquially referred to as a non-compete. These can sometimes be in-- you can find them either in the employment contract between the management firm and the manager, or it might be actually in the management contract between the management firm and the condo corporation.

 

RODRIGUE ESCAYOLA: Let me stop you there just for a second. In the army I've learned that you need to first tell people why you're going to talk about something to pique their interest. And I forgot to do that. My apologies. The reason why we're talking about that is it may be that you love your manager but you just can't stand the management firm.

 

So you're thinking, listen, this is what we're going to do. I love Shelley, but I don't like who she's working for so I'm going to cajole her into following me. And we're going to take her and go to a different firm. And we keep the same manager, everybody's comfortable with her, everybody loves her, but we're not stuck with the god awful back office lack of proper service. And so you're tempted to do that maybe.

 

Or it could just be that, in fact, Shelley changed management firm. Unrelated to you she changed, and now you're thinking, oh, well, I really like Shelley. And so I'm not sure I'm going to like the new guy. So I'm going to switch firms as well to follow her. Does that come with risks? And that's when we talk about the non-compete.

 

GRAEME MACPHERSON: And it might, yeah, because if your management contract includes something like we see on the example on the screen here, it may be that if you breach a term like that, the condo corporation could actually be liable for damages.

 

And there was some case law recently where that actually occurred not only for the condo corporation, the damages for that condo corporation, but the court actually found that, well, if they had stayed with that same manager, it might have even expanded to a sister corporation. So they kind of got on the hook for double.

 

The point being that if you're going to do something like that, again, the moral of the story, if you talk to lawyers, is just check the contract and make sure that you look at the terms of that to see if you're in the clear to make a decision like that before you do.

 

RODRIGUE ESCAYOLA: Right. I just sent in the chat the link to a blog post we did about that where that's exactly what happened. The manager left the firm to go somewhere else. The condo corp said, we like that manager so we're going to go as well.

 

Then the management firm sued and was awarded some damages, which when you think about it, it was a bit odd because the condo corp had the right to terminate the management agreement. They had that right. And they did. But they happen to then have followed the manager elsewhere, and that was in breach of their own contractual agreement with the first management firm. So, again, speak to your favorite condo lawyer, and that's it. So anything else, Graeme, on that?

 

GRAEME MACPHERSON: No, not on that.

 

RODRIGUE ESCAYOLA: Right, OK. The only thing I'm going to say too is that these non-competes, we used to find them in employment agreements. And so the management firm-- and I think-- I don't know if you said that already, Graeme.

 

GRAEME MACPHERSON: No, I didn't. But I can touch on that. So, yeah, normally these are something you'd find in an employment agreement, that if you're going to work for us, you can't then quit and then go work for a competitor.

 

Thanks to the Working for Workers Act 2021 which came into force in late 2021, now employers are prohibited from binding employees with non-compete clauses like that. However, that may mean that management contracts are going to include this type of provision more in the future since it can't be in the employment contract. So just something to be aware of.

 

RODRIGUE ESCAYOLA: Exactly. And if you saw Leran, was all excited because this is all about his past life with the city. Did we say anything that's totally dumb, Leran? So far so good?

 

LERAN OIRIK: Exactly, yeah.

 

RODRIGUE ESCAYOLA: OK, good stuff. Perfect. So now next topic, Graeme, still in on the legal front. Oh, we're running out of time. Something to look for in the new contract. So you're getting the new contracts, and some of them-- some management include them in the RFP, so you get to see what kind of contract you'll have. And so tell us a bit about the indemnification provisions and what they mean, and whether you need them. And help us out with this.

 

GRAEME MACPHERSON: So these types of provisions are quite common. And I do think they actually make a lot of sense because often what happens when, let's say, a condo gets sued by someone-- for example, a slip and fall-- what may happen is the condo will get sued. And then the manager will also get named in that lawsuit because the plaintiff will just sue everyone and anyone who was there at the time and felt-- and feels that, well, they have a tangential relationship to this so I'll sue them.

 

And what a lot of management agreements say is that except in certain circumstances, if the manager gets sued, the corporation will handle-- will pay for their defense and will pay for any damages that are incurred as a result.

 

Now, that's what this one says. And there are exceptions to that. Sometimes these cut both ways. And if it turns out that the corporation has now incurred damages or fees because of something that the manager did totally beyond the scope of what their work was, then it may be that the manager has to indemnify the corporation.

 

But in most circumstances, I think it does make a lot of sense for the corporation to expect an indemnification clause like this because the manager is an agent of the condo. And it's really the arms and legs of the condo, but it's not the decision making process.

 

So if there is something like an occupiers' liability case where someone slips and falls, this is a perfect example of where you would expect to see the manager being indemnified by the condo. And, frankly speaking, more likely than not, by the condo's insurance.

