Strata Council: Theft, Bullying and Unauthorized Decisions
Strata Councils: Theft, Bullying and Unauthorized Decisions
I’m the type of adult who still enjoys fairy tales. I believe that the truth will out! I believe that good will prevail over evil.
So, when I realized that the strata council running the building (housing my freshly purchased condo) was stealing money, bullying the residents, and making structurally detrimental choices, I joined the strata board. I saw myself as the reluctant hero - the good fairy who would save the building and give back the people’s freedom. I anticipated gratitude, happiness and exceptional community spirit.
All I did was lose my innocence.
Are you usually convinced that "your way" is the best way, regardless of what anyone else says?
Yes!!! Well then… strata council may be just the right place for you.
Strata councils are made up of volunteers. Many of these volunteers are exceptional people who give freely of their time & often give freely of their expertise.
But unfortunately, most the folks who are attracted to serving on this board are usually those with an agenda. Sometimes they use their position to make money. More often, they use their position to feed their dysfunctional control issues.
Table of Contents
- Is Strata Council the Boss?
- What Are Strata Council’s Responsibilities?
- So Who Is The Boss?
- Can The Strata Council Members Bully The Residents?
- Can The Strata Council Members Steal Money?
- Submitting Expenses Through Petty Cash
- In Cahoots With the Contractor
- Borrowing Money From the Contingency Reserve Fund (CRF)
- Isn’t The Property Manager In Charge?
- Is It Possible To Bring A Strata Council To Justice?
1. Is Strata Council the Boss?
This is a horrible yet common misconception. Horrible for the residents, because no one needs boss in their own home. And the truth is, also horrible for the strata council.
Managing just a few people usually requires a business degree in human resources. The demands of managing many families (depending on the size of the building or complex) would be enough to conjure up images of straight jackets, padded rooms & little voices.
No, strata council is not the boss.
Surprised? It’s true. Stratified homes do not have czars, rulers, or bosses. This relationship is simply not necessary, nor can its recommendation be found anywhere in the Strata Property Act (SPA).
The council members are not a police force. A constable takes extensive training in many areas including human behavior, investigation and legal issues.
Prior to or preceding the election, a council member receives no training whatsoever.
Be careful! Do not hand them power that they may not be qualified to have.
The leadership duties involved in serving on the board is often confused for positions of authority.
“Serving” is the key word.
As for authority, the council can only act upon something that goes against the bylaws & even then, they must have a written complaint. The only time they are supposed to have any power at all, is during properly convened council meetings.
If you happen to witness something or have a complaint, please, do not tell a board member. Instead, email the property manager. She has no knowledge of the building’s politics & therefore can remain unbiased.
As well, by law, all correspondence that the property manager receives must be brought forth & addressed by the strata council. That’s why you pay big bucks to the property management company.
Which choice most closely describes your strata council?
2. What Are Strata Council’s Responsibilities?
They are intermediaries, representing the building and residents (through election and votes). They direct the property manager in all the matters of the strata corporation. Together they make decisions about:
- The maintenance of the building (also known as the strata corporation).
- Correspondence from owners (as delivered by the property manager).
I have read & fully understand:
3. So Who Is the Boss?
The bylaws. You know, that dry, authoritative literature that causes tension in your chest followed by unbidden notions of rebellion… or at least yawning followed by weighty eyelids.
Honestly it’s not that bad! Usually just a tiny stack of papers, approximately two millimeters thick, reader friendly and you can finish them, cover to cover, in approximately 15 minutes. Indulge yourself and reap the freedom that comes from knowledge.
From their adoption date, the bylaws are the guidelines that the owners (for the sake of harmony and for the welfare of the building) have chosen to follow.
It is the bylaws and the SPA that you must look to for guidance – not individual strata council members (who may have their own biases).
All the owners are the boss through an agreement called "the bylaws” passed in a ¾ vote.
Assuming you own one condo (and your account is in good standing) then you have one vote and you own a portion of your building.
You have every right to:
- Use the building's amenities
- Know how your money is being spent
- Understand the decisions that are being made on your behalf
4. Can the Strata Council Members Bully the Residents?
Yes! Unfortunately, this happens quite often. Being on the board is a thankless job. It sucks up personal time and it doesn’t matter what decisions are made, many will complain.
Furthermore, council members have a front row seat to the ugliness of humanity. They are witnesses each and every time residents have disputes, violate the bylaws, and disrespect each other and common property. Over time, they can find this so frustrating that they lose faith in humanity altogether. Fining residents can become a way of venting. Even more so when if the strata council member(s) have control issues in the first place.
5. Can the Strata Council Members Steal Money?
Although they are all supposed to be volunteers, some or all 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.
However, when people spend years sitting on the board, they become powerful in knowledge. This coupled with becoming jaded and arrogant could possibly spur them on to make bigger and bigger cash grabs.
6. Submitting Expenses Through Petty Cash
Not all businesses offer credit, even to a strata corporation. So sometimes a council member must purchase an item "out of pocket" to be used by the building. This means that for reimbursement, she must fill out & submit a petty cash form. However, unless stops & checks are in place, this can be easily abused.
Prevention: Once you’ve joined the board, set up your petty cash system so that:
- Receipts must be submitted along with the petty cash reimbursement form
- There must be the signatures of two board members other than the council member submitting the form
Real Life Example
Racine was elated one day to show Pam her new hand-held portable steam cleaner with the anteater nozzle. Apparently, it could clean anything, anywhere, especially those hard to reach places. And she only paid $60!
