Conflicts of Interest Among Co-Ownership Directors

In a divided co-ownership, the directors of the board of directors (board) act on behalf of the syndicate. However, personal interests can sometimes conflict with the collective interest. Knowing how to recognize, disclose and manage these situations protects the board’s credibility and the co-owners’ trust. For search engine optimization, here is the exact term often searched: conflict of interest among co-ownership directors in Quebec.

In this article, we explain the legal framework applicable in Quebec, best practices for prevention, and a simple method for documenting each decision in the minutes. You will leave with practical tools for your next board meeting or annual general meeting.

What is a conflict of interest on the board?

A conflict of interest arises when a director has a personal, financial or relationship-based interest that could influence their judgment in a decision of the syndicate. The interest may be direct (a monetary gain or business relationship) or indirect (an advantage for a close relation, business partner or allied co-owner).

Common condo examples:

• A director proposes awarding a contract to a company owned by a family member.
• A director owns a parking space and participates in a decision that would specifically increase its value.
• A director rents their private portion on a short-term basis in violation of the by-laws of the immovable and intervenes in the application of sanctions.
• A director also works as a broker involved in the sale of a unit and participates in discussions about work that could influence the sale price.

A conflict does not necessarily involve moral wrongdoing. It is the inadequate management of the conflict (failure to disclose it, participating in the vote or influencing discussions) that undermines the legitimacy of decisions.

Legal framework and co-ownership documents

The syndicate of co-owners is a legal person (see section 1039 of the Civil Code of Quebec). Directors are therefore subject to the general rules applicable to directors of legal persons, including the duties of prudence and diligence, and honesty and loyalty, which include the obligation to avoid placing themselves in a conflict-of-interest situation and to disclose it when applicable (see sections 321 and 322 of the Civil Code of Quebec). In practice, this means:

• Promptly disclosing any interest at stake.
• Refraining from influencing the discussion.
• Not voting on the matter concerned.
• Having the entire matter recorded in the minutes.

In addition to the Civil Code of Quebec, your declaration of co-ownership and by-laws of the immovable may provide for additional rules: a written conflict-of-interest policy, disclosure thresholds, removal mechanisms, and so on. Make sure these documents are consistent and up to date.

• Useful references:
• Civil Code of Quebec (LégisQuébec) — directors’ duties (sections 321 and following)
• Syndicate of co-owners — legal person (section 1039 of the Civil Code of Quebec)

For a practical overview, also consult the RGCQ, which publishes guides and webinars on co-ownership governance.

Common situations and recommended responses

Here are typical cases encountered by the syndicates we support, along with practical responses:

• Awarding a contract for maintenance of the common portions to a related company: require at least three bids, have the interest disclosed, and have the director concerned recuse themselves from the vote and deliberations.
• Work in private portions that affects the common portions (e.g., plumbing columns or balconies): if a director is directly affected by the work, disclosure and abstention are required.
• Insurance and claims: if a director is involved in a claim that specifically affects their unit, they must not participate in selecting experts or interpreting coverage.
• Fines for violations of the by-laws of the immovable (e.g., noise or Airbnb): a director who is the subject of a notice of non-compliance must not participate in analysing the file or voting on the sanction.

Operational tip: create a “disclosure register” to track recurring interests from one board meeting to the next. This simplifies the preparation of the minutes and reminders about recusal.

A simple procedure: disclosure, recusal and recording in the minutes

Adopt a consistent procedure that applies to both board meetings and the annual general meeting:

1. Before the meeting
   • The director sends the chair of the board and the condominium manager a written disclosure (by email) describing the nature of the interest.
   • The agenda identifies potentially conflicted items.
2. During the meeting
   • The chair invites the person concerned to confirm the disclosure.
   • The person does not participate in the discussion or vote on the matter in question; they may leave the virtual or physical meeting room if necessary.
   • Their presence may count toward the quorum for the meeting, but not toward the quorum for the specific item if your policy so provides. Check your declaration of co-ownership.
3. After the meeting
   • The minutes record the disclosure, recusal, time of entry or departure where applicable, and the result of the vote by the other directors.
   • Documents (bids, emails and assessments) are archived in accordance with your document-management policy.

“Ms. Tremblay discloses an interest in connection with item 6 (maintenance contract). She recuses herself from the discussion and vote. Resolution adopted by a vote of 3 to 0.”

At an annual general meeting, a co-owner who is not a director is generally not deprived of their right to vote. However, when a decision creates a distinct personal benefit, disclosure and abstention remain good practices, and some declarations of co-ownership expressly provide for them. Refer to your internal clauses and, if necessary, consult a legal professional.

To validate potential contractors and limit risks, use the licence verification tool of the Regie du batiment du Quebec (RBQ).

Consequences of mishandling a conflict

Validity of decisions: a decision tainted by an undisclosed conflict may be challenged and, depending on the circumstances, annulled by a court.

Directors’ liability: directors who fail to fulfil their duties of loyalty and prudence may incur civil liability (see section 321 and following of the Civil Code of Quebec).

Internal measures: removal of a director by the annual general meeting if the declaration of co-ownership so provides, a formal demand, or a review of the resolution.

Reputation and atmosphere: a loss of co-owners’ trust makes it more difficult to approve budgets, increase common expenses and manage the contingency fund.

Before the matter becomes a dispute, prioritize internal mediation, prompt legal advice, and transparent correction of the process (a new call for bids, a new vote without the conflicted person, and so on).

Establishing clear and workable rules

Establish a written policy adopted by resolution of the board and, ideally, endorsed by the annual general meeting. It should cover:

• Definitions (direct or indirect interest, close relations and related suppliers).
• A standard disclosure and recusal process.
• Roles (meeting chair, board secretary and condominium manager).
• Recording matters in the minutes and maintaining the disclosure register.
• Calls for bids: minimum number of bids, evaluation grids and RBQ references.
• Measures in the event of a breach (reminder, training or removal if provided for in the declaration of co-ownership).

Example of a practical grid

Train the board every year, at the same time as preparing for the annual general meeting and updating the maintenance logbook/EUC. A clear reminder reduces grey areas and makes life easier for the secretary when drafting the minutes.

Useful resources and templates

• Civil Code of Quebec — general framework for directors: LégisQuébec (see, in particular, sections 321 and following; paraphrased in this text).
• Concept of the syndicate of co-owners as a legal person: LégisQuébec.
• Best practices in co-ownership: RGCQ.
• Verifying a contractor (bids): RBQ.

For management tools and minutes templates, visit the Services – administrative management section of our website. You can also browse our blog for other co-ownership governance resources or review our packages based on your syndicate’s needs.

FAQ — Conflicts of interest in co-ownership

• Can a director vote if they have a conflict of interest?
  In principle, no. The director must disclose their interest and refrain from influencing the decision or voting. Have this clearly recorded in the minutes.
• Does the presence of a conflicted director count toward quorum?
  Their presence counts toward the quorum for the meeting. For the item concerned, apply your internal policy: several syndicates exclude this person from the quorum specific to the resolution concerned and note this in the minutes.
• Must a co-owner who is not a director abstain at the annual general meeting if they have a particular interest?
  Your declaration of co-ownership may provide for this. Otherwise, disclosure remains a good practice and the meeting may invite the person to abstain, without necessarily taking away their right to vote. Obtain legal advice if in doubt.

This article provides general information and does not constitute legal advice. Consult a lawyer or notary regarding your situation.

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