Spend, spend, spend
“When money is once parted with, it can never return.
  —Jane Austen

There have been a few condos where soon after a new board gets elected, it starts spending the corporation's cash as if they struck oil underneath the parking garage. They start by making a lot of small improvements around the property.

Building improvements

The property may have been neglected and improvements are needed. They could be prettying up the property in order to raise property values.

The manager and the board may bring more contractors on-site working on several projects. If the fees have been kept low, they dip into the reserve funds to finance the deepening operating deficits.

Reserves depleted
A common result is for the operating funds to run a deficit and the reserves to be cut in half within the first year.

Suspected kickbacks
In some cases where this has happened, it is suspected that the rash of new contracts was triggered by the manager or directors looking for kickbacks or commissions. Rarely are these suspicions been proven in court.

When a new president was elected at a Scarborough condo, he immediately quit his job. (That is never a good sign.) A newly elected president of a condo in Etobicoke also quit her job. Once she lost her position on the board, she went back to work.

The superintendent says that the windows needed replacement and a contractor submits a bid of $950,000. The president gives the company the contract in return for $100,000. The contractor does $850,000 worth of work and leaves the windows largely un-caulked. Of course they leak so the owners blame the president. He resigns and sells his unit.

The music stops
At some point, usually by the second or third year, expensive repairs are required and the corporation is broke. There may be city issued work orders that cannot be ignored.

There are three ways the board can raise the needed money:
Pass a resolution at a board meeting for a special assessment. The owners have no say in the matter.
Hold a special owners' meeting to pass a loan bylaw. This may be preferred  by the manager because there may be undisclosed "finder fees" or other commissions that can be pocketed. The owners are told this is the preferred way to raise the money as the loan can be paid back over a long period which results in lower monthly payments.
Try to talk 90% of the owners into selling some of the common elements to raise money to pay for the required repairs. This is tricky to pull off as it means a change to the Declaration but it does make for a completely painless way to raise cash.

Regime change
At some point either the board is replaced in regular elections or by a requisition to remove the directors at an owners' meeting. A third possibility is the appointment of a court-appointed administrator.

Whoever takes over has a mess to clean up and the owners will face hefty fee increases along with the need to pay off the loan payments or special assessments.

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