Competition Bureau targets condominium renovation
industry in criminal probe
Globe and Mail
Tamsin McMahon
25 May 2016
Canada’s Competition Bureau is setting its sights on the booming
condominium sector in the Greater Toronto Area, ordering more than 100
condo boards to hand over records as part of a sweeping criminal
investigation.
The bureau is probing what it calls “allegations of bid-rigging and
conspiracy” involving the region’s multimillion-dollar condo renovation
industry.
Earlier this month, a Toronto court granted an order allowing federal
Commissioner of Competition John Pecman to compel 141 condominium
buildings across the GTA to turn over 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),” according to court records.
The investigation was launched by the federal bureau’s Cartels
Directorate and requests condo boards provide details about the
companies and individuals involved in bidding on contracts to renovate
shared spaces, such as lobbies, party rooms and parking garages.
“The bureau is looking into allegations of bid-rigging and conspiracy
in the supply of condominium refurbishment services in the Greater
Toronto Area,” Competition Bureau spokesperson Marie-France Faucher
confirmed in an e-mail. Both are considered to be criminal charges
under the federal Competition Act.
While most of the buildings are in Toronto, the bureau’s investigation
involves condominiums from Burlington to Newmarket to Whitby. All of
the buildings have hired companies to perform extensive renovations to
their common areas.
The renovation contracts date as far back as August of 2006 and as
recently as September, 2014, and the bureau said in court filings that
it may expand its investigation to other condos.
Those familiar with the situation say the board may be targeting up to
400 condominiums whose names were found on computers seized by
investigators roughly a year ago as part of a probe into a small group
of three or four interior designers and contractors involved in condo
renovations.
Condo lawyers say the federal watchdog’s order compelling more than 100
individual condo buildings to hand over detailed financial records is
highly unusual.
“I’ve been doing this 28 years and I’ve never seen the Competition
Bureau ask condominiums any information,” said lawyer Mario Deo, who is
also president of the Canadian Condominium Institute, a condo-industry
lobby group.
The May 10 court order gives condo boards 90 days to turn over the
information, which has left many boards scrambling to compile records
that go back up to a decade.
“They’re not the world’s best record-keepers,” said condo lawyer Audrey
Loeb, who was working on drafting letters for her clients that explain
their legal obligations in plain English. “In a single-purpose company,
you would have all these records, but in a condo, God only knows what
they’re going to find.”
Most of the details of the Competition Bureau’s investigation were
sealed by the court. Bureau lawyers wrote in court filings that the
records should be sealed “due to the size and complexity of the
bureau’s investigation” and also over fears that “future targets … may
destroy or remove evidence.”
However, Ms. Faucher said condominium owners were “not the targets” of
the investigation. She declined to elaborate, citing the
confidentiality of the investigation, which the bureau says is
“ongoing” and had not yet found any evidence of wrongdoing. “Should
evidence indicate that the Competition Act has been contravened, the
Commissioner will not hesitate to take appropriate action,” she wrote.
Legal experts say the bureau appears to be targeting companies that
supply the goods used in the renovations or the interior-design
companies that oversee the projects, rather than condo boards or
property managers. The federal agency may be looking into whether condo
directors and owners are the victims of potential collusion and
price-fixing when they enter into contracts for renovation projects
that can run into the millions of dollars.
“I think what they’re worried about is people from whom our clients may
have bought goods may have done something improper or illegal in terms
of pricing their goods,” Ms. Loeb said.
Most condos hire third-party professionals to manage their renovation
projects, including dealing with suppliers and handling budgets. Many
use a formal tender process to award renovation contracts, involving
sealed bids and overseen by professional engineers, particularly for
large and expensive projects.
But the contracts are just as often left to relatively unsophisticated
condo owners struggling to navigate a complex and expensive bidding
process.
“If the goal of this investigation is to say: Listen, there are forces
in the marketplace that are causing condo corporations to spend more
money than they otherwise ought to, then it’s probably a good thing,”
condo lawyer Chris Jaglowitz said.
Robert Weinberg, president of the Association of Condominium Managers
of Ontario, said members of his property-management organization adhere
to strict ethical standards when it comes to managing the bidding
process for renovation contracts, including requiring interior-design
companies to disclose any relationship they have with suppliers.
But the association represents a minority of the more than 300
property-management companies in the province. “Whether or not it goes
on, this has been a shock to most management companies who have started
getting served with this,” he said.
The move by the federal competition watchdog is part of a broader push
by government to examine the burgeoning industry that services the
proliferation of high-rise construction in the GTA, where close to
three-quarters of new homes are condos and many aging buildings now
require costly upgrades.
“There is this gargantuan sea change in just the size and the value of
the services and materials that these condo corporations consume,” Mr.
Jaglowitz said. “It is now a sizable portion of just about any aspect
of the economy.”
The provincial government recently overhauled its condo laws and is
working on regulations that would require condo boards to award certain
contracts through a proper tender process.
Canada Revenue Agency has also looked into the financial activities of
condo corporations, which are considered non-profits but that often
have profitable businesses renting out parking spaces, empty suites or
signing leases with companies to put solar panels and cellular towers
on the rooftops.
In a 2013 report that charity lawyer Mark Blumberg obtained under the
federal Access to Information Act and posted to his blog last month,
the CRA concluded some of the profits were actually flowing to
individual condo owners and should be taxed as personal income.
top contents
chapter previous
next