A director is in arrears when they owe their co-op money. Simple. Easy to understand.
In the old days (B.A.: Before the Agency), many co-ops saw things differently. Back then, a director who had signed a repayment agreement might not count as being in arrears. If they were keeping up with their repayment, they were considered in good standing, not just as a member, but as a director.
The Agency has never agreed with this, and we say so plainly. A director who owes their co-op money, even if they’ve promised to pay, is treating you and their other neighbours like a bank that makes interest-free loans. This is not acting in your co-op’s best interest, as their duty as a director requires. While most co-ops can carry a few members who are repaying their debt over time, if this practice spreads, your co-op will not have the cash on hand to cover its bills when they come due.
A co-op board of directors must address members who fall behind on their housing charges. While this could be due to a serious problem, like job loss or a marriage break-up, it benefits no-one to build up debt and put their housing at risk. No director who owes money to the co-op is in a strong position to tell a member household to pay up or face the consequences. They lack moral authority.
When co-ops file their Annual Information Return for the Agency, they report on director arrears and total arrears. Using these data, the Agency has helped co-ops reduce both director arrears and member arrears over time. We remind client boards in their co-op’s Risk Report that directors in debt to their co-op are raising its risk level. Each client’s Performance Report shows how their co-op’s arrears compare with the arrears reported by their peers. Relationship managers recommend ways co-ops can deal with this problem and provide advice in the form of a Q&A on Directors in Arrears.
Since the Agency began reporting on co-op arrears in 2006, we have seen a consistent pattern. If a co-op client allows directors in arrears on the board, its member arrears are much worse. In 2006 co-ops that permitted director arrears had total arrears more than three times higher than those in co-ops that forbid director arrears. By 2022, the few that still permitted directors in arrears to remain on the board had arrears that were six times higher than those that didn't.
We think the problem is simple, if not always solved without pain. No director arrears. Period.