Is your Self-Managed Condominium Corporation Exempt From the New Licensing Requirements Under the CMSA? What Is the Meaning of “Compensation Or Reward, Or the Expectation of Such”
We will be publishing some blogs to address some of the pertinent issues that may affect self-managed Condominium Corporations under the new Condominium Management Services Act, (CMSA) when it comes into effect. This Blog discusses the meaning of “compensation or reward, or the expectation of such” under the exemption from licensing for directors .
As described in our last blog dealing with the impact of the CMSA on self managed condominiums, section 35 of the CMSA permits exemptions from licensing requirements. Section 2 of the Draft Regulations, provides the following exemption for directors from the requirement to be licensed:
14. A person who is elected or appointed as a director of a condominium corporation under the Condominium Act, 1998, including a director who receives compensation pursuant to a by-law made under clause 56 (1) (a) of that Act, unless the person is providing condominium management services for compensation or reward or the expectation of such.
For many Boards, the wording of this exemption begs the question: What constitutes “compensation or reward” that might disqualify a director or board from the application of this exemption?
In our view, the key question is: Is / are the director(s) being compensated for providing management services?
Given the wording of section 35, the exemption is clearly intended to apply even if the director is receiving compensation pursuant to a bylaw passed pursuant to the Condominium Act. [The Condominium Act of course requires that compensation to be paid by a condominium to a director be approved by bylaw.] In other words, the receipt of compensation or reward, on its own, is not enough to disqualify a director from the exemption.
In our view, given the wording of section 35 of the CMSA, the exemption is meant to include all directors – whether or not they receive compensation – as long as the director is receiving the compensation (or reward) for their service on the Board, and not for otherwise providing general management services.
Boards who do receive compensation or reward, pursuant to a bylaw or otherwise, should therefore not be concerned that they will not be covered by the exemption simply because they receive some form of compensation or reward (including monthly or annual compensation paid to directors and rewards such as gifts for service, or Board dinners).
In our view, the requirement for licensing will only apply to a director where the director is receiving compensation or reward for management services that are provided above and beyond the role of director.
- While this would likely have to be assessed on a case by case basis, it seems to us that one would generally expect to see a particular director stepping up to provide managerial type services, and to be compensated more (than the other directors) for providing those services.
- It also seems to us that one might also expect to see some kind of agreement or Board resolution clearly indicating the intention to compensate for management work – not just a small “reward” for the different responsibilities as Directors.
Stay tuned for our next blog on self-managed Corporations, and the Condominium Management Services Act.