Category : Latest Property News Updates
Do you know what your Maintenance Fees pay for? How it works and Planning for future?
Here’s an article for your reference for your better understanding on maintenance fees and management. Normally, most of us is just pay without better understanding on it, the logic and the costing etc. Read the below for better understanding.
Find out more beyond just paying
Nippon Paint, Friday, 23 June 2017
If in doubt, the purchaser has the right to ask the developer to explain how the figures in the Statement are derived.
Joint Management Bodies (JMBs) and MCs must study the products and services in detail before implementing them in the properties. Are they worth the investment? For example, certain energy-saving lights may claim they will save 50% of energy cost, but note it is only on lighting. On the whole, it may mean only a 10% savings from your total electricity bill. Another consideration is for products that continually come up with newer versions — will the current model become obsolete too soon?
Siew: Managements must study the strata plan and development order. In one encounter, upon reading the plan, we realised that a set of escalators at the commercial area actually belongs to the developer. We allocated it back to them and saved about RM3,000 to RM4,000 a month.
What is optional?
Siew: Safety, energy and cleaning take up the main capital expenditure. The rest depends on needs and spending capacity. (Refer to the table below for a budget sample.)
If you want to minimise expenses, you can deactivate your water features because pump replacements are expensive. Furthermore, besides algae growth, people tend to throw things into ponds, so they require professional cleaning services.
Electrical cost can also be cut down. For instance, a building may come with 100 lighting points, but you may need to switch on only 50 to provide sufficient comfort. During the day or certain times of the year, when the hours of light and dark change, adjust the timer accordingly. Certain building automation systems can help lower utility cost, such as auto-switch off taps at public washrooms.
On the other hand, it is always good to have spare funds for unforeseen costs such as new regulations. A recent example is the requirement for anti-clamp devices for escalators and a back-up power supply (energy box) for lifts. These will set the management back by thousands of ringgit or more.
Low: The fixed costs are for security, electricity and water, property management services and cleaning, which typically take about 50% to 55% of the total expenses (as shown in Table 2).
Variables include ad hoc repair works and upgrading. For example, some JMBs tend to modify the development concept, such as replacing trees with grass to cut down on gardening maintenance. New committees may be over-ambitious for a transformation. But as a fixed-income organisation, you must schedule your upgrading works according to your financial capability. By right, the sinking fund should be used for repainting, lift maintenance and other crucial areas, but if you use it to change the concept, it will shrink your capital reserve.
One totally unnecessary spending is for legal cases such as those against normal defaulters. It is cheaper to file these claims under the Strata Management Tribunal (SMT) which costs only RM100 for residential and RM200 for commercial. The second type is litigation. This should be completely avoided. Besides, the parties will usually be directed to settle out of court. Anything that involves legal cases will take at least RM50,000.
Keeping fees unchanged
Low: Increasing maintenance fee is a very unpopular measure. Only if we are asked to take over from a messed up management, then we have no choice but to make a cash call.
Proprietors should also be realistic. If market tariffs have risen but you still want the same rate, you must be prepared to compromise, such as reducing the number of guards or frequency of cleaning works.
One way to keep fees reasonable is to get value-for-money services. For example, security services tend to increase after a few years. We can always call for tenders to do a comparison.
Variables like upgrading works must be spread over a longer period. Don’t do major works, like retiling, all at once. This ensures there’s enough cash flow and minimises disruption.
Planning for future works
Siew: The major areas that need planning ahead are repainting, facility upgrades such as lifts, and water pipeline replacements.
Get current quotations about three years before the work is due. Anything much earlier might be impractical. From the price, project a 30% increase and get the sum approved in a General Meeting. The law allows sinking fund to be increased more than 10%. For example, in one condo, residents pay an extra RM30 maintenance fees per month for three years for repainting. In another, RM70 is collected monthly for one year to install the CCTV. There is no hard and fast rule. It is up to how you manage it.
Low: We always plan ahead to cover the life cycle cost of major items, such as repainting, lift refurbishment, and major changes in CCTV, barrier gate and escalators.
If residents use the equipment conscientiously, they can last beyond the recommended life span, which translates into more savings. If they are vandalised or mishandled, it bounces back to your own pockets.
Every item in the inventory must have its life span recorded. Things like water pumps for fire-fighting equipment and water features all come with life span of maybe 10 years and five years respectively. All these must be factored in. For instance, based on current quotations, we add in an annual inflation rate of about 5% for the number of years of the life span. For practical reasons, we will not bill anything beyond three to five years, unless they are big ticket items such as repainting.
On repainting, a proper coating system must be used for the façade because it reflects the development’s image. Owners will be proud of their residence, while prospective buyers will find it more attractive. Besides, a proper coating system of exterior paint should last for at least five to seven years because it can’t be touched up easily like interior paint.
This story first appeared in TheEdgeProperty.com pullout on June 23, 2017.