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How can Property Management Enhance the Value of Property?

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Buying a property is often a once in a life time commitment. Some buy for their own use while others buy for investment. Either way, expectations of good returns either through rental yield or capital appreciation is common. Many purchasers rely on the established mantra of location, location and location, coupled with other factors such as reputation of developer, availability of public transport and surrounding amenities etc before making their decision. Unfortunately, many fail to realize that besides the usual suspects, the aspect of property management and maintenance of the property is equally or even more important in determining the quality of a development.

Property Management is not limited to only the maintenance and management of the common property and services, the facilities, the financial management, mechanical and electrical services. In many ways, it extends even towards creating and managing the lifestyle of the occupants.

Before committing to a property, purchasers should enquire about the service charge and sinking fund rates of the building, security procedures and standards, the performance of the property management company, level of cleaning services, the financial cash flow of the property etc. It might seem petty to some but failure to manage any of the above appropriately will have a negative effect on the value of the property in both the short and long terms.

Here is a very good simple example:

  • Property A – Slumbering security guards who merely “Salute n Go” for any person seeking entry; versus
  • Property B – Alert and responsive security guards who adhere to and administer the house rules strictly with a no-nonsense approach.

Potential purchasers or tenants will definitely prefer Property B because having a more secured environment is very important these days. The peace of mind and confidence these efforts produce cannot be underestimated. The high demand for such quality services will create further capital and rental appreciation to the owners. A building with repeated incidences of break-ins will have a downward spiral effect on the demand and market outlook.

Similarly, if the building has severely under budgeted for or faces poor collection of service charges and sinking fund, it will affect the cash flow and the services of the building. Just imagine a building with uncollected rubbish, broken down lifts, dilapidated gymnasium equipment and greenish swimming pool water; it will instantly turn any interest away whether from tenant or buyer.

As developments age, those with healthy bank accounts allow the Management to respond to emergency events such as lifts breaking down, as well as any future upgrading and capital expenditure for repainting the building. This allows the development to modernize and regenerate itself to compete with newer surrounding developments and offer latest services to its owners and tenants.

In short, it is vital for purchasers to look into these property management factors before making any decision. A site walk at the development, quick chat with the property manager, management staff or occupants and an Internet search will provide valuable insight to the development, enabling a wise, informed decision.

Take Charge of the Management

In Malaysia, the management of stratified properties is governed under the Building & Common Property (Maintenance & Management) Act 2007 (BCPA) and the Strata Titles Act 1985 (STA).

Under these Acts, property owners take control to manage the common property through their elected committee or council members. Common property is a term used to define an area being enjoyed or used by more than two parcel owners of the building. This includes the lift, lobbies, driveway and walkways, swimming pool, gymnasium etc.

The elected Joint Management Committee (JMC) are just like elected cabinet ministers except that it is a non-paying voluntary job. They are elected annually with heavy responsibilities and liabilities. The JMC is responsible to execute the duties and powers of the Joint Management Body (JMB) under the BCPA.

During the transition period under JMB, the Developer is a compulsory JMC member. Once the strata titles are issued and with the formation of the Management Corporation (MC), the elected owners will be redesignated as Council Members and guided by the STA instead. By this time, the Developer will be phased out from the management of the building.

The JMC or MC can appoint a Property Manager to manage the building. A registered Property Manager is governed under the Valuers, Appraisers and Estate Agents Act 1981 and regulated under the Board of Valuers, Appraisers and Estate Agents ambit. It is a very interesting profession that requires the Property Manager to multi-task effectively and be a Jack-of-all-Trades. The Property Manager must be conversant in laws especially BCPA and STA, knowledgeable about Insurance services, supportive in Human Resource Management, organized for Administrative Management, understanding and responsive to Customer Service, acts as an effective Debt Collector and Account Manager, and the list goes on.

Impending New Law

Recognizing the limitations of the existing BCPA and STA, additional amendments and improvements were enacted into a new Strata Management Act 2013 (SMA) and Strata Titles Act 2013. These new laws were gazetted in early 2013 but have not been brought into effect. Once they are enforced, the SMA will generally supersede BCPA and STA, forming a primary reference point with guiding principles for the JMB and MC to manage the property.

As for the Strata Titles Act 2013, it will mainly govern the process of application and issuance of strata titles. Amongst the most pertinent provisions of the Act is the requirement of the developer to hand over the Strata Title to purchasers at Vacant Possession stage, as opposed to the current practice of several years after completion.

Conclusion

Despite the clear benefits of good property management, it is often not given the priority and importance it deserves. Responsible developers should ensure architecture that enables easy and cost effective maintenance, accurate provisions for costs of service charges and sinking fund, and proper set up of the property management team from day one. Once the building is handed over to the JMC or MC, it is vital to have active committee or council members to ensure proper care and management continues.

Productive strata living necessitates participation and engagement from owners in property management. This is always a challenge for today’s busy executives but a paradigm shift from merely leaving it to third parties to taking active ownership of this crucial element will definitely bear much fruit. With more and more highrises being developed, it pays to only consider properties that tick all the required boxes of a building with exceptional property management services.

 

Article is written by Eric Lim, Founder and Managing Director of Hartamas Real Estate Sdn Bhd, MIEA’s Real Estate Agency of the Year 2012 to 2013 and Commercial Real Estate Agency of the Year 2011 to 2014. Log on to www.hartamas.com for more information. The article represents his personal views.