How Strata Management Companies Get Their Hands on Your Money

The foot soldiers are the Strata Managers.  They are expendable.  And they do all the dirty work.  Here’s how they operate:

When the contract is signed between your Strata and the Management Company your new Manager gets to work.  His / her (lets stick with he for now) job is to maximize cash flow from your Strata through the Strata Management Company accounts.  That means he has to get as much money out of the owners as possible every month and try to get that money in to his Company’s accounts as early in the month as possible.

Of course this just looks like good management to the Strata Council and so bravo! cheers for the new Manager …

The new Manager is well versed in human nature and knows what Canadians like and what they fear.  Very soon he has a close working relationship with a key member of Council (usually the President).  He knows how to make things easy for the Council members who, after all, are volunteers who dont want a lot of hassles.  He stick handles some issues involving fines, unexpected expenses, and personality conflicts with expert grace.  Some tactics he uses are to invoke possible conflict of interest, or clauses from; the Strata Act, from unread operating procedures (that your poor Council signed off on shortly after they hired the Strata Managers) or from the Strata’s By-Laws to support his friends.  Never mind what he says is not what the Law, rules or By-Laws actually say (who will read them anyway?).  But his most important weapon is to control the minutes of the meetings; small omissions, small insertions of things that were not discussed but deal artfully with the miscreant owners who dare question his friends; these are the preferred tactics.

After a while he only reports to the President and makes sure that the minutes reflect what is good for his chosen friends on Council.

Now he is really steam boating.  As his first AGM comes up he sends out the Year End Financial reports; your strata’s operating costs and revenues, and assets and liabilities. These reports strangely enough dont have opening and closing bank balances and for some reason dont report the special levies you had to pay for some unexpected major repairs.  Equally strangely the reports dont have actual expenditures, revenues, assets and liabilities for the last month or two – they give estimates to the year end.

Another wonderful thing the Strata Manager does is to find contractors for all of your Strata’s needs. Contractors who charge less than the others because this wonderful Strata Management Company gets “preferred rates” from a big stable of service contractors.  This is really good for the Council as it shows they are fiscally responsible and saving the Strata owners money!

Strata Management budgets are very carefully prepared.  Line items that are Strata Management costs are never grouped together with a sub-total.  Preferred Rate contractors each have a  5 – 10% increase over last year.

So at the AGM it is decided to increase the fees because costs are rising and anyway the Contingency Reserve Fund needs topping up (or for some other equally plausible reason).  Since the amounts of the increases are small (5 – 10% on your monthly fees) the new budget is approved.

But over a number of years these costs increase to levels that fixed income owners cant support and then we see liens being placed on individual units.

No one asks where is the money is going until its all too late.

When you add up the line items (including bank charges) that the Strata Mangement Company charges to, or costs, your Strata, collectively they have become the second highest cost for your strata surpassed only by repairs and maintenance.  And when you add up how much money you and your fellow strata owners have paid into the Strata Management Company’s bank accounts (Strata Fees, Special Levies, Fines and other costs) you find they have gone up by as much as 60% or more in five years.

What has happended is that you and your fellow strata owners are victims of the Strata Management Company scam.

Subtle, gradual, nothing you can point at and say “hey give us back our money!”

You all know something is wrong but the President and the other friends of the Strata Manager close ranks.  Angry letters are written.  Demands for meetings.  Threats of legal action.  All to no avail.  You are captured. Because you see fellow Strata owners your contract with the Management Company says you needs a 3/4 vote to get rid of them (nevermind the Strata Act says it needs only a majority).

Now some enterprising spirits think right we will take them to court only to find out that any decent lawyers in the region have worked for, or are working for, your Strata Management Company and “so sorry we cant take your case.”

To close the story; your Strata Mangement Company:

  • Uses your money for investment and takes all the interest and benefits.  Your CRF is actually bankable and the cash flow from your Strata added to many others gives them very large sums of money to play with and get really good interest rates for themselves.
  • Gets a rake off from their stable of contractors because they have so much business to share with them.  That rake off comes from your money.  Its between 10 – 20% of the costs reported by your Strata Manager.
  • Gets fees from you to pay for the Strata Manager, office supplies, special services, other miscellaneous costs and have the unmitigated gall to charge your Strata bank charges that result from the demands put on the Bank by the Mangement Company to move your money around for their benefit…

And when you compare your fees with other buildings they look OK.  Oh did we mention that the other buildings you are comparing to are managed by the same companies?

This is Part 1 of a series expounding on how these people operate and what you can do about it…

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11 thoughts on “How Strata Management Companies Get Their Hands on Your Money

  1. The only addition to this is that some management companies, like Baywest, hire managers who barely speak English. At meetings, if any important financial questions come up, he/she can say that he doesn’t have the info. at hand so he’ll get back to you. Often the question is never answered because owners forget they asked the question. If it’s pursued, the answer is usually…that’s the way things are done, and no further info. is offered.
    If a strata actually starts questioning the financials and the Management company can’t get out of it, they fire the manager just before an AGM and throw their hands up and say they have no idea what he/ she did. And owners are pacified. The Strata Property Act suggests financial audits, but they are not mandatory and can be voted down if there isn’t a 75% vote to do an audit. Again, the management company wins!

  2. Are you nuts? You do realize that the last three buillets are actually illegal and can cause a manager and a management company to lose their license as well as pay hefty fines. Majority of managers are very honest and reliable and dont believe the items you claim are done by all are worth destroying a life time career over. I have been doing this job – strata management for 30 years and would slap a slander/libel suit against any owner who dared to try and claim I did even one portion of the acts you claim we all do. And I wiould win,- thus I would own your house, your car, your business, while you get to keep the kids, the wife and the debts.

    • Actually the article is right on the money. Thank you Heather for telling us you would never do such a thing. You should have mentioned your management company so that others could use your service. Companies like Teamworks have been pulling those types of frauds off for years. For some reason RECBC protects them. JD

  3. Well that was an interesting exchange! Heather have you considered how awful your comment was? Threats. Nasty, vicious threats. I am thankful I never had to deal with you on our strata!!

  4. BLACK MONDAY August 1 2011

    A day to remember Condo Owners who have been abused by the BC Government, Developers,and Strata Management Companies. This should never happen to anyone.

    JD

  5. can anyone recommend a good management company in the Tri-Cities or Lower Mainland? My strata is currently self-managed but given some recent maintenance issues, council is concerned about our ability to take care of things and are considering a management company to take everything over. I would like to get quotes and suggest to them specific activities are contracted to a management company but that we keep some items to reduce costs as we are a 25-unit complex with one-third on fixed incomes. I would also be interested in any good indiviuduals you know of who could come and train our council on self-managed strata to make them feel more comfortable. Any direction you can provide would be helpful. Thanks!

  6. Some people turn to self-management; it’s an approach several of our clients have turned to. They use our web portal to communicate with owners and residents, post their documents online and make use of our issue tracking module to resolve problems within the strata. Feel free to check out our demo at http://demo.estrata.ca. We’re always happy to incorporate feedback to help make this option better with each release.

    • Self management is an option, but only for administration. The accounts and financials need to be handled by a professional company, which wasn’t the case previously. In any event, I wouldn’t want to self manage the financials – too much liaibility.

      • Excellent point. The cost of a book-keeper to handle the cheques and deposits and a CGA at year end to your financials and filings is worth it!!

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