Condo Board Member Liability in Ontario: What Every Director Needs to Know
(From a Condominium Management Expert)
Practical Guidance for Smarter Governance in London & Sarnia, Ontario
When you volunteered to sit on your condo board, personal liability probably was not the first thing on your mind. Most directors in London and Sarnia are neighbours who stepped up to help their community. But as a board member of an Ontario condominium corporation, you do carry legal obligations and, in some circumstances, real personal risk.
Understanding what the Ontario Condominium Act actually requires of you is not about creating fear. It is about making confident, defensible decisions. This article explains your duties as a director, when you could face personal liability, and the practical steps that protect you and your community.
What the Condominium Act Actually Requires of You
Section 37 of the Ontario Condominium Act, 1998 sets out the standard every board director is held to. In plain language: you must act honestly and in good faith with a view to the best interests of the corporation, and you must exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.
That second half matters. The Act does not expect you to be a lawyer, an engineer, or an accountant. It expects you to behave like a thoughtful, careful person who takes the role seriously. Directors who gather information before making decisions, consult professionals when a matter is outside their expertise, and document their reasoning are consistently in a stronger position.
The specific obligations that flow from this standard include:
• Attending board meetings and participating in decisions
• Reviewing financial statements and approving the annual budget
• Ensuring reserve fund contributions meet the requirements of the Condominium Act
• Enforcing the corporation's declaration, by-laws, and rules consistently
• Maintaining the common elements in a state of good repair
• Holding an annual general meeting and providing required notice to owners
• Disclosing conflicts of interest before they affect a vote
These are not optional. They are legal obligations attached to your role, whether you are a first-time director or have served for years.
When Can a Condo Board Director Be Held Personally Liable?
The most common question boards ask is: can someone actually sue me personally? The answer is yes, though it is not a common outcome for directors who act in good faith.
Personal liability for Ontario condo directors typically arises in a few specific situations:
• Authorizing payments that are not permitted under the Act or the corporation's governing documents
• Failing to disclose a conflict of interest and voting on a matter where you have a personal stake
• Neglecting the corporation's physical assets to the point where owners suffer damage
• Deliberately or recklessly violating the rights of an owner or resident
• Making decisions that benefit a contractor, vendor, or related party at the expense of the corporation
Courts are generally slow to hold individual volunteer directors personally liable for decisions that turned out to be wrong. What courts look at is process: did the board gather relevant information, consult appropriate professionals, consider the owners' interests, and make a decision in good faith? Boards working with Sapphire in London and Sarnia consistently hear this framed as 'document your reasoning.' A board minute that shows you got three quotes, reviewed a legal opinion, and voted after open discussion is a very different record than one that shows nothing at all.
For a practical look at the decisions that most often expose boards to criticism or complaint, read our guide: Top 5 Mistakes Condo Boards Make (From a Condominium Management Expert).
Conflicts of Interest: The Obligation Most Directors Underestimate
Section 40 of the Condominium Act deals specifically with conflicts of interest. A director who has a material interest in a contract or transaction that the corporation is considering must disclose that interest to the board, must not vote on the matter, and must not attempt to influence the vote.
What counts as a material interest? It is broader than people expect. If a board member's family member owns the landscaping company the corporation is considering hiring, that is a conflict. If a director personally owns a unit adjacent to where a gate or fence decision will be made and stands to benefit, that could qualify. When in doubt, disclose and step out of the vote.
Failure to follow Section 40 is one of the cleaner paths to personal liability because the obligation is so clearly written. Boards in London and Sarnia where a property manager is involved typically have the manager track conflict declarations as part of meeting governance so nothing gets missed.
Board governance also comes up directly at elections. For the obligations that begin the moment a director is elected, read: Condo Board Elections in Ontario: What Every Director Should Know.
Directors and Officers Insurance: The Protection You Should Not Skip
Directors and Officers insurance, commonly called D&O insurance, is the primary financial protection available to condo board members in Ontario. A D&O policy covers the cost of defending against claims made against individual directors and, in many cases, covers settlements or judgments up to the policy limit.
This is not the same as the corporation's general liability policy or its property insurance. Those policies protect the corporation as an entity. D&O coverage protects you personally in your role as a director.
This is not legal advice, but generally speaking under Ontario law, condo corporations are not required by the Condominium Act to carry D&O insurance, though the Act does permit corporations to indemnify directors under Section 38. In practice, most well-governed corporations carry it, and many management contracts include a review of coverage as part of onboarding. If your corporation does not have D&O insurance, this should be placed on your next board agenda.
At Sapphire, we find that boards who have not reviewed their insurance package in more than two years often discover gaps. Reviewing both the general policy and any D&O coverage annually is a basic governance step.
The Business Judgment Rule: Good Process Is Your Best Defence
Even when a board decision produces a bad outcome, Ontario courts are generally reluctant to second-guess it if the decision-making process was sound. This principle is sometimes called the business judgment rule, and while it originates in corporate law, it applies meaningfully to condo board decisions.
What good process looks like in a condo context:
• Getting proper notice to all directors before a vote
• Allowing discussion and dissent to be recorded in minutes
• Consulting a professional (engineer, lawyer, accountant) when a decision is outside the board's expertise
• Considering the interests of all owners, not just those who are vocal
• Avoiding decisions that benefit one director or one group of owners at the expense of others
The Condominium Authority of Ontario (CAO) and its Condominium Authority Tribunal (CAT) also handle disputes that used to require going to court. Owners can bring complaints about records access, noise, pets, and other defined matters through the CAT without litigation. This means boards face more formal accountability than they did a decade ago, but also that many disputes are resolved without personal liability ever coming into play.
Financial decisions carry particular weight because they affect every owner. For a look at one of the most significant financial obligations a board can face, read: What is a Special Assessment?
Frequently Asked Questions
Q: Can a condo board member in Ontario be personally sued for a bad decision?
Yes, but it is uncommon for directors who act in good faith and follow a proper process. Ontario courts apply a reasonableness standard. If you acted honestly, gathered relevant information, consulted professionals where appropriate, and made a decision with the corporation's best interests in mind, you are in a much stronger position than a director who made a snap decision without documentation. Directors and Officers insurance provides an additional layer of financial protection.
Q: What does conflict of interest mean for a condo board director in Ontario?
This is not legal advice, but generally speaking under Ontario law, Section 40 of the Condominium Act requires a director to disclose any material interest in a contract or transaction being considered by the board. After disclosing, the director must not vote on the matter or attempt to influence the outcome. A material interest includes situations where you, a family member, or a business associate would directly benefit. When there is any doubt about whether a conflict exists, disclosure is always the safer path.
Q: Are condo board members in Ontario required to have Directors and Officers insurance?
The Ontario Condominium Act does not currently mandate D&O insurance for condo corporations, but it does allow corporations to indemnify directors under Section 38. In practice, carrying D&O coverage is widely regarded as a governance best practice. London and Sarnia boards that work with a professional management company typically have their insurance package reviewed as part of the management onboarding process. If your corporation does not have D&O insurance, raise it at your next board meeting.
Related Reading
→ Top 5 Mistakes Condo Boards Make (From a Condominium Management Expert)
→ Condo Board Elections in Ontario: What Every Director Should Know