Approval, Authorization and Contracts
We are often asked by Strata Councils about some of the procedures we have put in place to ensure proper approval and authorization of work and then payment for that work. Below you will find a brief primer on some of the important terms and concepts that drive our policies, and yours:
Approval – Approval for the funding of work starts with the Owners in one of 3 ways:
- Setting the annual budget which approves annual operating expenses (those that occur at least as often as once a year);
- Approval of a 3/4 vote to pay for a capital expenditure from either the Contingency Reserve Fund (CRF) or by way of Special Levy (for expenses that occur less often than once a year);
- Emergency expenses approved by the Strata Council (or occasionally in dire emergency by the Property Manager) to ensure safety or prevent significant loss or damage, whether physical or otherwise, to the Strata Corporation.
Once the funds are set aside for a project, we seek Council’s authorization to actually enter into a Contract for the work. Under the Standard Bylaws and Strata Property Act, Council has the sole authority to enter into contracts on behalf of the Strata Corporation. It is not the Owners who directly retain a contractor, but the Strata Corporation on the direction of the Strata Council (and we, as Agents, facilitate the issuance of contracts and workorders on the Council’s behalf). It is after a Contract is entered into that work actually begins.
Once the project is complete (or if it’s a large project, at regular intervals usually referred to as “progress draws”) we will seek Authorization to actually PAY the invoices issued by the contractor or service provider. There are some expenses which we’re automatically authorized to pay through our service agreement (below a certain dollar threshold, ongoing expenses for services like garbage hauling, etc.) or by way of agreement with the Strata Council so that they don’t have to review every invoice in advance. Most of our Strata Corporations receive 50+ invoices per month, and though we can run every one of them by the Council this is usually not what we’re asked to do- rather we’re asked to provide invoices for non-recurring work that might require Council or others to inspect it in advance of payment. Some clients believe that if the work has been authorized then that authorization flows to the payment of the related invoice, but that is not the case.
Now, the tricky one is for special projects. Some Strata Councils are of the belief that once the Owners have Approved a project by way of a 3/4 Vote, that we will automatically engage the Contractor/Service Provider on the Strata’s behalf. This isn’t the case- as noted above it is Council who enters into Contracts and so we’ll seek formal authorization to do so once the funding is approved. Likewise, we’ll seek specific authorization for payment of invoices on all projects where funding comes from the CRF or Special Levy to ensure a paper-trail demonstrating we obtained Authorization to pay and that Council is happy with the work or service provided. In other words, when you hold a Special or Annual General Meeting, and funding for a project is approved by the Owners, we will still ask for Council’s direction to actually retain a contractor to conduct the work the Owners allocated funding for.
We hope that this clarifies why we occasionally ask for Authorization to enter into contracts after a General Meeting, and why we also seek Authorization to pay invoices from project funds.