'Proxy Wars' in Condos

[CondoInterested]

'Proxy Wars' in Condos

See attached article from TODAY 11 Jun 2012

Opinion?

[House]

those stories are nothing.

in some newly TOP condos, agents volunteered to the developer to "help" giving out the keys to new owners, make owners sign the exclusive form on the spot. And of cos, the manager of the mgmt(developers') gets a cut from every transaction.

can the CEA do anything? none so far.

[Wild Falcon]

And some condos full of tenants, the owners just appoint the agents are proxy and every vote goes against maintaining the estate. Every landlord just want lowest possible maintenance and sinking fund contribution.

[roly8]

greed have no boundary

[marktkt22]

Hi bullman,

Your mailbox is full,
tr agm is on wed.
Looking fwd to support, if you can make it.
so we can pass the resolution that improve the estate.
there quite a fair bit of investment orientated owners that juz want min fee and no change.

[hopeful]

actually, how does maintenance affect rental? anybody knows?

if maintenance increased from $200 to $250 per unit, would rental increase from 3000 to 3020?

if maintenance decreased from $200 to $150 per unit, would rental decrease from 3000 to 2980?

if decreasing maintenance by $50, and rental decrease by $20,any investor would opt for decreasing maintenance.
What's in it for the investor landlord to increase maintenance?
as in the sail thread, the place is rundown, yet price still maintains.

[Draven005]

These agents or developers are vermins!

'Proxy Wars' in Condos

See attached article from TODAY 11 Jun 2012

Opinion?

[CCR]

Not maintaining the estate and cutting corners is very short sighted..... You paymmillions of dollars to buy a condom and then you sting on 50 bucks? Let say we increase by 100 bucks a month, it's 1200 per year and 12 k for 10 years.... A well maintained condo can easily fetch 100 psf more than a similar condo nearby.... For a 1000 sq ft condo that's 100k...

What I never understand is the moment residents move in they want to reduce maintenance fees.... Look at yong an park and pacific mansion.... There are plenty of examples.... I am not saying we waste money.... But its silly to cut corners.... Lobbies become old don't upgrade, lift don't upgrade, etc

[hyenergix]

Not maintaining the estate and cutting corners is very short sighted..... You paymmillions of dollars to buy a condom and then you sting on 50 bucks? Let say we increase by 100 bucks a month, it's 1200 per year and 12 k for 10 years.... A well maintained condo can easily fetch 100 psf more than a similar condo nearby.... For a 1000 sq ft condo that's 100k...

What I never understand is the moment residents move in they want to reduce maintenance fees.... Look at yong an park and pacific mansion.... There are plenty of examples.... I am not saying we waste money.... But its silly to cut corners.... Lobbies become old don't upgrade, lift don't upgrade, etc

Whaa your brother must be quite big!

[hopeful]

Not maintaining the estate and cutting corners is very short sighted..... You paymmillions of dollars to buy a condom and then you sting on 50 bucks? Let say we increase by 100 bucks a month, it's 1200 per year and 12 k for 10 years.... A well maintained condo can easily fetch 100 psf more than a similar condo nearby.... For a 1000 sq ft condo that's 100k...

......

12k translate to 100k cap gains. that looks good.

in that case, i propose that maintenance increase by 500 bucks a month = 60,000 over 10 years. it would gain me additional 500k cap gains.
much better yield than bonds, fd, etc.

i wonder why people so stupid as not to demand an increase in maintenance fee.

[Wild Falcon]

Agree. Actually the main contention is the "sinking fund" contribution. As an investor, I just want MINIMAL contribution because frankly, you won't see the effect on your property until 7 years later when it is due for major repainting. And goodness knows, 7 years later I would have already sold the property and I don't get to "utilise" the benefits of the sinking fund. That's how an investor thinks.

actually, how does maintenance affect rental? anybody knows?

if maintenance increased from $200 to $250 per unit, would rental increase from 3000 to 3020?

if maintenance decreased from $200 to $150 per unit, would rental decrease from 3000 to 2980?

if decreasing maintenance by $50, and rental decrease by $20,any investor would opt for decreasing maintenance.
What's in it for the investor landlord to increase maintenance?
as in the sail thread, the place is rundown, yet price still maintains.

[teddybear]

Funny, The Sail is probably 1 of the odd one out full of MMs and hence stingy and selfish non-resident owners trying to save some cash. As far as I know, those condos mostly >50% occupied by tenants are the ones that are most likely to not stingy on maintenance funds and keep improving the landscaping and facilities etc as these small money can help to improve rental yield tremendously and anyway they get back more money from rental!
I have seen many 10 years old condos mostly owner-occupied and know what? All badly maintained. Because mostly owners-occupied, most owners want to keep maintenance funds lowest possible as they can't get these money back from rentals! Don't believe? Go see South Haven, Hume Park, etc.

And some condos full of tenants, the owners just appoint the agents are proxy and every vote goes against maintaining the estate. Every landlord just want lowest possible maintenance and sinking fund contribution.

