Strata manager’s actions a form of racketeering
10 October 2018
Dear Tony: I am a commercial broker concerned about a recent problem
that is occurring for strata owners considering a windup and
liquidation of their corporation.
Our office was recently approached by a strata manager who indicated a
strata client was looking for an opportunity to wind up their
corporation. We were requested to submit a proposal to the manager,
with a specific deadline and copy of the terms of our representation
A week before the deadline, we were contacted by the strata manager,
who indicated we could be on the short list if we were prepared to
confidentially split our commission 50/50 with the management company
in the event the windup was successful.
Up to this point, we were never informed of the identity of the strata corporation, other than the number of units.
Our concern relates to two problems. The first is every location is
different and requires a unique level of assessment in detail and
marketing. As a result, the rates may vary depending on the projected
work or site studies that may be required. The second is a greater
concern. If the strata management company is demanding a split
commission in exchange for a short list result, it is obvious this is
not condoned by the strata corporation, otherwise we would have been
told the name and location of the strata and the contact information
for the strata council members.
Clearly the company is withholding critical information to leverage an
undisclosed commission or fee on behalf of their client, which is both
unethical and in violation of the Real Estate Services Act. At this
time, we informed them we would not pay any commissions or submit a
proposal without the explicit consent and details of their client.
Thank you for coming forward. A serious flaw in our real estate
legislation is that there is no whistleblower protection, so many
violations in the industry go unreported for fear of recrimination. I
urge you to file a complaint with the Real Estate Council of B.C. on
behalf of consumer interest and the reputation of the industry.
Strata managers are not contracted as brokers or as the liquidator for
the purpose of winding up a strata corporation. They are contracted to
provide services for operations, maintenance, financial management and
general administration. They are contracted under an “agency”
agreement, which conveys the authority of the strata corporation to
enable your manager to act on your behalf for the purposes of
operations. Unless otherwise agreed in your agency agreement, they act
solely for your strata corporation and any fees, commissions or
benefits they receive that are not directly from the strata corporation
must be disclosed to the corporation.
Undisclosed fees and commissions are a growing problem within the
strata management industry and strata councils have a right to demand
their strata management companies inform them of any fees or
commissions they have received. A simple disclosure in the service
agreement that a company may receive fees from time to time does not
meet the requirements of disclosure. The company must disclose the
amount of the fees, percentage of a gross fee or other interests where
they receive a benefit. While they are acting as your agent, they are
not acting as an agent for other parties unless you agree.
When an agent of one party pressures a third-party service provider to
provide a fee in exchange for the undisclosed privilege of an awarded
contract, it is a form of racketeering — unlawful on many levels and
certainly not in anyone’s interest but the agent.
In all of the windup proceedings I have been involved with, the strata
managers play the least role. The lawyer acting solely for the strata
corporation will provide the greatest level of service and continuity
as they will review the commercial agency contract, notices and
resolutions for meetings that will authorize the strata council to
engage a broker and proceed with a marketing or negotiation process,
attend information meetings and meetings with council to negotiate the
terms of any of the offers, and finally the preparation of the notice
package including the resolutions for the 80 per cent vote, the court
application to approve the windup and the appointment of the liquidator.
Your commercial broker plays a significant role and negotiates the sale
of your property. It is their contracted responsibility to assess,
evaluate and market your property to the broadest audience in the
effort of obtaining you the best price for your property.
Your strata manager will have additional work as the strata corporation
moves through the windup process and they should be compensated as set
out in the schedule of fees for the cost of additional meetings and an
hourly service. A strata management agreement signed by a strata
council that pays a commission to a strata management company in the
event of a windup still requires the approval of the owners at a
general meeting. If you want to pay an additional fee or commission to
your strata manager it must be disclosed and approved by the owners, as
you will be paying out part of their proceeds of sale.
Finally, if anyone advises a strata council against a lawyer
experienced with strata windups, they are likely protecting their own
interests. Consumers deserve the best price and terms of sale for their
property. Keep your strata corporation in control of the windup process
where your strata council works directly with your lawyer and the
commercial broker, and all stages of progress are reported to the
Tony Gioventu is executive director of the Condominium Home Owners Association.