For most house buyers, the valuation of a property is often pegged to primary factors such as location, pricing, sq ft and population density. These variables are important, but buyers also need to observe the upkeep of the property as it will influence the market value.
The collection of maintenance fees, for example, is one of the main criterias that determine if a development will be maintained properly. In the secondary market, this assessment can be easily determined through a physical viewing. However, savvy buyers should also learn to anticipate such a problem with the primary market. After all, prevention is better than cure.
According to Gather Building Management Sdn Bhd property manager Ken Teo Khiok Nyuk, developments that display a certain characteristic will usually have problems in the collection of maintenance fees. Based on his experience, Ken said the management of micro buildings registering a total of 150 units or those below 200 units often struggles with collection issues.
A quiet, low, dense environment with fewer residents denotes a higher maintenance fee as there are fewer people within the collective community to share in the expenses. Hence, if a small number of individuals are to default in payment, then there will be a problem.
Further on, low-density developments often include penthouse units, and if these owners stop paying, that may easily contribute to over 35% of the total payment. Understandably, residents in such developments should belong in an income category that allows them to service their maintenance fee sufficiently.
However, Teo said that this is not always the case as the people living within the development may not come from the same income group. He cautioned that some individuals might be living along the borderline.
To encourage payment of maintenance fees, Teo advises property managers to offer flexible payment options to residents, such as credit card, other forms of online payment, as well as through property management apps.
Under normal circumstances, Teo estimates that over 30% of parcel owners will pay on time. Another 40% requires a reminder while the other 15% needs pushing. There will also be the bottom 15% who may require legal action to exact their maintenance fees.
To increase collection, residents of the development should also be educated on the importance of paying their dues. Maintenance fees are not like conventional retail service charges which are consumed and paid later on, he said. These charges are prescribed under the Strata Management Act 2013, Act 757, where contributions for the expenses are needed to operate and maintain the building.
Failure to pay management fees on time is considered an offence under the act. The offender is liable to a fine not exceeding RM5,000 or imprisonment for a term not exceeding three years or both. In the case of a continuing offence, the offender can be further fined. The amount is not exceeding RM50 for every day or part thereof during which the offence continues after conviction.
Also, Teo encourages residents to pay up their maintenance fees as this will affect the value of their property. Especially in the secondary market where potential buyers will come for a property viewing, the seller of a poorly maintained development must be prepared to offer discounts.