Money is a frequent cause for complaint in strata complexes. Recently, the Condominium Homeowners’ Association of BC published the most common strata queries -- and their answers:
Article Published by Tony Gioventu, of the Condominium Home Owners Association.
Fraud and financial irregularities are common complaints filed with our offices. They range from owners cleaning out the reserve funds to support their gambling practices to the caretaker fleecing the profits of the laundry change, to council members paying for their personal expenses and condo improvements out of the strata funds. Here's our top-10 list of problems:
"Our strata council treasurer has not paid her strata fees for more than two years in exchange for handling our finances." Council members must pay their strata fees, otherwise they are in arrears and possibly not eligible to continue to be on council. If the owners have approved the remuneration of a council member, then they pay their fees and the corporation in turn pays them for the services.
"We have a caretaker and accountant who are contractors. Do we have to file taxes for them?" Strata corporations must issue T-5A tax forms for any person who is paid more than $500 a year for his or her services as an employee contractor.
"Our strata council draws funds from our bank machine to re-supply the petty cash." ATM cards should be for deposit purposes only. If the strata uses petty cash, it should be reimbursed with proper receipts and by cheque to ensure a record of the transactions.
"Our strata has spent more than $10,000 at Home Depot on gardening supplies, but our landscape budget is only $3,500." Credit/borrowing of funds must be approved by a three-quarters resolution of the strata corporation before they are authorized. Credit cards are a serious danger for the strata, as often purchases are made that are not approved or there is no funding.
"Our treasurer issues a cheque to himself each month to pay for supplies and materials and no one is allowed to see the receipts."Council members should not sign cheques made out in their own names. Either increase the number of signing officers or direct your manager/council to approve all expenses in writing in advance. If the strata or manager is not willing to provide copies of receipts, then your strata has greater problems. An audit is likely the next step.
"Our strata has paid for a wholesale membership and we just discovered our resident manager has been receiving and cashing the rebate cheques for the past five years." Council members, employees or agents must not receive any undisclosed or unapproved commissions, rebates or finder's fees. A strata bylaw and/or a condition written into service contracts and accounts that prohibits rebates can help avoid an otherwise illegitimate practice.
"The Company we hired to do the roofing, which was recommended by the treasurer, turns out to be owned by the brother of the treasurer." Council members, agents or employees must disclose a business relationship with a contract or service provider before the decisions are made and cannot be a part of that decision. If it is later discovered that the terms of the contract were unfair or unreasonable, the strata can seek redress through the courts.
"Our strata just had a fire, our replacement value is significantly lower than what it is supposed to be, and only half of the losses are being covered." Strata corporations have their insurance appraisal updated every year and must be insured for full replacement value. Never take anyone's word for it. If it isn't in writing from the appraiser or insurer, it can't be proven.
"The property manager refuses to give us copies of our investment certificates." Term deposits and banking accounts must be in the name of the strata corporation. Copies of the certificates and bank statements must be provided within 14 days of written request. If a written request is unsuccessful, the strata should take immediate legal and disciplinary action.
"Our strata council has lent three owners the funds they need for special levies at a rate of interest lower than any other owners are paying." The Strata Property Act gives no provisions for financial loans to be made by a strata corporation. These activates are controlled under Canadian banking legislation and the proceeds from the lending of the funds are taxable. If owners require special consideration for payment, arrangements should be made with the strata corporation.