Dear Condo Smarts: I was recently elected treasurer for our 108-unit townhouse complex in the Fraser Valley. Our annual budget was always balanced, fees were moderate and we had few troubles in the complex. Everything seemed normal.
After reviewing the previous three years of expenses, the new council is horrified to find out much of our money was spent on expenses for items that were not for our strata operations or maintenance. There have been lavish council dinners for 10 or more people, where the bar bills exceeded the cost of dinner, donations to political campaigns and expenses for improvements to council members' personal residences, including some locations outside of our strata. None of the expenses were ever included in the budget or reported in financial statements. Is this allowed? Can we recover these funds?
Gerry D.
Dear Gerry: The funds that are collected from your owners are restricted by the Strata Property Act for expenditure on those items that relate to the common expenses for the use, enjoyment and operations of your strata. They include such items as routine maintenance, service contracts and licences, repairs, purchase of capital items for the strata, management fees, remuneration of council (as established in the bylaws, set in the budget or approved by a 75 per cent vote of the owners), legal services, accounting services, insurance policies and deductibles, membership to organizations that benefit your strata, such as the Condominium Home Owners Association, record keeping and storage, municipal services and taxation.
The fundamental principle is that all expenses relate to the maintenance, repair and operations of your strata corporation.
The actions you describe could be fraudulent and your strata corporation may wish to exercise its right to proceed with actions to recover the losses. To begin with, you should hire an independent accountant to first establish the sum of the costs and how they were allocated. Once the report is complete, a general meeting of the owners may be necessary for the council to receive instructions on what should be done next.
The tough decisions will be weighing the cost of recovery versus the losses, and what the long-term impact will be on your community as a result of your next steps.