Condo corporations, be aware…

//Condo corporations, be aware…

Condo corporations, be aware…

Condo Corporations in Canada

condo board

A recent article on Condo Reporter website by Heenan Blaikie LLP covers an important topic which has been top of my mind and is currently also the hot topic amongst the general condo community. I am sharing above article’s advice here with you all, as well as my personal opinion on the issue.

I would encourage all condo dwellers who read this post to share this topic with their respective condo corporations. This is not to say that there are any issues with their Condo Corporation, but it should be considered only as cautionary information sharing. We all have a responsibility to make our condo community better in many aspects and protecting it from potential fraud is paramount.

The topic relates to a recent article in the Toronto Star, which talks about how a property manager cheated several condo corporations out of a whopping amount $20 million dollars. This news hit the paper’s headlines, and for good reason.

Apparently, the frauds conducted by the property manager include, registering bogus borrowing by-laws on title and using fraudulent bids for major repair works. These tactics allowed the property manager to embezzle millions of dollars!

Con artists can thrive anywhere, and condo management corporations are no exception. They may start small by cheating the corporation of a few hundred dollars, which surely will turn into hundreds and thousands of dollars eventually. Professional scamsters will likely go for the big kill, as seen in above example. The point being that whether it is cheating at a small level, or a huge scale scam, condominium corporations need to be vigilante and keep an eye on the financial dealings of the corporation.

The onus for this does not lie on the shoulders of one person; all the Board members need to observe what is happening.

Can a condo corporation protect itself from fraud by its managers?

There are some steps which a condo corporation can take to minimize the risk of fraud from its managers. It is important to be consistently vigilant and to constantly monitor activities and accounts of the corporation. They need to be alert to warning signs, which start with hiring the property manager. It may sound like stereotyping, but the fact is that fraudsters are often charming, charismatic and educated folks. This is a perfect combination to quickly earn the confidence of people around them. After all, who is going to doubt or question the sophisticated and suave person who also holds a position of authority? Look at Bernard Madoff, Martha Stewart and Conrad Black, who could have anticipated the conniving moves on their part?

Barbara Holmes of Heenan Blaikie LLP advises below due diligence steps for the condo boards: Relying on individual impressions is risky. Diligence pays! Condo corporations need to conduct a thorough background check on their property manager, and even the parties involved in big contracts. After all, it doesn’t take long to tempt someone with a bribe.

Beware of all contractual bids that come substantially lower than the others. This should be an immediate red flag.

The property manager should be required to obtain a fidelity bond that covers and protects the corporation from fraudulent acts or omissions on the part of the property manager or their employees.

The property manager should not be allowed to engage in any kind of contractual dealings with parties that they may be related to. Nepotism can prove to be harmful.

The property manager should not be given the sole authority to sign cheques.

Employees who do not take any time away from work or who seem to have an excessively lavish lifestyle should raise red flags.

While the above measures may not completely stop a determined and clever fraudster who is willing to engage in forgery, hopefully they will make it more difficult for a fraud to be committed.

By | 2017-01-23T12:11:04+00:00 September 19th, 2011|Categories: Realty Talk|Tags: , |Comments Off on Condo corporations, be aware…

About the Author:

Amit Kalia
Amit is a full time local REALTOR® since 2003. Currently he is with RE/MAX Real Estate Brokerage Inc. in Mississauga. RE/MAX is Canada's #1 real estate company. He is supported by a very strong Sales and Marketing team. Together with his team, Amit has been serving property sellers, first time buyers, real estate investors, landlords, renters, new immigrants to Canada and non-residents. Amit and his team specialize in Square One condos and also work in many other Mississauga neighbourhoods. Team Amit Kalia offers a 30 Days Sold Guarantee to Sellers. Amit's team also provides exclusive A La Carte property management services for their investor clients and landlords.