Winter 2011/12 - Issue 3

“Kickbacks” for Strata Managers














Is your strata manager receiving a commission or “kickback” from a supplier of goods and services provided to your strata corporation?    If this is occurring, what does this mean for strata owners?

Some strata managers receive payments from suppliers to compensate them for their work in developing contract specifications and placing the order.    This may seem reasonable when considering that a strata manager deserves to be compensated for time spent on a task performed for the client strata corporation.    However, the practice can eliminate objectivity in supplier selection as the strata manager may be induced to recommend the supplier willing to pay him the highest commission.    Furthermore, where a commission is based on a percentage of the contract’s value, it provides an incentive for the strata manager to inflate the value of the contract.    The higher the value of the contract, the more the strata manager gets paid.    Such a practice can lead to either higher contract prices paid by strata owners or utilization of poorer quality goods and services in order to keep a bid low while including the cost of the commission.

According to “rules” administered by the industry-run Real Estate Council of BC, it is acceptable for a licensed strata manager to receive a “benefit” or “remuneration” from a supplier provided the strata manager discloses the matter to the strata corporation.    The disclosure must be made in writing and include the amount of the benefit as well as the nature and extent of the benefit.    The disclosure must be made before the benefit is accepted by the strata manager.

The Real Estate Council disclosure “rules” are based on the assumption of informed consent.    Informed consent is defined as agreement to do something or to allow something to happen only after all the relevant facts are known.    Given the number and substance of complaints I receive from owners it is apparent that not all relevant facts are being disclosed by some strata managers.    When only one bid is presented for a major remediation project, owners are left wondering whether it is from the bidder paying the highest commission to the strata manager.    When the annual premium for an insurance policy placed with the strata manager’s recommended insurance broker is thousands of dollars higher than a quote obtained independently by an owner, one is left wondering about the adequacy of the Real Estate Council “rules”.

An alternative to relying completely on the “rules” of the Real Estate Council of BC to protect owners from illicit gains by strata managers is to amend your management contract.    The amendment would prohibit the strata manager from receiving a benefit from any other party for goods and services provided to the strata corporation.    The amendment may require including a new compensation schedule for the strata manager but it would support fair dealing, reduced costs and improved service quality for owners.

If you have any comments or suggestions for protecting strata owners from the cost of illicit gains by strata managers, please use the “Contact Us” tab on this website.

Editor’s Note:We challenge you to use this website as a resource in contacting the Premier and other politicians with your strata legislation concerns and to contribute your ideas, suggestions and comments to our editors. You are encouraged to refer this website to other strata owners. Thank You, Deryk

Contents

* VISOA Survey

"Click Here" To help VISOA continue to speak on behalf of strata owners about their concerns with BC's strata legislation, VISOA is seeking input from BC strata owners.   The survey results will provide VISOA with important information that will help in its communication with government and the media.

History

The British Columbia Strata Property Act (SPA) came into force on July 1, 2000.   Since then there has been massive growth in the number and diversity of strata properties.   Many problems have arisen in applying the Act to strata issues and in protecting the rights of strata owners.   Although the present BC government made a commitment in 2003 to review the SPA it has refused to undertake either a comprehensive review of strata legislation or consult publicly about the legislation that affects over 700,000 strata owners.   Instead it passed Bill 8 in 2009 to amend the SPA based on "private and confidential" discussions with real estate industry insiders while ignoring many pressing concerns of strata owners.   This website is provided as a resource for strata owners seeking a public review of BC legislation affecting the rights of strata owners.