The Shady World of Corrupt Property Managers

When it comes to making ethically questionable choices, many condo property managers are up there with the best of them.

For example, in 2011, The Toronto Star reported that Manzoor Moorshed Khan, president of Channel Property Management, borrowed millions against at least five buildings he managed without their knowledge.

More than 5,000 people sent letters of complaint between July 2009 and the end of April, 2017

Lawyers estimated the total misappropriation was going to be more than $20 million. And then to add insult to injury, Khan fled to his mansion in Bangladesh, leaving the tenants to pay off his fake loans.

While Khan might be one of the most egregious offenders, he isn’t the only property manager to embezzle money or commit fraud. Over the last few years the number of condo fraud cases has gone up almost as fast as the price of rent is rising.

More than 5,000 people sent letters of complaint between July 2009 and the end of April, 2017, according to the Ontario Condo Information Centre. By the end of April 2017 the organization had heard from over 48 per cent of all condo corporations in Ontario.

And unsurprisingly managers were the most frequently reported problem, a trend that still continues today.

You only have to look at the twitter feed of William Stratas, a managing director at Eagle Audit Advantage, a Toronto-based company that investigates grievances from both condo owners and board directors, to see how sketchy the industry is.

Kickbacks and bullying and freebies, oh my!

One of the more common forms of condo property management corruption is kickbacks.

This is when managers become BFFs with a contracting company and then give rewards to the company for jobs which the contractor low balls. Sometimes, they don’t even do or complete the work, but the money gets spent all the same, divied up between the condo manager and contractor.

Another favourite is when the BFF contractor does work on the manager’s personal home and charges the work back to the corporation.

But Stratas’ entire feed is filled with cases of fraud both large and small. You’ll find everything from insurance fraud to mismanagement cases to just plain petty cases like the tenant who was bullied over some backyard garden ornaments.

"Condominium management is a deeply troubled business," Stratas, told The Globe and Mail in 2016. "There are some good providers who try to do right and uphold professional standards, but overall it's an unregulated industry that has the potential to victimize condo owners on a wide scale."

The wild wild west

And that’s been the problem for years: lack of regulation. Even when the Condo Act came out in 2015 it didn’t slow down the number of issues reported, according to the Ontario Condo Information Centre.

But in February 2018 the Ontario government updated the Condominium Act, with the hopes that it might cut down on the number of issues.

The updated act means that condo directors have more duties and higher accountability, as do condo owners, who have the responsibility to be informed and participatory about their financial investment in their condominium. The new act also requires that condo managers have to now undergo training and be certified

Even so, it’s unclear if the updated act has had the desired effect.

And the hits keep coming

Just four months ago, a condo property management company embezzled thousands of dollars in maintenance fees. The tenants were dutifully paying their monthly maintenance fees for six years, with the understanding that they would cover their utilities, when the City of Toronto slapped them a $1.3 million bill.

Turns out the property management company hadn’t paid a single utility bill so the City of Toronto hired a collection agency to get their money.

The tenants were rightfully upset, with personal bills totalling more than $26,000, but there didn’t seem like much the tenants could do to fight the injustice. And at the time of publication the property management company still hasn’t been held accountable for their unscrupulous ways.

Stopping fraud

Even with new regulations the whole thing seems a bit hopeless. Sure, we’d all like to think we’d be able to spot and stop fraud like CIA agents but it’s not the easiest thing to do.

Fraud is supposed to be sneaky. Often, amounts will be small, random and concealed like a zit before a prom photo, making it really hard to pin down the bad guy. And corruption in the form of kickbacks can be especially tricky to spot as it’s usually only a small amount of money changing hands.

But if you suspect something nefarious is going down try to find proof. Preferably in the form of documentary evidence, such as financial records (if they exist), which all condo owners are entitled to see.

However, as Ontario Condo Information Centre points out, “there is unfortunately not much that owners can do because, under the current Condo Act, they are not adequately protected.”

But if you do have enough evidence you should, with the help of a lawyer, obtain a court order under Section 134 of the Condo Act, advises the Ontario Condo Information Centre. Just be aware this will likely be expensive and you might not be reimbursed.

If you want to minimize the likelihood of working with an unscrupulous property manager, be sure to look up their previous work history before hiring. If they have a habit of frequently moving from building to building, beware.