Manager invested roof fund in long-term bond

Dear Condo Smarts: Our strata corporation recently proposed a special levy of $280,000 for a roof replacement.

We know it is time for the new roof and we have been contributing the funds over the past 10 years, and have collected $350,000 in our reserve funds to date.

It should come as no surprise that with this amount in the bank, the owners flatly defeated the levy and the council was instructed to convene another special meeting to approve the money from the contingency fund.

I have sat on council for the past 10 years and was in support of the owners’ direction, as were my fellow council members. The notice package was sent out by the property manager without our review, and no one had ever agreed to a special levy.

We met with our property manager last week to draft the notice for the meeting, and he advised us that we could not use the reserve funds.

He had invested them in a three-year-bond, and while its yield is much higher than that of general GICs, we cannot get the funds back until it matures.

Our council is at an impasse. We know we cannot go back to the owners with a special levy, and we cannot access our funds.

Please help, so we can get going with our roofing this summer.

Keith M., Greater Vancouver

Dear Keith: The strata corporation, represented by the strata council, is the authority that makes the decisions regarding your financial operations and investments.

Your strata should review your minutes of meetings and contractual services and determine whether your strata has given any instructions to the strata manager to lock your investments into three-year bonds.

Lawful instructions to the strata manager should either be by council minutes, contractual obligations or an email or memo from council instructing the manager to take direction.

The immediate issue that your strata council needs to address is gaining access to funds to proceed with the necessary repairs.

The owners could pass a three-quarters vote resolution permitting the strata corporation to borrow the funds, using the bond as a security, and once the bond matures, use the principal and interest to pay the balance of the account.

This would require a short-term payment schedule for strata owners, but at least would relieve them from the obligations of a long-term debt or a large special levy.

As it is technically a loan and the circumstances are a bit complicated, I would advise you to seek legal counsel on the writing of the resolution and the loans before you proceed.

If the strata council did give instructions to the manager to invest the funds in a fixed-three year term, the owners have a credible claim and gripe with the strata council which gave the instructions.

However, if the strata manager proceeded without the proper authority, it is a valid complaint with the real estate council for which the management firm may be disciplined, and your strata may wish to consider an action to recover any of the net costs of the loan and additional meetings.

Section 3-3 of the Council Rules under the Real Estate Services Act prescribe that the agents must act only within the scope of authority given by the client. If you have given the strata manager or the brokerage an instruction, and this could include items such as borrowing funds from the contingency fund for shortfalls in operating as well the decision to invest your funds as permitted by the legislation, that instruction needs to be documented.

For more information on Strata Manager Standards, licensing and consumer complaints, go to the Real Estate Council website at recbc.org.

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