Jones Lang LaSalle says Luring buyers with low maintenance fees is false economy
In an effort to speed up sales, developers usually reduce maintenance fees of condominiums to a very competitive level but this can have a detrimental effect in the long run, says Suphin Mechuchep, The managing director for Thailand of Jones Lang LaSalle. Buyers are usually very concerned about common area service charges and developers tend to cut the rates. But these fixed amounts are difficult to increase later without the consensus of co-owners, which hampers property management professionals from raising standard. “I think professional property managers should be involved right the start when the rate is fixed because afterwards if problems crop op, the building cannot be maintained at a high standard which is contrary to the image of the project being sold,”Ms Siphin said”, It should not be just architects and interior designers, property managers too should have a role. As with anything else in life, it is difficult to obtain both good and cheap property management and the aim should to set a reasonable fee level. “If you want more service or are keen on adding value to your property then you have to be willing to invest because this is an investment cost,” she said. Whereas some new buildings suffer from the problem of low service a large number of older ones, especially grade C condos, not only face this problem but are also weighted down by outstanding debits of co-owners not paying their fees at all. This cannot be called bad debt because is has to be cleared before the unit is transferred on being resold. When condo managers face cash flow, problems they often dip into the sinking fund that is collected when units are transferred, to fund major repairs in the future. This practice persists despite the Juristic Person Law of 1994 clearly stating what the maintenance fee and sinking fund are meant for, Ms Suphin said. The law does not state the penalty for co-owners who do not pay fees. The action has to be written into the rules to be enforced by the juristic person. One of approach that is gaining favour is penalty fees against co-owners. Some managers enforce the rules by cutting off the water supply as this is governed by the juristic person. However, electricity and telephone service cannot be cut because the co-owner directly owns the meter and the line. ”But if they do not live in the unit then cutting the water supply is useless.” She said. Ms Suphin suggests the law be tightened to resolve the problem of people not paying fees, and to clarify what actions the building manager can take to enforce payment . “I think there should be flexibility and the juristic person should be given more authority to pursue action. Even though building managers can file lawsuits enforce fee payment, many see the cost of litigating as simply adding to their financial woes. “They may not do this because they know that if and when the unit owner sells his property the unit can only be transferred after the maintenance bill has been cleared.” Ms Suphin also suggests that building managers be allowed to rent out unoccupied units with large amounts of maintenance fees in arrears order to generate revenue. “Some units are part of the banks” NPLs (non-performing loans) which they are trying to sell but while they are still unsold, we could make some money. Maintenance problems that often crop up might lead to some buyers shunning buildings with few units but Ms Suphin said the focus should instead be on whether the building can operate without the deverloper’s support.