Attention, bad condo management practice!
Closed tenders, favouritism, inflated prices, censored board meetings minutes, and condo directors bullying are
not discoverable and not controllable with the current condominium regulation and people believes
The nature of a condominium functioning is similar to a public company, but the nature of financial motivation of condo management companies, condo managers and commercial corporate managers is different. It engenders a potential conflict of interests.
Main Types of a conflict of interests in condominiums
condoinformation.ca is perfectly explained management companies and managers’ main root of potential conflict of interests:
The first stems from the structure and ethical culture of management companies. Indeed, most managers and administrators who work in condos owe their allegiance to the management company rather than to the condo corporation they work for. They are in reality accountable to their company first and secondarily to the board of directors…and, far behind, to the corporation and owners at large.
The second type of conflict of interest resides when contractors hired to service, maintain, and repair the various systems in a condo building are related to the manager or the management company directly or indirectly. This results in maintenance and repairs being carried out that are not necessary; in invoices that are padded; in contracts awarded without an open fair bidding process; fraud and kickbacks–all of which probably costs annually tens of millions of dollars to condo owners in Ontario.
Considering that Condo Board members are not paid, and can potentially face situations where conflicts of interest arise with condo contractors.
Those situations with potential conflicts of interests might be not detected, not recognized for a long time because of Condo Board’s members lack of knowledge, skills, group’s conformism and right justification.
If a public company has many requirements to the Board members, top managers and employees, the Condominium laws do not require those skills. Moreover, based on statistics
and personal stories told CondoBI by other condo directors that were trying to bring transparent procurement processes in condominiums during 2022 – 2023 years, as soon as a knowledgable and motivated condo director tries to detect a potential conflict of interests to isolate it from a decision-making, they has been bullied. But such directors just stepped back feeling frustrated.
Condominiums are very vulnerable for frauds and errors.
There have been a lot of instances where fraudulent activities have taken place in condominiums. It is crucial to establish proper governance, oversight, and internal controls to minimize the risk of fraud in condominium management.
Can Closed Tendering processes of a condominium
be Open, Fair and Transparent?
condo owners interests became depending on just human factor
The main goal of tendering process is to select the most advantageous proposal in terms of cost and quality, and delivery. But tenders that is not open for all qualified contractors do not allow to reach that advantageous because of:
Lack of Competition: By limiting the pool of contractors to only those preferred by the management company, the competitive bidding process is compromised. This reduces the opportunity for other qualified contractors to present their proposals, potentially resulting in inflated prices and missed cost-saving opportunities for the condo owners.
Higher Costs: When a limited number of contractors are invited, there is a higher likelihood of receiving fewer competitive bids. This can lead to higher costs for the condo owners, as the absence of market competition may result in less favorable pricing and terms.
Limited Quality Assurance: By restricting the selection to preferred contractors without considering alternative options, there is a risk that the quality of work or services may not be objectively evaluated. This could result in subpar workmanship, inadequate service levels, or the use of lower quality materials, compromising the value and integrity of the condominium property.
Potential Bias and Conflict of Interests: The preferential treatment of certain contractors raises concerns about potential bias and conflicts of interests. If the management company has personal relationships or financial incentives tied to the selected contractors, it may undermine the objective decision-making process and compromise the best interests of the condo owners.
Reduced Transparency and Accountability: By excluding other contractors from the tender process, transparency and accountability may be compromised. Condo owners may have limited visibility into the selection criteria, evaluation process, and justification for choosing specific contractors, potentially eroding trust and confidence in the management company.
Some condo management companies in Toronto and GTA that declare that their processes are transparent actually prepare all board decisions in advance. The Board get just a set of choices prepared to make a predictable decision. Also, some management companies/ and managers are supported at least one long-term director (always on the board) that uses all possible arguments and means to make procurement process not competitive, not controllable and not transparent.
Formally, the board meetings’ minutes’ have clear records that indicate, all condo corporate decisions made by directors. But those “decisions” just a formal acceptance of ultimate responsibility for the decisions made by property manager/or management company. For example, if property management company starts a tender and invites just 3 or 4 contractors based on its own choice, and usually, at least 2 of them are preferable, and two others might be also preferable, but might be invited just for statistics. Can such tender be competitive and fair? Can such tender give condo owners a reasonable assurance they get the best quality and price. And wow, a miracle, two of preferable contractors that already work for your building are always apply for the tender with the best prices. So, when the Directors are considering proposals the choice is always fell to the first two. If you notice the same decision-making algorithm in your condominium just try to get another quote from a reputable independent contractor to make sure you are getting the best price.
Often, Board meetings’ minutes are censored not reflecting problems and important discussions that expose ethical problems, and sometimes directors’ values that are opposite majority of condo owners values. The problems are hidden because the Board has to resolve the problems if the Board shows the problems on the minutes. So, the Boards prefer to hide problems. Often, the Board minutes reflect just the Board choices based on a predictable scenario as a proof everything is in compliance with laws and regulations.
For owners, directors and auditors, all formal requirements of the procurement processes are followed:
- tendering process was applied
- required quantity of quotes has even received (at least 3)
- a board approved choices
- right records in meeting minutes
The law looks like followed but it does not protect condo owners’ interests effectively, without dedicated investigation and a legal help.
Such imitational practice of tendering and its harm to condo owners interests might be not detected for a long time because there are Triangle of fraud conditions exist:
That is why formally right processes might be very risky for condo owners interests. In such situation, condo management companies that already use best practice in procurement processes, can educate condo board members, and create transparent procurement processes are needed!
If your condo managers can organize management processes based on transparency, fair bidding please submit your condos list to start proofing it to condo directors.