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…