 

RODRIGUE ESCAYOLA: Thank you, Stephen, for having spotted a typo which I had deliberately left in this clause because I didn't draft this agreement, and I just thought it would be funnier to just have tortuous instead of tortuous. But in any event, there it is, I corrected it. Thank you so much for that. Keen eye.

 

And make sure that you have the reverse or the mirror image of this provision. So one thing is you the corporation having to indemnify the manager if the manager did nothing wrong. But you also want the manager to indemnify you if you did nothing wrong and they did something wrong.

 

And something else that we often see is an entire section dealing with who is responsible if there is a complaint to the CMRAO. And who's going to have to pay for the extra work and who's going to have to pay for the extra time, and this and that.

 

And, of course, you want that clause to be fair. I mean, I don't think a manager wants to have to incur all sorts of expenses, defending frivolous claims against them. But at the same time, if it turns out that there-- I was going to say disbarred, but maybe not disbarred. I'm not sure what would be the expression for a manager. But if their license gets suspended, you the corporation don't want to be on the hook for that. And so you just want to make sure that this is fair.

 

I want to go to one last legal question before we run out of time, and it's this. Do we have to consult the owners before we pull the trigger and change management? So I'm going to ask, first, the managers if they're of the view we should. Then I'm going to ask Leran whether he did. And then I'm going to ask the lawyer to come up with that one exception that made both of them sound like they had the wrong answer. So managers, do we have to consult with the owners before we pull the plug?

 

MURRAY JOHNSON: Go ahead Shelley.

 

SHELLEY SEABY: OK. [LAUGHS] I was waiting for you, Murray. No, it is within the authority of the board of directors to make that decision on behalf of the corporation.

 

RODRIGUE ESCAYOLA: Yeah, that's the default setting. The same way you have the authority to hire the landscapers and the snow removal guy and the plumber ans the this and the that, the board has that authority. Leran, do we consult-- did you consult?

 

LERAN OIRIK: We didn't consult owners except in the idea that there was a pattern of owners complaining about certain communication not being met or tasks not being done. So that was the consultation, so to speak. But, no, I don't view it as appropriate necessarily to reach out to them.

 

RODRIGUE ESCAYOLA: Yeah. Do get ready that you're going to have owners that are going to push back hard if they feel they're haven't been consulted. They love the manager, and they feel that you're changing one of their most important key player usually right behind the cleaner.

 

People have a very strong relationship with the cleaner. People have a strong relationship with the super, and may have a strong relationship with the manager. And so if you change that, some people feel like it's as if you had changed the lobby on them without consulting them. Having said that, there are circumstances where consultation is required. Graeme, what is this about?

 

GRAEME MACPHERSON: Like a true lawyer I'll say it does depend. Normally the default setting, as you said, is that it's something that the board has the ability to decide. However, you do want to check your corporation's operating bylaw.

 

That's the one that usually will have a provision that sets out what the powers of the corporation are. And what we've got here is an example of one that says that the powers of the corporation include employing a manager with compensation to be determined by the board to perform duties and services, yada, yada, yada. And here's the important part, "Subject to ratification by a bylaw of the corporation."

 

And so that-- in order to ratify a bylaw, you need a vote of owners. So this is one of those circumstances where if this were the bylaw in play, it seems as though in that circumstance, at least the level of consultation involved in a vote for a bylaw is required. That's certainly, I think, the exception. It's not going to be there all the time, but it just goes to show the mantra that I've been repeating this whole time of just check the documents beforehand.

 

RODRIGUE ESCAYOLA: Right. And before Stephen says anything about it, there's a typo, I've corrected it. It's corporation. There it is. I mean, this is a fine example where there was a corporation that was about to pull the trigger, had gone through the RFP process, had interviewed, had made a decision, was ready to put in place the manager imminently, was about to send the notice out to the owners.

 

And then they consulted legal and legal said-- to the surprise of many people around the table-- they said, well, no, actually, you require the ratification of a bylaw to be able to change management. Now, I think one of the justification is to avoid the situation in which that corporation found itself where you had a lot of people that were unhappy with the decision to change management.

 

And I think if you ask that corporation today, would you like to vote to repeal this bylaw? They'd say, heck no. I really like it the way it is because now people-- the board has an obligation to speak with us. Anyways, but it is exceptional, I think. This is not a-- go ahead Murray.

 

MURRAY JOHNSON: Rod, I've got over 450 agreements out there with corporations. And I have one that has this clause, one.

 

RODRIGUE ESCAYOLA: Yeah, it's quite rare, I would think. I think there's more than one out of 800. But, I mean, this is a good sample that you gave us. OK, we only have one minute left so I'm just going to have a quick look to see if there's something else that we should quickly have a look at.

 

What we're going to do is this, is with our parting words. So what I do usually when we're at the end, I thank everybody of course, but then I ask everybody for words of wisdom or parting words. And so the question I'm going to have to each of you will be this. What is it that you should look for in a new manager? When you're about to change, what is it that the one quality or the one thing that to keep in mind? If you're about to go and search the woods for the perfect manager, what are you looking for?

