After
reading our previous article titled “Accountability, The Elusive Goal“ a
unit owner emailed me a set of concerns and requested a clarification on the
issue of “Trusted Contractors”, and
how maintenance contracts and equipment purchases are awarded to companies
selected by the property management team and rubber stamped or scrutinized and
endorsed by The Board of Directors of a condominium.
When
addressing the issue of contracts in the condominium industry, the amount plays
a very critical role. In general, most Boards allow the Senior Property Manager
to use her/his discretion to award contracts under $10.000.
Above
$10.000 the “De Jure” practice is
to:
(a)
Solicit
bids from qualified suppliers who have the means and expertise to finish a
project safely and efficiently.
(b) Tenders are compared and analyzed
by The Management Company and a recommendation is submitted to The Board.
Sometimes complicated factors are involved, and the lowest bidder for a project
may not be the most efficient to finish a project with minimum disruption of
the day-to-day activities in a condominium.
Now the “De Facto” reality of bids, tenders, and contracts. When you have
more than 1 million condo owners in the Province of Ontario, and the average
condominium (depending on the number of units) has an annual budget of
$1.000.000 and up, the industry becomes very easily the target of unscrupulous
greedy, and corrupt practices. Like any other industry, “The Condo Industry” is not immune to the phenomenon of “Bad Apples” when billions of dollars
exchange hands and hundreds of contractors, engineers, and self-styled
experts/consultants are competing to grab and swallow the biggest portion of
the pie.
To paint a reasonably accurate
image of the phenomenon labelled as “The Bad Apples of The Condo Industry” we
will do a quick analysis of what the Canadian media delivered to the attention
of condo owners during the last five years, then cover a recent investigation launched
by the federal agency known as “The
Competition Bureau of Canada”, rely on the outcome of another investigation
spearheaded by another federal agency “Canada
Revenue Agency” (CRA), and last but not least allow readers to reach their
own conclusions.
The
poster child of Canadian journalists who have covered the bad practices of the condo
industry is The Minto Plaza. The
upscale 434-unit Condominium at 38 Elm St., near Bay and Gerrard, was
victimized twice during the last 6 years, and the legal procedures launched to
recover thousands of dollars in unauthorized expenses and contracts gone wrong
is not over. For more details use the following link:
In September 2016, law firms specializing in “Condo
Laws” released multiple articles on their web sites, mostly addressed to
management companies and Board of Directors, about the most appropriate methods
to deal with the massive probe launched by The Cartel’s Directorate of The
Competition Bureau of Canada.
Competition
Bureau spokesperson Marie-France Faucher confirmed to The Globe & Mail that
“The bureau is looking into allegations
of bid-rigging and conspiracy in the supply of condominium refurbishment
services in the Greater Toronto Area,”. Both are considered to be criminal
charges under the federal Competition Act.
The
scope of the Bureau’s investigation is impressive considering the fact that,
like any federal institution, it has a limited number of forensic accountants, analysts,
and investigators mobilized to review thousands of repairs and renovation projects,
where the money trail is diluted between several layers of consultants,
contractors and sub-contractors.
According to court records, The Bureau managed
to compel 141 condominium corporations, spread across the GTA, to hand in
thousands of records related to “the budget, tendering, bidding, negotiating
and awarding of a contract for renovations to the common areas of the
condominium corporation’s building(s).”
Considering
the fact that The GTA has approximately 1000 Condominium Corporations,
scrutinizing 14% of Condo Boards is a gargantuan task that clearly indicates to
the average condo owner, that illegal activities centering on assigning
contracts are not isolated events, contrary to all the efforts made by “The Captains of The Condo Industry” to
convince us that dishonesty, theft, and unethical practices are very rare in
the field of condo management. For additional details check the following links:
As mentioned earlier, The Canada Revenue Agency launched also its own investigation under a project code named “Non-Profit Organization Risk Identification Project” (NPORIP). The project-NPORIP, basically investigated the amount of unreported revenues made by non-profit organizations, including condominium corporations, that are earning and failing to report income, for a long list of reasons that include diverting money into private pockets. For more details use the following link:
In conclusion, after putting all the facts
together, we can safely conclude that “The Condo Industry” is not the most
shining example of honesty, transparency, and unflinching dedication to the
common good.
It
has its fair share of bad apples, and it is up to every condo owner to exercise proper vigilance, attend annual general meetings, and
have the courage to challenge the questionable
narratives and dollar figures received from management companies and Board of
Directors.
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