The day that I bought my condo unit, I became a cash cow for the property developer. How did it happen?
Like anyone who wants to invest in the real estate market, a few years ago I checked out a condo unit in the Burgos Circle area, looked at its layout and facilities, talked to some residents about their experience living there, and decided that the unit could be a good investment, so I went ahead and bought it.
Since then, I had attended a couple of annual general meetings called for the condominium corporation to learn what was going on. Each time, the AGM failed to meet the quorum required to convene the meeting, but the meeting went ahead as an information session for owners. Each time, I heard from the management office that the building had a large amount of delinquent accounts. I was not happy about it, since that meant that the upkeep of the condominium could not be done properly. Many owners, including me, urged the PMO to do something about that, the PMO promised that they were doing something, but the same problem persisted every year.
Then, early last year, I learned from a social messaging group formed for residents and owners of the condominium that some financial mishap had happened. One employee who worked as a property management assistant at the Property Management Office (PMO) apparently had misappropriated money that some owners and renters paid for their dues or utility bills through the PMO. In other words, she stole from the condominium’s corporation. Those owners paid cash to the ex-employee, and received fake receipts.
Owners were horrified. We wanted answers. The Property Manager was new, since the previous one left on retirement soon before this was discovered. After a couple of months, the new PMO sent owners emails, saying that they would conduct an investigation. We were told nothing else.
Fortunately for me, my unit was under the care of a good property management assistant, and she properly recorded all the payments I made in the system. She was originally assigned two of the six towers in the condo complex, and two more assistants took care of the other four towers. Then, in around 2020, one position was eliminated, and the remaining two assistants each took care of three towers. Maybe that’s when the irregularities started.
It was puzzling how this could have happened without the knowledge of her supervisors. If a unit owner paid to the property management assistant, and the money was not credited to the owner’s account on the PMO’s books, the association bills would be shown as not paid, there should be reminders, and then threats of power cut off would be sent. If money paid for paying utility bills were not recorded, similar actions should have been taken, and the owners would have known.
We owners have since learned from some diligent owners who went out of their ways to contact the affected owners to find out the scope of the problem that the irregularities have been going on for over a year, and more than one quarter of the total number of units were affected!
This case is still on going, more than one year since we were notified officially of its occurrence. The latest official information that we received from the PMO is that a forenic accounting is being done on it, and that a criminal case has been filed against the former employee.
This update was provided at the latest general meeting of the condominium corporation held two weeks ago. Since the meeting failed to meet the required quorum for an election of the board of directors, no election took place.
Now you may thing that the embezzlement of funds from the condo corporation was what I meant when I said that I have become a cash cow of the developer. This is not completely correct.
Yes, I, as one of the condo unit owners, have money stolen from me when money meant for the condo corporation is diverted, because that money is supposed to pay for bills and maintenance of the condo corporation, and we are all affected. We do not get individual power and utility meters. Condo units only have sub meters. The PMO apportions the bill to individual owners, so if there is insufficient funds to pay for the utility bills, the PMO will have to cover the payment from somewhere.
Association dues are meant for the daily expenses and maintenance of the buildings. We are all affected if not enough security guards and ground maintenance workers are hired, and repairs of common areas not done.
PMO said in one of the memos sent to owners that the PMO had replaced some of the money lost. We do not know how that was done, and whether they would replace all of the money lost.
The point is, the embezzlement is one of the more egregious examples of the abuse that unit owners suffer in the hands of the developer. How?
First, they secure their control of the Board of Directors.
A property developer can, and some do, control the properties that you bought, long after they sold it to you, without having to own a majority of the units.They can control the board, since they get to appoint the initial trustees of the board when the board was formed while the building is under development. Then these board members stay on it years after years, because AGMs were held but quorum not met.
Once they control the board, they can decide which contractors to hire, including the property management office and the security company, and the auditor for the books. These contractors can be subsidiaries of the developer, so it is possible that at least some of the money paid to them will enrich the developer. Since the developer controls the Board, there does not need to be bidding for the contractor’s contracts. Even if there is bidding, the bidding documents could be dictated by the developer.
Even if the contractor is not a subsidiary of the developer, the developer can still exert undue influence on the contractor.
In this condo development, there are seven board seats, but only four are occupied, and two are representatives for the commercial properties owned by the developer. The other two are also people connected with the developer.
At the recent general meeting, the auditor was questioned on why they did not discover the embezzlement. They responded that their scope was limited to a general audit, which relied on documents provided by the PMO, and they only had one day to do the audit. In response to a question from an owner, the auditor also confirmed that they were also the auditor for many condominium developments built by the same developer.
From the questions asked by another owner, we also learned that one of the board member was even an employee of the company that operates the PMO. That company is of course a subsidiary of the developer.
Condominium associations are legally set up as a corporation, and therefore it falls within the purview of the Securities and Exchange Commission. Under the Corporate Codes, a corporation should hold a general meeting every year, and important decisions like the election of board members can only take place when a quorum of attendees is met.
So one can say that developers can take advantage of other unit owners of a development because other owners do not bother to show up at a general meeting. On the other hand, efforts to encourage, or even inform all owners of a general meeting can only effectively be made by the PMO, since only they have contact details of all owners, many of whom are resided overseas.
Many owners share the feeling that the state that the condominium common facilities are in do not justify the dues that we pay.
Under corporate law, owners can request SEC to allow for a general meeting to be held for board election purpose even when quorum is not met, and SEC has suggested that they could support such a request if adequate efforts have been made over a long period of time to try to reach quorum.
One owner did that last year. We will see what happens next. In the mean time, the PMO has informed us that there will be a special assessment (meaning fees to pay) coming soon.
Lesson for would be condo unit owners: before you put your money down, check not only the condition of the unit, price and location, but whether the developer is known to be willing to hand over management of the condominium to the owners once it is finished. This is an additional factor that will affect the value of your property in future.
If you are already someone’s cash cow, I suggest that you look for greener pasture.