 

So going around the table thanking everybody, I'm going to start with you Graeme. I know you're contractually mandated to be here at this webinar, so it's not like you had a choice. But thank you so much for all the work you put into that. Any words of wisdom?

 

LERAN OIRIK: Yeah. Sort of answering the question, sort of not. But I think my answer would be that if you're in a situation where you're looking for a new manager and looking through management contracts, one of the most important things you can do is get a sense of what work is going to be covered in the normal cost of management and what's going to be extra work.

 

Because a lot of the times, I think, people get the sense that managers are sort of an all you can eat buffet. And you can just sort of take everything and everything and-- with no thought to whether or not that's beyond the scope of what could ordinarily be expected.

 

That's usually in the contract in some sort of schedule. Maybe not in a schedule, maybe in one of the sections there. But it'll set out what the normal duties are under the contract and what the extra duties are that might come with an additional cost. And just be aware of those so that everyone is very clear on what everyone's duties are.

 

RODRIGUE ESCAYOLA: Right, wonderful, perfect. Murray Johnson from Crossbridge, thank you so much, again, for having accepted this invite and for taking on a topic that could be touchy for someone in the industry. So thank you for that. And tell us what we should be looking for. What is the unicorn condo manager out there? What do they have?

 

MURRAY JOHNSON: This happened at a sales pitch I think more than once, certainly for me. When we did have the manager there, the board asked the manager a really technical, legal type of question. They already knew what the answer should be, but they wanted to hear what the manager said.

 

And I think one of the things you want to hear is that a manager knows what they don't know. So if they don't know, let's not make it up. Let's say, look, I have to research that. So I think don't have somebody that's just going to jump to a conclusion right away before they even understand the problem.

 

RODRIGUE ESCAYOLA: Yeah, yeah. Honesty and your answer and candor to me they go a long way, right. I don't know the answer to that. And I'm going to look it for you-- look it up for you. OK, perfect. Thank you so much, again, Murray.

 

MURRAY JOHNSON: My pleasure.

 

RODRIGUE ESCAYOLA: Shelley Seaby from CMG, the condo management group. The biggest manager here in Eastern Ontario. Shelley, what am I looking for? I'm looking for the Albert, if you remember the Philadelphia commercial. I'm looking for Albert but in the management universe. What is that person?

 

SHELLEY SEABY: Again, that it's not just a person that you're hiring. You're hiring a provider, a service provider, a management service provider. So you have to look at the whole package. Your proposal, your RFP is going out for management services, not just one person.

 

So going back to throwing the baby out with the bathwater, keep in mind that there should be an entire team that is supporting the face of management services. And it's important to keep in mind that you're just not hiring one person that has to be a good fit, but you're also contracting an entire team to provide those services.

 

RODRIGUE ESCAYOLA: You know which part-- thank you so much, Shelley. Thanks for being part of this webinar. The part that we totally skipped is the turnover and the documents and what needs to be turnover. I think we need a second episode, so I think you've all been rehired for the follow up episode. So, Leran, I love this guy.

 

Anytime he tells me-- anytime he tells me, I love it. I don't mind coming back. I'm just going to keep inviting him. So thank you so much, Leran, for having taken on this. Everybody's busy but, I mean, you really have no sort of skin in the game so there's really no benefit to you. You're just doing it at the kindness of your heart. So thank you for that. And who is-- what are you looking for in a condo manager? Like in a one sentence, what are we looking for?

 

LERAN OIRIK: See, I'm going to switch up the question a little. But for me it's make sure that it's truly time to change. With my labor relations background, I'm all about the relationship. Make sure you've set the expectations, and that the trust is gone. And you really have to change.

 

RODRIGUE ESCAYOLA: Right, perfect. Yes, because there's no turning back. OK, fantastic. Folks, we have one more webinar this season. It's usually the first Wednesday of the month, but we won't be able to do it that Wednesday. I forget why, but I'm sure there's a good reason. Either Easter or ouzo, I'm not sure, but there's a reason.

 

And so we're going to probably aim for June 21. And it's going to be one of my favorite episodes, right after this one. This one was my favorite, but it's going to be my second favorite where I'm hoping to invite some of my colleagues from the condo bar, from different firms. And it's going to be what I call the condo lollapalooza.

 

And they each come and they present, they introduce their favorite case of the year. And so hopefully we're going to get the usual bunch of misfits together to share good stories and laughs. So we'll see. I haven't asked them yet so who knows. Maybe it'll just be Graeme and me alone, who knows.

 

So that's going to be on the 21. You'll need to register again. The information will be posted on the webinar, on the Condo Advisor webinar tab at the top. OK, we are over time. And I'm not paying any overtime. So there it is. Thank you very much, everybody. Wishing you all a great month of May, I guess. And we'll see you next month, at the end of next month. Thank you so much, everybody, around the table for your time. See you later.

 

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