Forming and Running a Housing Co-Op
Once the Co-op has been Formed
Once formed, the initial membership is created and members live in the co-op and take responsibility for its overall management. Here is an overview of the principles, documents and processes that are important in the operation of a co-op.
Co-ops Operate on a Co-operative Basis
Co-ops are expected to run on a co-operative basis, which means that they must govern their members and make bylaws or rules following the principles set out in the co-op act.
Bylaws or Rules Set Co-op Policies and Procedures
Using the co-op act as a framework, each co-op creates its own bylaws or rules that outline the purpose of the co-op and how it is to be managed. The bylaws or rules are created by the members, and topics that are commonly addressed in these documents include:
- The process for electing a board of directors
- The process for admitting new members
- Timing of annual meetings, elections
- The process for calling meetings and special meetings
- Notice requirements for meetings and other items
- The process for determining the housing charge and dealing with problems of non-payment
- The process for managing a reserve fund for anticipated capital repairs.
Therefore, to understand how a co-op is run one must look to their bylaws or rules. Since each co-op will have its own unique bylaws or rules, it is impossible to provide a specific summary of how a co-op is run. However, many elements are common amongst all co-ops. Here are some general principals — variations and differences are identified in the Provincial and Territorial Fact Sheets.
Note: There shouldn't be an issue with access to the bylaws or rules, but sometime members will have difficulty accessing a copy. As a democratic organization you can insist on getting access to your bylaws or rules, either by viewing a copy or by getting your own copy. One of the most important actions any co-op member can take is to request a copy of the co-op bylaws or rules and review them carefully.
Members Make Broad Decisions, While an Elected Board Manages More Detailed Issues
Within a co-op the membership as a whole makes decisions about broad-based issues such as co-op policy, changes to the rules or bylaws, and the approval of the annual budget. A board of directors is elected by the membership to take care of more detailed management issues.
The bylaws or rules of the co-op may also set out the voting process for the election of directors; e.g. how and when members vote to elect a board of directors from the general membership. Elections are normally held at the Annual General Meeting (AGM). The co-op act sets out who can sit on the board of directors and the steps for electing a board of directors — see the Provincial and Territorial Fact Sheets to review the requirements for your province or territory.
Board members are elected for a specific time period or "term". Co-ops will often have "staggered terms" for its board members. This helps maintain continuity, as continuing board members will be familiar with outstanding issues and concerns as well as projects that are still in progress. One way to set-up staggered terms is to set a combination of one and two year terms when the first board is elected. This way, not all members will be up for reelection at the same time.
The board is accountable to the members of the co-op. It is very important that the process outlined in the rules or bylaws is followed when notifying members of an upcoming meeting and running a meeting. This is discussed in more detail below. The board of directors must attend the AGM and report to the members about the financial well being of the co-op.
In larger co-ops that have staff, the staff will report to the board of directors. The board will address member complaints, deal with non-payment of housing charges, and oversee the annual budget. The board will also take responsibility for special projects as directed by the members. For example, it is important for the co-op to have a reserve fund that is set aside to cover capital expenses such as replacing the heating system or repaving the parking area. The co-op members may ask their board to do a replacement reserve study to determine how much money the co-op should set-aside to cover future major expenses.
The board of directors, and in particular the board executive, are responsible for familiarizing themselves with and following the procedures outlined in their co-op's rules or bylaws. If the members are not satisfied with the performance of the board they may call a special meeting to remove a director, more than one director, or the entire board.
Decision Making: Co-op Meetings Must Follow Specific Guidelines
As a democratic organization, meetings are important to the operation of the co-op. Meetings are held to make decisions on co-op policy, the annual budget, and other major issues. They may also be held to consider an appeal from a member who is facing termination or to remove a director, more than one director, or the entire board.
Each co-op must have an annual general meeting (AGM), the timing of which may be related to fiscal year end, and a co-op can set a rule or bylaw that will allow its members to meet more often.
Members are expected to attend members' meetings. A members' meeting cannot occur and must be re-scheduled if quorum is not met. (See the Importance of Proper Meeting Notice and Quorum).
A co-op will also have:
- General meetings, where members meet to discuss and decide on matters of the housing co-op.
- Special meetings; the co-op act or the bylaws set out who can call a special meeting and the procedure for calling a special meeting, as well as how much notice is required.
The rules or bylaws will set out specific procedures regarding the timing and notice of meetings as well as the management of meetings and voting requirements.
The Provincial and Territorial Fact Sheets provide more information on meeting requirements.
The Importance of Proper Meeting Notice and Quorum
Co-ops must adhere to their rules or bylaws when holding meetings. It is important that the timing of the meeting, type and length of notice, and the management of the meeting all conform to the rules or bylaws. In many cases the annual meeting must be held no later than 4 months after the end of the fiscal year of the co-op. (A fiscal year is the co-op's financial year.)
In addition to requiring that proper notice be given, most bylaws will require that there is a quorum, which is a specific percentage of the total membership in attendance, for a meeting to continue. A quorum is often 50% of the membership plus one. However, a greater percentage may be required for special meetings or meetings where the co-op's rules or bylaws may be amended.
As an example, if the rules or bylaws require that a general meeting have a quorum of 50% plus 1, and a co-op had 100 members, the co-op could not run a meeting unless 51 or more members were in attendance.
The bylaws or rules should set out the required number or percentage of members to have quorum.
Proper notice and the requirement that there is a quorum present ensure that all members are given the chance to participate in decision making, and that a representative number are involved.
The Co-op's Reserve Fund Allows for Building Maintenance and Repairs
Co-ops often maintain a reserve fund, which is money set aside to cover building maintenance and repairs. The reserve fund must be invested in accordance with the co-op's bylaws or rules, the co-op act regulations, and any operating agreement the co-op may have with the government.
The Importance of Maintaining Accurate Records
It is important to put clear guidelines in place when you form a co-op and to make sure that you maintain copies of your bylaws or rules over time. All decisions should be recorded and the board of directors should ensure that accurate records are maintained. If an amendment to the co-op's rules or bylaws is approved, the co-op should update the bylaws or rules and make sure that they have kept an archive of older copies.
In some co-ops, smaller ones in particular, record keeping can be a significant problem. Members may not record decisions or keep their bylaws or rules up-to-date as they believe that they will remember what has been decided. However, as time passes people will forget whether a decision was actually made, and they may disagree over what was decided if the decision was not recorded. This can create serious legal difficulties should the co-op need to enforce a bylaw or rule that is disputed, and is why it is imperative that the co-op maintain accurate records.
Adjusting to an Evolving Legislative Landscape
Co-ops, and in particular the board of directors, also need to keep track of legislative changes that may occur in their province or territory. In recent years there have been significant changes to the co-op acts in British Columbia and Alberta.
When this happens co-ops are expected to bring existing bylaws or rules in line with the new legislation within a specified time period. For example, Alberta co-ops created before March 31, 2005 were required to file new articles of association and bylaws that complied with the new Alberta Cooperatives Act if they wished to remain in existence.
Offences Carry a Stiff Penalty
If a person or co-op is guilty of an offence under the co-op act, where that person disobeys the co-op act, the consequences can be quite serious. Fines, imprisonment, or a combination of both may apply. The Provincial and Territorial Fact Sheets provide more information on this topic.