Update 2 January 2020: Developments regarding financial disclosure are reported on this site’s new page, “$ disclosure refused by Westsea”: https://orchardhouseleaseholder.ca/disclosure-refused-by-westsea/
Because no disclosure is required in the long-term residential lease that our landlord drafted to his own advantage back in 1974, we lessees at Orchard House wonder if we are subsidizing the landlord. The same applies to the other nine leases identical to ours, the standard-form nature of which was declared by the B.C. Court of Appeal in May of 2020.
Let’s start with the annual budget; we don’t get one. A simple question or two that I once put to the company about spending in the upcoming year were dismissed in writing by the company’s lawyer as “inappropriate”. No, I’m not kidding.
In May or June of each year we receive a past-year statement of operating costs with a one-page list of expenses and, most years, the amount we owe in addition to last year’s monthly suite fees to cover all of the costs. In May of 2019, for example, we were told that the “shortfall” for 2018 was $495,690, so lessees were told to pay three monthly payments ranging from $564 to $1,112. No total was given, but if we chose to do the math and pay the “shortfall” at once, that ranged from $1,692 to $3,336 depending on suite size. This expense was on top of monthly fees that had already increased 38% over 2017.
Westsea’s lawyer boastfully tells judges that our finances are “audited”, but little good a one-page statement does us, as we have no idea what’s included in a line item only identified as “legal” at $454,000, or “accounting and administrative costs” at $63,000, nor “salaries and employee benefits” at $85,229. Since my innocuous questions about these statement line items were “inappropriate”, I should move on to more fundamental questions, such as:
- Are the 16 suites to which Westsea itself holds the lease assignments and rents out 13 for revenue paying their share of the building operating expenses and lump-sum capital costs, such as for new windows? (There are two managers’ suites and an owner’s suite that appears to remain vacant.)
- Are lessees paying the site managers to operate Westsea’s rental suites and perhaps even for advertising or in-suite repairs?
- Westsea provides no visitor parking, but by my count retains 34 parking stalls that it can assign at will or rent out for revenue. Yet Orchard House costs are paid by suite lessees, nothing by parking stalls, so I suppose that lessees paid for the cost of the new roof, sod and sprinkler system atop that parking, as well as the annual garage cleaning, property tax and regular lawn cutting.
- Do the above-mentioned accounting and administrative costs include head-office operations for Westsea? Where do Orchard House-specific operating costs end, and Westsea’s own business expenses start? Does Westsea’s business run with no costs to itself whatsoever? Does “bill the lessees; they won’t know” apply, because we certainly don’t know.
That last point reminds me that Justice Douglas somehow came to believe that our lease includes a clause allowing Westsea to bill lessees “management costs”. On this point see my article “Don’t believe it!” How did Madam Justice Douglas come to read into our lease a non-existent clause? The court record on this has since been corrected.
More questions about our money could be asked, some substantial, some more minor. But obviously lessees deserve to know more about where their money is going, which point MLA Carole James raised with me as a specific concern of hers when last I chatted with her.
Yes, we could undertake legal action, similar to what lessee Hugh Trenchard did in 2014, to see if the court would require the company to open its books. In Hugh’s case the company’s lawyer agreed on the fourth day in court to disclose a windows engineering report, avoiding what was likely to be an adverse ruling. The company’s lawyer portrays this as a victory, saying that the action by Mr. Trenchard was dismissed. Sure… by consent.
Of course we should not have to sue to be assured that we’re not subsidizing our landlord’s rental business and head-office expenses. A mature and fair landlord with no guilty conscience would likely have an open-book policy. It’s not like there’s any business advantage to keeping secret the operating expenses of a leasehold building. Which secrecy then makes us suspicious.
Since the owners of Westsea Construction won’t be open about how it spends our money we need legislation that requires the books to be open. Back to you, Carole. (And, updated 2 December 2020, to you, MLA Grace Lore and Minister of Housing David Eby.)