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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