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Condo management: The most underrated cause of selling at a loss

February 25, 2016
The ugly truth: Most condo management committees struggle to manage more than basic maintenance.

The ugly truth: Most condo management committees struggle to manage more than basic maintenance.

There are plenty of reasons you may sell your condo at a loss. A bearish property market, poor global economic situation, selling to relatives because you took leave of your senses, etc. But the most ignored factor is the condo management. Here’s why they can be a problem, and how to spot troublesome management early:

A quick rundown on condo management

The Management Corporation Strata Title (MCST) is the management committee of your condo. They are identified by a serial number (e.g. MCST 1111).

The initial management committee is chosen by the property developer. After the first Annual General Meeting (AGM), tenants can choose to appoint their own condo management firm, form a management council among tenants, or retain the management committee picked by the developer.

Tenants pay maintenance fees that form the management committee’s budget. This is typically $500 to $700 for most condos, but luxury condos may have costs in excess of $1,000. The smallest unit at Draycott 8, for example, has a maintenance fee of around $1,070 per month.

The impact of condo management

The ugly truth is, most condo management committees struggle to manage more than basic maintenance.

Condos are one of the hardest building types to manage, even more so than shopping malls. The facilities are shared among hundreds of tenants, and usage is 24/7. A condo never closes for the night. Gym equipment has to be replaced, landscaping is ongoing, and elevators break down as frequently as the manager after the fifth year.

Fast forward 10 or 15 years, and the most expensive condo can easily become a complete dump.

Now when the pool has missing tiles, and the garden areas look like that planet in Star Wars, you can bet your property value will take a hit – and the best property agent in the world can’t hide it from prospective buyers.

It also goes without saying that a poorly maintained condo is harder to rent out.

So when you’re about to buy a condo, don’t ignore the management. Look out for these things as well:

For new condos

If the condo is new, you have to rely on the reputation of the developer. Most developers will be happy to tell you who they want to manage the condo, and why – be sure to ask and check.

Some developers have turned this into a selling point. Eastern & Oriental, for example, is known for their obsession with condo management; particularly for concierge services (they started with hotels and it carried over.)

Bear in mind, however, that the condo management picked by the developer can be replaced later.

For old condos

If you are buying a resale unit, it is quite easy to check on how well the management is doing (or rather, not doing.) Do the following:

  • Pay attention to what’s outside the unit you’re buying
  • Check for improvements that go beyond basic maintenance
  • Talk to the staff
  • Examine the interaction with residents

1. Pay attention to what’s outside the unit you’re buying

Don’t dismiss the condition and quality of facilities, even if you’re not the type to use them. I’ve never been in my condo pool in the 10 years I’ve lived at Costa del Sol (I believe in swimming only when I’m drowning), but it will matter to tenants and future buyers.

Take note of whether the gym has missing equipment, if the carpark has accidentally become a second hand furniture store, and if the clubhouse or BBQ pits are in good condition.

2. Check for improvements that go beyond basic maintenance

The best sign of a good management committee is asset enhancement. This means they have actually improved the property, rather than just maintaining it. This can mean new exercise areas, new landscaping features, or even the inclusion of retail spaces (e.g. getting approval for convenience stores and laundromats to move in, whereas they were not present when the condo first launched)

Asset enhancement can contribute to rising property values. And if you are renting the place out, your tenants will appreciate it.

3. Talk to the staff

Don’t neglect to talk to the cleaners, security guards, concierge, etc. The staff often have a good sense of the condo’s problem areas, such as if the lift in a particular block is notorious for jamming.

It’s also a bad sign if the staff seem disgruntled or unhappy about the condo management. The committee handles their pay, so conflicts between them and the management can get messy.

If the management replaces the security or cleaning firm due to such conflicts, the outcome can be unpredictable. There may also be an interim period in which maintenance slides.

4. Examine the interaction with residents

Good management committees are proactive. You will see a lot of activities, beyond just Chinese New Year and Christmas functions.

You want the management to have a strong presence. You don’t want the phantom manager types, who will resolve your issues at the speed of continental drift.

A management committee that interacts is also likely to use its budget in the right way. You don’t want situations where everyone complains about a reeking pool shower, but the budget surplus gets spent painting sunflowers in the car park.

 

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1 Comment

  • Reply condominium management @catalyst January 23, 2017 at 6:30 pm

    Nobody wants to sell a property at lose and it is important to do condo management properly in order to avoid that. The article is really really helpful for people like me.

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