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Condo Smarts: Strata management can’t skim interest without approval

Dear Tony: Our strata corporation has just issued its final accounting report on a special levy that was collected over two years for a major building upgrade. The account collected $3.8 million and shows every strata lot owner as paid.
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Tony Gioventu is the executive director of the Condominium Home Owners Association of B.C.

Dear Tony: Our strata corporation has just issued its final accounting report on a special levy that was collected over two years for a major building upgrade.

The account collected $3.8 million and shows every strata lot owner as paid. However, there was a significant delay between the payments and contracting the project, and owners are demanding to know why there is no interest generated.

Our original resolution, approved in 2016, required that council invest the special levy into term deposits so we could compensate for inflation.

We also noted that several owners were charged interest at a rate of 10 per cent annually when they paid their instalments late. None of this interest is shown and no one is disclosing where the funds were invested.

We have found out that, as part of our contract, the interest collected was paid to our management company in addition to a three per cent fee to administer the project.

How do we find out how much interest was generated?

Kevin W., Surrey

The Strata Property Act clearly defines how interest is managed, how it is reported, where it must be deposited and how fees are approved.

In addition to interest generated from investments of special levy funds, a strata corporation may charge a rate of interest that does not exceed 10 per cent annually.

The rate is calculated monthly and compounded annually. This may be approved in either a bylaw or as part of a special-levy resolution.

When interest is generated as part of the late payment of special levies, that interest forms part of the special levy.

Any interest earned by the special-levy investment or late payment of fees becomes part of the reported income and expenditures of the special levy.

In addition to the financial statement showing the revenues of the special levy of the strata corporation as part of the annual financial report, the interest will generate a tax statement that forms part of the tax return, which includes the financial statement updated to the end of the fiscal year.

Owners can request copies of the bank statements and investment certificates for all accounts of the strata corporation, including special-levy accounts, and can request a copy of the annual income tax return and the financial statement.

Both types of interest generated from these sources must be shown.

If the strata corporation has contracted to pay a share of interest from either a special levy or a contingency reserve account to its management company, that amount must be approved by the owners at a general meeting — by a three-quarter vote if the funds are paid directly from the special levy or contingency fund, or by a majority vote if the funds are paid from the operating fund.

Bluntly put, no one gets to quietly contract a skimming of interest from the contingency fund or special-levy fund without reporting the fee to the owners and obtaining their approval for the payment.

A strata management contract does not override the three-quarter vote requirements for approval of special-levy expenses or contingency expenses.

If your strata corporation or management company does not provide disclosure of the fees and interest calculated and paid out, either 20 per cent of your owners can file a petition demanding a special general meeting to address the matter, or any owner can file a complaint with the Civil Resolution Tribunal to obtain an order for provision of the records.

Go to civilresolutionbc.ca to file a claim.

Tony Gioventu is executive director of the Condominium Home Owners Association.