Condo corporations can have annual budgets in the millions of dollars with even larger reserve funds. This creates opportunity for those who desire to steal some of these funds.
It is not uncommon to read about condo corporations that have had these funds stolen or misused.
When condo funds are stolen or misused, who is responsible?
Condo assets are owned by condo owners and managed by the board. Directors are fiduciaries; they manage other people’s assets and are held to a higher standard of care. Directors are expected to make prudent decisions and understand that their actions must minimize condo owner risks and liabilities.
Not all financial fraud or embezzlement is the result of negligence. Prudent efforts to manage and protect condo owner assets can be circumvented. When negligence does occur, condo directors may be held accountable.
A condo director’s job involves more than attending monthly board meetings. There is a duty to oversee accounts payable and receivable. This requires efforts to minimize illegal actions and improper access to funds. While it is not uncommon for condo boards to employ a condominium manager to handle such tasks, a director’s supervisory role cannot be delegated.
When a condo board fails to adequately supervise and diligently uncover mismanagement or theft, or catch employee misconduct, it is forced to raise condo fees or undertake a special assessment so that the condo corporation can continue to operate.
Condo owners are also at fault when mismanagement, theft or employee misconduct occurs.
Condo owners are also at fault when mismanagement, theft or employee misconduct occurs. Each condo owner has access to corporation records. Had condo owners requested access to records and been denied, this alone could be an indication that something is amiss. Condo owners are expected to monitor the board to ensure they are doing what is expected of them. The choice a condo owner makes to sit back and assume everything is ok or rely on verbal assurances is ill advised when dealing with what is typically an individual’s most valuable asset.
Regular document demands should be a part of condo owner due diligence.