Tony Gioventu
Province
Dear Condo Smarts: Our strata council has done something rather stupid, and now we’re about to face the owners admitting we’ve probably lost almost $100,000 of their money.
Our strata has always been self- managed and extremely well run. Local agents often refer to us as the model community.
Unfortunately, we let our guard down. In 2005, our treasurer invited a broker from an investment firm to talk to our council about managing our reserve funds.
We took advantage of the advice and decided to place our contingency funds with the investment broker to gain the highest yield possible.
Unbeknown to us, the funds were extremely risky.
They did pay a great rate over 10 per cent in 2006, but now with the current challenges in the markets our broker has advised us that our portfolio is worth half its value due to devaluation.
Here’s our dilemma: Do we tell the owners and admit the loss or wait and see if this is recoverable? My fellow council members are concerned that we may be personally at risk for this loss.
— G.G., Okanagan
Dear G.G.: Unfortunately, your strata is not the first to report this error in the past few weeks.
While no investment is an absolute guarantee, our legislation in B.C. is specifically designed to significantly limit the types of investments that strata corporations can invest to reduce the risks.
You have received some incorrect advice regarding the investment of your reserve funds.
You need legal advice regarding the liability of your council members, and the actions of your investment broker, who may also have incurred liability if he or she knowingly invested contrary to the Strata Property Act and the Regulations.
You will also need to advise your owners that it may be necessary to convene a special general meeting and seek their instructions.
The owners may very well consider a court action against the council members for this error, and if your directors and officers liability policy does not cover the loss, or the investments don’t recover, you may well be personally facing the costs.
Go to www.choa.bc.ca and click on the Strata Property Act, then follow the link to the regulations and print off Regulation 6.11.No matter what, every strata needs to confirm that all of its investments are in trust in their name and comply with that regulation.
Tony Giventu is executive director of the Condominium Home Owners’ Association.
Email: [email protected]
© The Vancouver Province 2008
