Owning property comes with its merits, but to get the most out of your investment, it is imperative that the asset is well managed and maintained. And this is where the owners’ association (OA) steps in. However, most investors and owners remain partially or completely ignorant to the need for an OA, and its essential role and responsibilities.
What is an OA?
The Jointly Owned Property Law, popularly known as the Strata Law, was enacted in 2007, with regulations added in 2010 pertaining to the ownership of common areas, and providing provisions for the establishment of an OA to manage the same.
“OA is a non-profit establishment and a separate legal entity comprising all the owners of the units in a jointly owned property,” explains Srinivasan Krishnaswamy, vice-president of business development and strategic planning at Deyaar, whose job includes looking after OAs for Deyaar’s communities. “The OA is responsible for the management, monitoring and maintenance of common areas within the jointly owned property and each unit owner is a member of the OA. All individual owners in a building or community automatically become members of the OA.”
This means as soon as you purchase an apartment or house in a building or community, you become a part of the OA. And that necessitates a payment of what is called the annual service charge, for the maintenance and upkeep of the common areas of the building or community.
OAs manage, control and administer the common areas on behalf of all the owners of a property, including matters like enforcement of statutory regulations, community or building rules, maintenance and upkeep, and security. They also play an active role in facility and property management, as well as strategic financial management required to discharge their role responsibly. Why finances, one may ask? Because properties need considerable financial commitment to maintain and improve over their ageing life cycle.
The OA is usually governed by a board of five to seven elected unit owners, who work voluntarily for the betterment of their community. It is headed by an OA manager, who may be an owner acting in a voluntary capacity, but there is a growing trend for appointing OA managers from a specialist company licensed and registered by the Real Estate Regulatory Agency (Rera).
“Rera plays an important role with respect to the management and regulates the relationship between parties, including owners, landlords, developers, owner association management companies and service providers of facilities in a real estate development or project,” says Krishnaswamy.
Are OAs meeting expectations?
There is a lot of discussion regarding customer expectations from OAs, from disputes surrounding service charges, to the quality of maintenance and upkeep. So are OAs meeting expectations?
Given the complexity and range of activities OAs need to balance and an increasing demand for quality by customers, upskilling the OA is becoming a pressing need. An example is companies like Deyaar Owners’ Association Management (Doam), established in 2009 and a subsidiary of Deyaar Development. Doam offers management services, not limited to Deyaar properties alone, which include professional administration, diligent contract and maintenance supervision, cost control and property inspections, among others.
Jeevan J. D’Mello, chief customer and community officer of Emaar Properties, also believes that the maturing OA market is recognising the need for highly skilled members to meet rising customers expectations.
“The owners’ association management industry is fast developing and the importance of having professionally qualified association managers is being recognised in the region,” says D’Mello. “Complementing it, service expectations from customers too are augmenting. It is, therefore, important to train and develop professionals in the owners’ association management industry to meet the world-class standards that customers expect.”
How can OAs bridge the gap?
A critical expectation of customers is the quality being delivered. While service charges do attract an expectation that the money will be spent and invested wisely, controlling wastage where possible, a compromise on quality is not in order, according to D’Mello. “OAs should not compromise quality over cost,” he says. “Good maintenance practices will not only enhance the value of the property but also reduce capital replacement costs and ensure health and safety of the residents. Proper insurances to protect the community and residents must also be in place.”
Inadequate management of building plant and machinery, the perils of which most owners remain oblivious to, is fundamental to an understanding of the cost-vs-quality ratio. As buildings depreciate, so does the machinery and equipment. Quality preventive maintenance is, therefore, essential to extend their life and avoid high replacement costs before time.
An evolving ecosystem for property management has meant evolving customer expectations from OAs. These now go beyond pure building maintenance to sustainability and efficiency management, as well as adherence to a growing code of conduct for buildings. Therefore, smarter building management systems for health and safety, lighting, fire etc., that can further improve quality of life, as well as ensure utility efficiency and cost savings, need to be factored in if OAs are to bridge the gap. For example, some companies are already implementing a comprehensive and robust portfolio of services, overseeing technical, environmental, security, financial, administrative and customer service tasks for the communities they manage, says Krishnaswamy.
What challenges do OAs face?
To enjoy seamless functioning, OAs need to ensure they have ample funds. But that appears to be one of the biggest roadblocks facing OAs currently. “OAs must focus on ensuring they have a robust capital reserve fund and insurance policies to protect their assets,” says D’Mello. “Capital reserve fund is set aside for future plant and equipment replacement, after the useful life of an asset has come to an end. On the insurance front, OAs must ensure they have the right cover by consulting professionals.”
Krishnaswamy adds: “Often if preventative maintenance towards replacing building systems is not planned correctly, the costs of replacement often negate any possible gains from efficient energy consumption.”
A key driver of low capital reserves is unpaid service charges, which can wreak havoc on maintenance plans and budgets. The absence of a legal recourse due to the grey area surrounding the legal status of OAs exacerbates the issue, although Rera is continuously engaging to make the OA a robust and independent legal entity.
The issue becomes more critical in the case of owners residing abroad. “Authorities have yet to enforce legislation on these service charge requirements,” says Krishnaswamy. OAs allow unit owners to have a say in the day-to-day operations of the buildings and communities. However, greater communication and engagement is required to ensure unit owners, the board and the OA manager are fully aware of their roles, and are adequately equipped to execute their responsibilities.