Condo sues property manager alleging theft and mismanagement - again

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Much to the chagrin of its residents, Minto Plaza has become a poster child for the challenges facing Toronto's burgeoning condo industry.

For the second time in six years, the upscale 434-unit building at 38 Elm St., near Bay and Gerrard, is embroiled in a legal battle with its property manager over allegations of thousands of dollars in unauthorized expenses.

Conflict among condo boards, owners and property managers have become increasingly common as Ontario's booming high-rise housing market has swelled to more than 1.3 million residents. Rising numbers of condo lawsuits prompted Queen's Park to pass legislation last year to create two new bodies to settle disputes between condo owners and board members and to license property managers, although critics say the province has been slow to roll out its new rules.

But when it comes to battles in the condo world, few buildings have experienced as much strife as Minto Plaza.

In 2009, the condo board, known by its legal name of Metropolitan Toronto Condominium Corporation No. 933, sued its property-management company, Brookfield Residential Services Ltd., and the on-site manager, Christine Maitland, after the board paid a contractor nearly $150,000 for hundreds of low-flow toilets that were never delivered.

Among the allegations was that Ms. Maitland steered the board into a contract for the toilets with a company run by an acquaintance of hers. The board won an out-of-court settlement in 2010.

Late last year, Minto Plaza filed a $900,000 lawsuit against its new property-management company, ICC Property Management Ltd., and the new on-site manager, Massimo Musso, alleging Mr. Musso had spent more than $100,000 of the condo's money on personal items.

In its statement of claim, the board said an internal review of its finances "uncovered dozens of purchases made by Mr. Musso, for which he sought and received reimbursement from MTCC 933, which were exclusively for Mr. Musso's personal benefit."

Among the allegedly improper expenses are thousands of dollars spent on underwear, cologne and men's clothing at Moores Clothing for Men, houseware at a Bed Bath & Beyond store in Oakville where Mr. Musso lived, and items such as an iPhone arm band and a Valentine's Day card.

The lawsuit also alleges that condo residents' money went to buy six Nespresso coffee machines even though there were only two coffee machines in the building, and another $9,000 went to pay legal expenses for a small-claims court case against Mr. Musso that was unrelated to his work at the condo.

None of the claims against ICC or Mr. Musso has been proven in court. No statement of defence has been filed. Toronto Police told The Globe and Mail they aren't conducting any criminal investigation into the allegations contained in the lawsuit because the condo board was pursuing its own internal investigation. Two condo board members contacted by The Globe declined to comment about the case, citing the ongoing legal issues.

In an interview, ICC chief executive officer Steven Christodoulou said the company denied all allegations of wrongdoing and that despite the lawsuit, ICC continues to manage the building.

The company has yet to be served with the statement of claim, Mr. Christodoulou said., although he was aware of it after some court documents were posted to an Internet condo blog.

"I really don't know what the underlying intent is for this," he said. "There has been a history and it seems like the same people that were behind previous claims against property management are the same people that are behind this claim."

The company removed Mr. Musso as the building's manager a little over a year ago at the condo board's request. Mr. Musso no longer works at ICC, but Mr. Christodoulou said he wasn't fired.

Reached by phone, Mr. Musso declined to comment, saying he also had not been served with any court claim and wasn't aware of the suit until contacted by The Globe.

Some Minto Plaza residents are fuming at the prospect of having to go to court to recover funds for the second time, particularly since condo fees at the 26-year-old building jumped 12 per cent last year.

"It's very frustrating because you want to do something as an owner to protect yourself, protect your investment and you feel like your hands are tied," says Pascale Décosse Léger, who owns a unit in the building.

Ms. Léger bought her property a decade ago after attending nearby Ryerson University. She and her husband moved out in 2009 when they bought a house. But She has kept the condo as a rental ever since in hopes her children will one day attend their mother's alma mater.

After hearing concerns from other residents about the building's financial affairs, and receiving little in the way of an explanation from the building's board members, Ms. Léger spent her own money to hire an independent forensic accountant to examine some of the board's financial records. "It really felt personal," she says. "That's why I went to the lengths that I did, because it was me protecting my children's future."

The report, by the firm Nagel + Associates Inc., ultimately formed the basis of the condo building's lawsuit.

Owner Aaron Silverman is thinking seriously about selling his unit, in part due to the ongoing legal issues at the building. "I like living there, but I'm feeling a lot more anxious about the financial health of my investment and the financial health of the building," he said.

While it is rare for a condo building to end up in court against two separate property managers in the span of only a few years, Minto Plaza is hardly alone in facing bitter battles between owners, board members and property managers.

In the past three years, courts and administrative tribunals have mitigated dozens of disputes involving condo buildings in the city. Police have also laid fraud charges against a handful of property managers in the province. And last year, police charged a Collingwood, Ont., property manager Rhonda McCarthy with more than 50 fraud-related offences. In Halton, police laid nearly two dozen charges against a property manager Brett Mackenzie Leahey for an alleged $4.1-million fraud involving 13 condos in Burlington and Hamilton.

Those charges follow on the heels of other high-profile cases, including that of Manzoor Moorshed Khan, who in 2011 was accused of borrowing as much as $20-million from several condo buildings in the Toronto area and then fleeing the country. In 2013, property manager Tim Toole was handed a two-year sentence for embezzling nearly $1-million from two North York condo buildings.

"Condominium management is a deeply troubled business," said William Stratas, managing director at condo consulting firm Eagle Audit Advantage Inc. "There are some good providers who try to do right and uphold professional standards, but overall it's an unregulated industry that has the potential to victimize condo owners on a wide scale."

A long-time owner and former board president at Minto Plaza, Mr. Stratas helped spearhead the successful 2010 legal settlement against the building's former property manager. Afterward, he says he received so many requests for advice from other condo buildings that he and neighbour Judy Sue, an accountant and financial analyst, launched a consulting company that helps condo owners investigate financial fraud and waste.

Such problems are supposed to be a thing of the past under the provincial government's sweeping overhaul of its condo legislation. But the process to get the planned new condo tribunal and property-manager licensing system up and running had dragged on for years. In a statement, the Ministry of Government and Consumer Services said it has put together two advisory groups that are working to draft the regulations that will govern the two tribunals. it expects the first phase of regulations will launch some time next year.

Meanwhile, the battles at Minto Plaza wage on.

"I'm glad that somebody recognized that something was needed, but we've been waiting and waiting," Ms. Léger says. "I know it will come, but by then how much money will have been lost?"