Why do you want to be a secondary Client
The other day I was talking to a client who has a second property they are asking us to manage. We provided the proposal of our services and they would take the contract home and sign it back shortly.
About a week later we talked on the phone and they indicated they were going to send it back then the strata company who manages the building sent them an email offering a limited time offer to manage their rental property. The offer was for a monthly management rate well below ours and indicated there would be no placement fee. The client did identify they would need to pay for advertising, which can be very costly and the screening of the tenants. We do charge the cost of the credit checks back to the client. I assume that is what they are speaking of.
We recommended to our client, we understand you need to consider other options if they are more cost effective for you. We advised them, DON’T use the strata management company who is managing the building to manage your rental property in the same building. Our client said, “why do you say that”?. In BC the governing body for all licensed property managers is BCFSA. BCFSA has identified this as a conflict of interest and recommends it should be avoided.
What does BCFSA advise in this situation?
BCFSA the governing body advises management companies to avoid this conflict as follows:
“This potential conflict could be addressed by modifying your duties in advance by designating a primary and secondary client. The secondary client must understand and agree that the primary client the duties owed to them may be limited in certain situations”
What this means is before they are able to represent your rental property in the strata they are managing they will ask one of the two parties to sign a secondary client document. A secondary client document means there will be times they will not be able to represent you as their client (modify duties) due to the fact they represent the strata who are on the other side of the conflict. That is what modifying their duties means, translation it means not being able to act on your behalf due to the conflict. Why are you the owner of investment property signing an agreement that has situations where the manager of your property will not be allowed to give you advice on how to deal with the situation while they are under contact as your manager.
BCFSA also has a requirement that licensed professionals are not permitted to provide management services (offer advice) unless the party in question is our client. That means if a person comes to me and says we are the secondary client and the management company is not helping me, by the regulations of the licensing body I am not permitted to assist this person with their issue.
When are you going to have a conflict of interest with the strata corporation?. There are many times but the two most important are bylaw enforcement and emergency repair losses.
Let’s look at bylaw enforcement. When a tenant moves into a strata the tenant is required to sign a form K which is known as tenants responsibilities, meaning they have been given a copy of the bylaws and rules and agree to adhere to them. Many strata corporations don’t like tenants in general and can be quick to enforce bylaws on tenants, and often incorrectly.
If the strata corporation applies a bylaw enforcement on your rental in the strata they also manage they will argue on behalf of the strata corporation they are doing the right thing and the rental manager is not going to be able to give proper advice due to the secondary client relationship. Your rental manager, even though they are not the strata manager the company still represents the corporation and would be in violation of the primary client relationship if they provide direction contrary to what the strata perceives as correct.
What if the strata incorrectly enforces the bylaws? Are they able to fight to clarify this is being done correctly?. Simply no. If the tenant refuses to pay a fine for a bylaw infraction especially one that is incorrectly administered will be applied to the owners account. The RTB and CRT are full of cases where stratas have applied fines incorrectly and tenants have been awarded refunds or the fines cancelled plus costs of the proceedings. Having an outside party reviewing the process of the bylaw enforcement is important.
The other major time an independent voice is important is when there is an emergency loss.
An emergency loss can and often includes water affecting other units in the building. There are processes where the strata must have the owner permission to enter and repair items in the strata lot. If the strata investigates a water ingress and they make a hole in the strata lot they are required to put it back to paint ready condition. They often do not do this.
During an emergency it may be determined the damage is in excess of the water damage deductible for the building. Each owner has the right to engage the building's insurance policy on their own. We have seen buildings who don’t engage the insurance policy even when the damage is over the deductible amount then charge the owner of where the leak originated, the deductible amount to pay for the damage, this is the incorrect process under strata law.
When there is an issue at the building the strata corporation is making decisions that are best for the strata corporation and that decision may not be in alignment with the owner.
For this reason it is important to have independent advice on what the home owners rights are.
You can find more information about us at: www.cartrefproperties.com
