Avoiding Fraud at Condominium Corporations

Time Posted on October 29, 2009 at 08:37 PM User John Moher

Unfortunately, many condominium corporations have been defrauded by contractors, employees, property managers and even board members. These condominium corporations had to learn the hard way that stringent internal checks and balances with the goal of preventing fraud must be in place at every condominium corporation.

An example of a serious case of fraud occurred at a Toronto condominium corporation a few years ago. A boyfriend of a unit owner involved himself in the governance of the condominium corporation and eventually rose to the rank of President. The fraudster used his position on the board to steal almost $50,000 from the condominium corporation’s reserve fund. The fraudster was eventually caught, charged and pleaded guilty to fraud. 
The fraudster was ordered to pay restitution to the condominium corporation for the full amount withdrawn from the reserve fund. However, the condominium corporation has not been able to recover any funds from the impecunious ex-president fraudster to date.
Another example of fraud occurred when an unidentified fraudster forged the signature of a board member on a cheque. The condominium corporation’s bank had no idea that the signature was a forgery. Fortunately for the condominium corporation, the bank agreed to refund these funds. Don’t count on all banks being so accommodating. 
There are steps a condominium corporation can take to reduce the chances of being victimized by unscrupulous fraudsters. One such step is to ensure that every cheque over a certain amount, say $1,000, must be signed by two directors. If your condominium corporation’s governing documents do not require this, now is the time to consider whether such a requirement should be put in place.
Has your condominium corporation been the victim of fraud? Share your story by commenting on this posting and hopefully others can learn from the steps you have taken to prevent similar incidents of fraud.

Tag Fraud

4 responses to Avoiding Fraud at Condominium Corporations

  • Name: Director compensation, November 23, 2011 at 01:01 AM

    hello there,

    I live in a condo consiting of 20 units . in toornto .there are 3 board of directors and 2 officers . one of the directors who is also a president has been writng cheques to herself ,signing it and second signature is of her friend alsoas a board and claiming that i can take this for maneging the condo .
    however there was no votre taken ina meeting whwre 51% of owners agree , not was it registered at the land titles .

    when confornted , she says we as a board decided to make a desicion to pay her for her services as property manager while being on the board also and plan to use the condo money to defend her case ,

    what can a single unit owner do report this as Fraud or go to small claims ,specially when he has cash cheques copies of the mney taken out by the director and depositing in her personal account . Hoepfully you could include our answer on your web site for everyone to view .

    please advise . Thanks .


  • Name: M Nicula, August 12, 2010 at 01:33 AM

    Internal Controls dilemma:
    The Property Management company is a 'Supplier' to the Condo Corporation. Hence, it sends invoices to be paid by the Condo Corporation. SHould the Property Management company owner be one of the persons authorized to sign cheques on behalf of the Condo Corporation?
    Basically this means that person can send an Invoice and the same person can issue a cheque to pay it.


  • Name: Tracey McLellan, November 14, 2009 at 01:09 PM

    The protection of the Corporations funds and elimination of Fraud should be a dual undertaking from both the Corporation and management. I know this would be a hotly debated point, but all cheques should be signed by both managment, and the board.

    The management company is ultimately responsible for tracking, reconciling and reporting on the corporations funds, they are also responsible for issuing payment from those accounts. They should be entitled to the same protection against fraud as the Condominium Corporation.

    Just my two cents... Tracey McLellan - www.traway.com


  • Name: T.M. Director, January 13, 2010 at 10:52 PM

    Our PM has been negligent in upholding By-laws governing reserve fund expense, violating the condominium act and even its own contract. He has supported and engaged in a cover up attempting to include the infraction within a resolution in the corporate minutes. All is easily proven but the Board refuses to take action in dismissal, probably because 3 of the 5 Board members are complicit. Ive gone to the police and they say it is a civil matter. In other words, the only way justice can be served is if a unit holder spends thousands of dollars out of their own pocket to charge the PM who will be protected by the condominium corporations lawyer(per contract)which will impose a fine on the Corporation and it's directors of up to $175,000 in fines which in turn will be assessed against the unit holders and the unit holder bringing the action will pay again. This same property manager would be engaged by the Bank to administrate a poorly run corporation and would keep the corporation in debt to maintain the administration without the Board having opportunity to change if they discovered another impropriety. What's wrong with this picture? NO teeth? or... no accountability? Better yet. No ability to financially support enforcement with reliance on the common man to underwrite the cost of resolving corporately funded(no option) fraudulent activity. Laws without support from those who create them are useless to those that do not have the personal finances to enforce them. There are no consequences to deter violations and contravention of the law. The most money buys the best legal representation and rules. We need to have the government underwrite prosecution that is provable at a minimum to discourage abuse of the power given Board and Property Managers.



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