Racine is known for her history of impulse buying as a result of her fanatic attraction to gadgets that after only a few days, turns to boredom.
Months later, upon becoming treasurer, Pam received, in the mail, her first batch of photocopied (paid) invoices to sort through. Imagine her surprise to find a petty cash form, submitted by Racine, including that very hand-held portable steam cleaner. Racine must have gotten bored with it, so she’d decided to sell to the strata corporation – for a cost of $270.
In the grand scheme of things, this is a paltry amount. However, if someone is willing to steal a small sum of money, they’re definitely willing to steal a large sum.
7. In Cahoots With the Contractor
Have you ever noticed a council member who seems to have a great relationship with one or two trades-workers who frequent your building? Has she ever told you that by being so attentive she’s saving the building money?
How the scheme works:
- A mechanical “emergency” occurs in the building & the council member bypasses the property manager & deals 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 & 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 & keeps his share plus taxes.
- The trades-worker meets the council member in a dark alley & hands over a brown paper bag with the council member's share, in cash.
Prevention: Difficult. Unless you’re willing to join the board & take over.
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 that it had “burst” & she’d deemed it an emergency and had it replaced immediately.
She used a trades-worker who she was very friendly with. Although he was a plumber, he’d done many odd jobs around the building. She’d even had him up to her condo for lunch. Pam later found out that his invoice was $27 000 including parts and labour.
Just to put everything into perspective, the very next year the new council replaced the other hot-water tank at a cost of $3150 including parts & labour.
8. Borrowing Money From the Contingency Reserve Fund (CRF)
The CRF is a huge target as many strata corporations have more than they need sitting in this account & the money is not earmarked for anything. The SPA of British Columbia has a Law in place for this:
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 that this Law allows abuse:
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.
How the scheme works:
- The same as the "In Cahoots With the Trades-worker" scheme, except the amount is so large that there isn’t enough money in either the operating fund (or a special levy fund) to pay the invoice.
- 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 receives & cashes his cheque. He keeps his share plus taxes.
- The trades-worker meets the council member(s) in a dark alley & 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 owners are not sent monthly CRF balances, they never know money is missing until the end of the year (if they even bother to look at the statement).
- If the council does get caught, then they simply do what they have done many times 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 & take over.
Real Life Example
The strata corporation was sitting on a special levy of hundreds of thousands of dollars for a specific project and a construction company was hired.
One day, Pam sees an email from the property manager with an attachment: a “Directive To Use Contingency Reserve Funds” form for $24 000.00. Being new to strata living and the board, Pam didn’t understand & so inquired.
Racine informed Pam that the special levy fund & the maintenance account from the operating fund had been exhausted due to arising complications with the project. Racine had deemed the situation an emergency because if the construction company wasn’t paid in a timely manner, they could 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 out:
- The construction company was 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 have strata council members stolen from your strata corporation?
9. Isn’t The Property Manager In Charge?
No. The board has the power to hire & fire the property management company (with a 3/4 vote that is easy to pass). In order to keep their job & make as much money as possible, it’s in the property manager’s best interest to keep the strata council happy.
Property managers are overworked, do not receive much gratitude, but can make a significant amount of money. They are paid “per door”. Let’s take a look at three different property managers, each one responsible for 1000 doors & therefore, each one earns the same paycheque:
These Property Managers Take Home The Same Paycheque
Suites per Strata
Betsy has an easy job!
1000 suites over three strata corporations
300, 350, 350
Maria does more than twice the work
1000 suites over seven strata corporations
230, 150, 150, 150, 150, 85, 85
Ellen is ready for the funny farm!
1000 suites over twelve strata corporations
100, 100, 100, 100, 75, 75, 75, 75, 70, 70, 80, 80
Remember, each strata corporation has:
- One strata council to deal with
- 6 – 12 council meetings to attend
- An annual general meeting to run
- Possible special general meetings to run.
The more strata corporations a property manager is responsible for, the more difficult and time-consuming the job becomes. The larger strata corporations are more lucrative and thus attract the better and more experienced property managers.
Thus, if the harried property manager becomes aware that one of her strata boards are planning something that is a violation of the bylaws or SPA, she'll simply email them a warning regarding the legalities. Thus, she and her company are “off the hook” and can save time by simply looking the other way. This allows strata councils to do whatever they please.
10. Is It Possible to Bring a Strata Council to Justice?
Surprisingly enough, the following SPA law protects strata council members. It’s the subjectivity of this law that makes it difficult to prove negligence and theft:
Council member’s standard of care:
31 In exercising the powers and performing the duties of the strata corporation, each council member must
(a) act honestly and in good faith with a view to the best interests of the strata corporation, and
(b) exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances
Furthermore, you cannot count on the overworked property manager to:
- Prevent theft
- Bring a board member to justice
- Pursue full recovery of stolen money
That would be time consuming and costly - no property manager will do it!
To pursue justice, there’s got to be proof. So, if you’re as sure as Pam is, you could probably prove theft with a forensic audit. However, forensic audits are expensive & unless you want to use your personal funds, you’ll need a ¾ vote at a general meeting to launch the strata corporation into a lawsuit. That could mean a special levy. So first, you’ll have to convince your neighbours.
Furthermore, courts don’t look favourably upon strata corporations going after an individual, especial a volunteer who has donated her time. So, even if she is found guilty, the penalty would be minimal.
So, yes, you can bring a council member to justice. Through gargantuan effort that takes up your time, patience, sanity and possibly your finances without any direct benefit to you.
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
- The Strata Property Act (SPA)
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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.
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© 2010 Sylvia Leong