Prevent Condo Fraud by Ensuring Fair Elections

August 2016

Controlling the Proxy Vote

An important component to successful condo fraud is gaining control of the board.

Condo boards have wide discretion on how and where to spend money. Having the wrong people elected to a condo board can open the door to fraud and mismanagement.

Controlling the proxy vote is the easiest way to get onto a condo board.

If you reside in a condo building where a majority of condo owners own their property for investment purposes or are renting out their suites to earn income, it is likely that few attend the Annual General Meeting. It is in such buildings where it is easiest to gain control of the proxy vote and control the board.

A proxy is the legal right to vote on an owner’s behalf on matters pertaining to the condo corporation.

Where a condo corporation makes decisions in the interests of investors or landlords, the interests of condo owners who reside in their suites becomes secondary. Affecting positive change for residents can become more difficult when non-resident condo owners have financial incentives to focus on short-term considerations which can be to the detriment of the condo corporation.

Keeping monthly condo fees too low, for example, can deplete condo corporation bank accounts so that funds are unavailable when infrastructure work is necessary. This approach is more costly but can be more profitable for those who intend on selling their suites or do not intend on living in the building.

In a building where many rely on rental companies to manage their rental property, it becomes relatively easy to gain control of proxies for this block of absentee owners. Control of a large block of proxies allows one to control who is elected to the board. Being elected to the board makes it easier to direct funds toward specific contractors or enact measures that are not in the best interest of the condo corporation.

Ensuring elections are open, fair and not controlled by a single voting block with short-term interests inconsistent with residential home ownership is an integral part of minimizing the risk of condo fraud.