Financial disclosure refused by Westsea… again!

Updated 14 December 2024

Westsea Construction maintains its position that its lessees have no right to ANY disclosure about how their money is spent or even a line-item budget about spending planned for the coming year. Most recently Westsea Towers lessee Eberhard Kobler had lawyer David Wu of law firm Arvay Finlay write the landlord company’s lawyer asking for disclosure to show that the lease-required “prudent and reasonable discretion” was exercised in spending, to which the answer was, in summary, ‘no’. The letter of request for disclosure can be read here.

The company lawyer’s reply letter prattled on for two pages about an aging building needing maintenance, finally closing with, “Westsea has no obligation under the Westsea Towers Lease to provide further information or documentation to Mr. Kobler related to any of the requests in your letter dated July 15, 2024.”

The company’s obdurate attitude has obviously not changed since 2019, when I wrote Westsea president Julie Trache demanding spending information, but the company refused to disclose anything about astoundingly basic concerns over the spending of Orchard House lessees’ money.

Here are 10 questions that I put to Westsea President Julie Trache in a registered letter dated 1 December 2019, not one of which the company was willing to address:

Whether the 16 Orchard House suites to which Westsea itself or a sister company hold the lease assignments contribute monthly to the building’s operations and to capital-project assessments. Since 2008 my studio suite has paid approximately $40,000 in capital assessments (new roof, replacement windows, etc.). On that basis the company’s suites, which are mostly larger, were responsible for about $1 million. We need to see that these amounts were contributed, and that they are for future capital assessments and for future years of operating costs.
Whether about $90,000 per year in “Salaries and employee benefits” paid by lessees is also paying for site staff and perhaps even Westsea head office staff to administer and advertise for the company’s portfolio of rental suites at Orchard House, as opposed to only administering the functions of the building. Lease clause 7.01 specifies that operating expenses are only those “…in connection with the maintenance, operating and repair of the building…”.
Whether about $70,000 per year in “Accounting and administrative costs” is limited to the operation of Orchard House, or whether it inappropriately pays a portion of Westsea Construction’s corporate operating expenses. Unlike some other Westsea leases, the Orchard House lease does not authorize the charging of “management costs”.
Whether the combined $160,000 annual cost of the two just-mentioned line items is a reasonable amount to administer a building operation that has little complexity, noting again that the O.H. lease does not authorize the billing of management costs. In other words, the lease intends that the administration of the building by Westsea be a revenue-neutral function.
Whether $426,675 in “Repairs and maintenance” billed to lessees during 2018–more than double the 2017 amount—was incurred with discretion, and for what projects.
Whether about $35,000 year after year in “Scavenging” is properly incurred on lessees’ behalf. Discretion in this would have seen cameras installed in the refuse-bin area and notice posted that those leaving furniture or debris will be billed for its removal.
Whether lessees cover the expenses for 34 indoor parking stalls (my estimate) that Westsea Construction holds for its own use or rental profit. Discretion in incurring expenses for lessees means that they should not pay expenses for a building function that does not benefit them, and that may be earning the company profit. A calculable portion of building operating costs, property tax and capital-project expenses can be attributed to parking stalls.
Whether $659,525 in “Legal” billed to lessees during 2019 (41.8% of spending) was in any way connected with actual operation of the building or contracts to serve it. Also, whether Westsea is incurring unnecessary expenses by referring to its costly legal team straightforward administrative matters.
Whether $2,825 awarded in August of 2017 by Madam Justice Power to litigant Hugh Trenchard against Westsea was subsequently recovered by the company from him and from other Orchard House lessees under the budget heading “legal”, rather than properly paid as a corporate expense by the company.
Whether Westsea billed lessees its expenses (well over $10,000 by my guess) for the just-mentioned loss–with costs awarded to Mr. Trenchard—AND then the appeal of that loss, which it later abandoned, of the company’s application to strike his notice of civil claim regarding the cost of replacement windows.

The 10 December 2019 reply from the company’s property manager rejected my assertion to Ms. Trache that the company’s duty to exercise “prudent and reasonable discretion” in the spending of our money requires disclosure to lessees beyond a one-page summary of annual spending.

Required by the lease or not, the lessor could choose to be more open; why would Westsea not have an open-book policy? But whether to hide fraud or more likely due to an obsessive and misguided policy of non-disclosure about anything, to anyone, ever, if Westsea and other leasehold landlords won’t be open about the supposedly break-even operation of their buildings at lessees’ expense, legislation should require it.

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