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3 Ways Strata Council Can Steal Money

With 23 years experience in strata living, Sylvia amassed help to topple a rogue council, then spent 4 years on council herself.

3 Ways Strata Council Can Steal Money

3 Ways Strata Council Can Steal Money

Ever served on strata council? If you have, then you know it’s a thankless, time-sucking job that’s done for free. Regardless of the decisions made, many residents will stop you on common property or in the grocery store or even interrupt your meal in a restaurant to complain bitterly.

Volunteering on strata council is like having the self-absorbed stupidity of humanity, along with their lack of gratitude, thrust in your face, repeatedly. There comes a point where you’ve had enough. Do you quit? If so, you lose all that control. Hey, what if you could get paid instead? Ooh!

One or more strata council members may steal money in order to subsidize their efforts. If the amount is kept to a minimum, it usually doesn’t become a problem. But greed is human nature.

When people spend years sitting on the board, they become powerful in knowledge. Arrogance coupled with an increasingly disgruntled nature can spur on bigger and bigger cash grabs.

1. Submitting Expenses Through Petty Cash

Not all businesses offer credit, even to a strata corporation. Sometimes a council member must purchase an item "out of pocket" and submit a petty cash form for reimbursement. However, unless stops and checks are in place, this is easily abused.

Real Life Example

Racine was elated one day to show Pam her new handheld portable steam cleaner boasting an anteater nozzle. Apparently, it could clean anything, anywhere, especially those hard to reach places. And she only paid $60!

Racine was infamous for her history of impulse buying, along with her fanatic attraction to gadgets. Unfortunately, gadgets eventually break. Or Racine’s fascination turns to boredom.

Months later, upon becoming treasurer, Pam received her first batch of paid invoices to sort. Imagine her surprise to find Racine’s petty cash form included that very hand-held portable steam cleaner. Racine must have gotten bored with it and decided to sell it to the strata corporation—for a cost of $270.

Prevention

Once you’ve joined the board, set up your petty cash system (bylaws):

  • The reimbursement form must include receipts.
  • Require two board members signatures (other than the council member submitting the form).

In the grand scheme of things, this is a paltry sum of money. However, if someone is willing to steal small, they’re definitely willing to steal big.

Ever notice a council member who has a great relationship with one or two trades-workers frequenting your building?

Ever notice a council member who has a great relationship with one or two trades-workers frequenting your building?

2. Getting in Cahoots With the Contractor

Ever notice a council member who has a great relationship with one or two trades-workers frequenting your building? Has s/he ever told you that by being so attentive, s/he’s saving the building money?

Real Life Example

The building has two identical hot-water tanks.

One day, while the other council members were at work, Racine replaced one of the hot-water tanks. Later, she explained to council that the tank had “burst,” she’d deemed it an emergency, and had it replaced.

Racine was friendly with a trades-worker, who although a plumber, had done many other odd jobs around the building. She’d even had him up to her condo for lunch. Pam later found out his invoice was $27,000 including parts and labour.

To put the cost into perspective: the next year the new council replaced the other hot-water tank at a cost of $3150 including parts and labour.

How the Scheme Works

  • A mechanical “emergency” occurs in the building and the council member bypasses the property manager, dealing directly with a trades-worker of her choice.
  • The attending trades-worker processes an invoice for far more labour than he actually does. Overtime can be especially profitable.
  • The council member is on site to approve the work and therefore, the invoice.
  • The property manager, on behalf of the strata corporation, cuts a cheque to the trades-worker.
  • The trades-worker cashes his cheque and keeps his share plus taxes.
  • The trades-worker meets the council member in a dark alley and hands over a brown paper bag with the council member's share, in cash.

Prevention

Difficult. Unless you’re willing to join the board and take over.

3. Borrowing Money From the Contingency Reserve Fund (CRF)

The CRF is a huge target. Many strata corporations have ample funds sitting in this account. The money is often just a huge slush (not earmarked) ready and waiting.

The strata property act SPA of British Columbia has a law in place for use:

Expenditures from contingency reserve fund

96 The strata corporation must not spend money from the contingency reserve fund unless the expenditure is (b) first approved by a resolution passed by a ¾ vote at an annual or special general meeting, or authorized under section 98.

Except this particular law allows abuse:

Unapproved expenditures

98 (3) The expenditure may be made out of the operating fund or contingency reserve fund if there are reasonable grounds to believe that an immediate expenditure is necessary to ensure safety or prevent significant loss or damage, whether physical or otherwise.

Real Life Example

The strata corporation had collected a special levy fund of hundreds of thousands of dollars for a specific project. A hired construction company was working on said project.

One day, Pam sees an email from the property manager with an attachment: a Directive to Use Contingency Reserve Funds form for $24,000. Being new to the strata board, Pam didn’t understand and inquired.

Racine informed Pam that project complications had exhausted both the special levy and the operating fund. Yet, the strata still had to pay the construction company in a timely manner—lest they place a lien on the building.

Pam couldn’t argue.

Months later, upon becoming treasurer, although Pam searched, she could never find the entry stating that this money had been paid back to the CRF. She also found:

  • The construction company had been hired without any competitive quotes.
  • There was never a written contract with the construction company, hence no warranty.
  • A construction permit was never issued by city hall.
  • Although Pam knew that Racine was friendly with the construction company’s workers, she never realized until much later, that one of the supervisors was actually Racine’s boyfriend.

How the Scheme Works

  • Pretty much the same as the "In Cahoots With the Trades-worker" scheme, except the invoice is so large it exhausts both the operating fund (and a special levy fund).
  • The property manager sends a Directive to Use Contingency Reserve Funds form. In order to “borrow” money from the CRF without getting owner approval at a general meeting, this form must bear the signature of four council members. It effectively shifts the liability from the property manager to the board members.
  • The trades-worker cashes his cheque. He keeps his share plus taxes.
  • The trades-worker meets the council member(s) in a dark alley and hands over a brown paper bag with their share, in cash.

The Money is Never Paid Back to the CRF

  • The property manager won’t bother to “make” the council pay back this money, remember, they are “off the hook.”
  • Because CRF balances are not sent monthly to owners, they never know the money is missing until the end of the year (if they even bother to look at the statement).
  • If council gets caught, they simply do what they’ve done in the past—they say an “emergency” had to be dealt with immediately. Then they can use the residents' future maintenance fees to pay back the CRF.

Prevention

Again, very difficult. Unless you’re willing to join the board and take over.

Please note: if you live outside British Columbia, although your laws will probably be similar, it's in your best interest to check.

Theft prevention is difficult, unless you’re willing to join the board and take over.

Theft prevention is difficult, unless you’re willing to join the board and take over.

Your best bet is prevention through being involved. Furthermore, you'll never go wrong with due diligence. Knowledge is power! Give yourself an edge and place yourself in a superior position by thoroughly reading and understanding both:

  • Your strata corporation's bylaws
  • British Columbia’s Strata Property Act (SPA)
  • If you live outside of British Columbia, check the property laws in your area.

More Information on Strata Council Difficulties

Do you have Individual Questions or Concerns?

Strata difficulties are so numerous, I can no longer discuss individual concerns. Your best bet for help with strata issues is to join the Facebook page entitled, Strata Council: Theft, Bullying & Unauthorized Decisions.

We're getting close to a thousand members, many who are helpful, knowledgeable, and incredible people. To ward off bullying, the page is set to "private" so only members can see the posts.

Click on the link above and answer all four questions. Moderators will add you to the page, and you can get help with your concerns. Thank you and good luck!

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2021 Sylvia Leong

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