Last week the Ontario government announced that it will be proceeding to implement a licensing mechanism for condominium property managers. This is a major intervention by government in the operation of condominium corporations, and represents a huge shift in legislative thinking since the last revision of the Condominium Act about twelve years ago.
At that time, the Act was updated in notable ways but self-enforcement remained at its core, since good intentions were assumed on the part of all stakeholders. Anyone close to the industry knows how that turned out — the worse side of the business has been witnessed in recent headlines, millions of dollars in fraud, and many thousands of condominium owners and corporations victimized in ways large and small.
Judging by the reaction of various stakeholders, it seems everyone in the condominium industry is on board with this proposal, and without much surprise since it was one of the primary recommendations from the Ontario government’s broad-based consultation process in 2012-2013.
As fraud examiners and auditors, we also applaud this effort, but from a different perspective, and with some cautions.
We suspect that some stakeholders are embracing this proposal as an attempt to plug the holes in the business and forestall greater regulatory intervention. It’s a smart move for those who have feasted on the vulnerabilities of volunteer condominium boards for many years. Because the inside secret in the business of condominium management is now openly known. Label yourself a condominium manager, join one of the dozens of management companies that are constantly chasing new hires, get your hands on a condo’s operating and reserve accounts, start wheeling and dealing business to your friends and family, work out a few cash kickback deals with contractors, keep your directors in the dark by smartly controlling and filtering all their information and communications, fix the board elections to deny any newcomers the chance to shake things up, and voila, you have a pretty lucrative career ahead of you. Just try to avoid the day the music stops playing. Or a fraud auditor knocks on your door.
Sorry to say, but that’s a fairly accurate description of what happens in some condominiums today, and only the bravest of management insiders are willing to discuss or admit it. We know, we’ve spoken with them. It’s astonishing what goes on, but almost no one has the courage to speak up.
So licensing is a good move because it should bring standards of some sort to a business that has had few if any mechanisms for self-regulation and oversight. Oh, sure, you have ACMO and the RCM designation, but as insiders will tell you, what standards does ACMO actually uphold? Their web site claims to offer a complaint intake process, but with what results? Send ACMO a request for aggregate statistics regarding number of complaints received, number of complaint investigations, and number of RCMs de-certified through their internal disciplinary process. What do they say in reply? Nothing. Silence. You would think that an organization that claims to set and uphold professional condominium management training and certification standards would openly stand behind the results of their complaint process. Professional bodies for accounting, law, dentistry and many others do. But ACMO apparently has chosen to avoid such scrutiny and accountability. We have learned from insiders that apparently the total number of RCMs booted is zero. Imagine that.
Which is why, in our view, ACMO is not in a position to validly claim the role of being the new licensing body for condominium managers in Ontario. Any licensing body must be completely independent of all existing stakeholders. We strongly urge the Ontario government to resist the lobbying efforts of some persons with agendas that may not fairly serve the public interest. ACMO can credibly and effectively continue to lead the education programs for RCMs, its core strength, but ACMO should not be involved in the licensing and disciplinary mechanisms for managers. A solid line of separation needs to be defined between property manager education and property manager licensing/discipline.
And that brings us to the second concern we have concerning the proposed manager licensing process. To be effective it has to have real consequences for misconduct. And that means, real disciplinary standards and real enforcement. Following are measures we suggest are sensible and appropriate for protection of the interests of condominium corporations and their owners:
- Management companies should be registered with the ministry, as well as individual managers. Similar to the financial services industry, both corporations and individuals in the business of condominium property management should be licensed by the Ministry and held accountable to business standards and disciplinary measures.
- Audit powers to open up property management company records, property management correspondence and financial records. The back-office operations of management companies are a risk for questionable conduct, equal to the risk posed by front-office operations at client condominiums.
- Directors and officers of management companies held accountable for employee misconduct and fraud. How else will the management companies with poor or absent internal controls ever care to enforce proper diligent oversight of their front-line managers and back-office operations?
- Credit checks for property managers, with results reviewed by the licensing body as a means to red-flag managers who may have financial difficulties that could lead to fraud. How can anyone properly entrust millions of dollars in operating and reserve funds to a manager who cannot responsibly manage his or her own personal financial outcomes? Employee credit checks are conducted in other businesses that involve significant financial dealings, and it is therefore appropriate this practice be made standard as part of a new regime of condominium manager licensing in Ontario.
We sincerely hope that the Ontario government delivers substantial and credible standards in condominium manager licensing, to help reform a business that has coasted along for decades with almost no scrutiny and very little internal accountability.