Making the Right Call: Director Standard of Care and Liability in Condominiums
Serving as a director of a condominium comes with important responsibilities. The Condominium Act, 1998 provides that directors must act honestly, in good faith, and with the care and attention that a reasonable person would use in a similar situation.
Simply put, directors must make decisions that are in the best interests of the condominium corporation, not for their own benefit or the benefit of a specific group of owners. This means staying informed, attending meetings, reviewing important information, participating in discussions, and overseeing the corporation's finances. When an issue requires specialized knowledge, directors should seek advice from qualified professionals such as lawyers, engineers, accountants, or reserve fund consultants.
Most condominium corporations carry Directors' and Officers' (D&O) liability insurance, and directors who act in good faith should be protected from personal liability. However, directors can still be held personally responsible in situations where they act dishonestly, fail to disclose a conflict of interest, misuse confidential information, knowingly ignore legal obligations, or put their personal interests ahead of the corporation's interests.
There are practical steps boards can take to reduce the risk of liability. Except in unusual circumstances, decisions should be made collectively by the board, properly recorded in meeting minutes, and supported by professional advice when needed. Directors should declare any conflicts of interest as soon as they arise and avoid participating in related discussions or votes.
Property managers also play an important role. By maintaining accurate records, providing timely guidance, and helping boards follow good governance practices, managers can support informed and compliant decision-making.
Courts generally respect board decisions when directors have acted reasonably, honestly, and in good faith. This is often referred to as the "business judgment rule." Directors who are informed, thoughtful, and who rely on professional advice are unlikely to face personal liability, even if their decisions are later questioned.
The key takeaway is straightforward: make informed decisions, keep good records, seek professional advice when needed, and always put the condominium corporation's interests first. Good governance is not only good management, it is also the best protection against personal liability.