[teddybear]

Your theory contradicts facts. As an investor myself, I want to increase maintenance funds to improve the condo estate's facilities and landscaping, and in return I can rent out at higher $PSF rate! My experience and what my eyes see, those badly maintained condos are the ones which are owner-occupied since owner-occupied can't recoup the higher maintenance funds from rentals, hence will always try to keep maintenance funds lowest possible. Make sense right?

Agree. Actually the main contention is the "sinking fund" contribution. As an investor, I just want MINIMAL contribution because frankly, you won't see the effect on your property until 7 years later when it is due for major repainting. And goodness knows, 7 years later I would have already sold the property and I don't get to "utilise" the benefits of the sinking fund. That's how an investor thinks.

[Wild Falcon]

Not true. There is an optimal amount of monthly maintenance and sinking fund contribution. It doesn't mean the more the better. I've known condos during AGMs when there is a lot of debate of over-contribution, esp into the sinking funds, whereby the sinking already has $3 million for a medium size condo and seriously its about time to STOP contribution to that fund until the sinking fund gets utilised. Its about optimal use of cash for an investor and the last thing I want is to keep my cash all tied up in a condo sinking fund for like 7 years earning puny bank interest rate which I may not even see the returns. And it doesn't mean a condo which makes HUGE monthly contribution means well maintained. Its about how efficient is the estate management as well. I've known condos of similar size & age, 3 bedder, one makes $400 thereabouts monthly payments, another $700, and the former is actually better maintanined than the latter.

Your theory contradicts facts. As an investor myself, I want to increase maintenance funds to improve the condo estate's facilities and landscaping, and in return I can rent out at higher $PSF rate! My experience and what my eyes see, those badly maintained condos are the ones which are owner-occupied since owner-occupied can't recoup the higher maintenance funds from rentals, hence will always try to keep maintenance funds lowest possible. Make sense right?

[hopeful]

......I've known condos during AGMs when there is a lot of debate of over-contribution, esp into the sinking funds, whereby the sinking already has $3 million for a medium size condo and seriously its about time to STOP contribution to that fund until the sinking fund gets utilised. ......

does the size of sinking fund affects property value of a condo?

just like a company with considerable cash hoard but very low share price, so analyst say it is undervalue, rate it a buy because cash can be distributed as dividends.

likewise, if we become management council, can we redistribute out the sinking fund to existing owners?

[Komo]

does the size of sinking fund affects property value of a condo?

just like a company with considerable cash hoard but very low share price, so analyst say it is undervalue, rate it a buy because cash can be distributed as dividends.

likewise, if we become management council, can we redistribute out the sinking fund to existing owners?

reduce fee or skip certain month better than redistribute

[heehee]

When owners try to stingy on maintenance fees since they won't get rental return for paying more, I wonder they really care about "optimal" contribution? Who can determine an acceptable optimal value? Their optimal is probably never to increase maintenance fund & to keep cutting expenditure by using cheapest contractors for all services, don't spend any money on upgrading & improving the estate? We know that cheapest 99% of the time means sub-standard? Some condos resort to charging for the use of almost every single facility in the estate! Including 2nd or more Car park lots, some even from the first?. When it is not possible to charge, they reduce the frequency of cleaning & maintenance. When condos do these continuously for just 5 years, they will become dilapidated. Usually owners won't feel there is any problem, but can even blow trumpet that their condos have lowest maintenance costs to boast of as though it is some thing they are very proud of.

Medium size condo is how many units & how big is the estate & how many facilities to maintain? See, we don't even have a common standard on what is considered "medium size" condo, how to have a common standard on "optimal" maintenance fund value? Too much accumulated funds could also be a sign of under-maintenance & cutting all corners to save costs?

Not true. There is an optimal amount of monthly maintenance and sinking fund contribution. It doesn't mean the more the better. I've known condos during AGMs when there is a lot of debate of over-contribution, esp into the sinking funds, whereby the sinking already has $3 million for a medium size condo and seriously its about time to STOP contribution to that fund until the sinking fund gets utilised. Its about optimal use of cash for an investor and the last thing I want is to keep my cash all tied up in a condo sinking fund for like 7 years earning puny bank interest rate which I may not even see the returns. And it doesn't mean a condo which makes HUGE monthly contribution means well maintained. Its about how efficient is the estate management as well. I've known condos of similar size & age, 3 bedder, one makes $400 thereabouts monthly payments, another $700, and the former is actually better maintanined than the latter.

[House]

I remember a few years ago, some joker abscond with millions(sinking fund).

What wild falcon said is very true, already 3 mil can stop contributing liao. Unless the mgmt wants to buy over the plot of land nx door...

[teddybear]

$3m sinking fund also not enough if the estate has 1000 units!
It is useless telling us $3m without telling us the size of the estate, the number of units in there, the amount of facilities available. For all we know, the $3m sinking fund estate is in very poor condition because the MCST has been trying to save all money possible without doing proper maintenance!

I remember a few years ago, some joker abscond with millions(sinking fund).

What wild falcon said is very true, already 3 mil can stop contributing liao. Unless the mgmt wants to buy over the plot of land nx door...

[Wild Falcon]

There is no model answer. What is "optimal" amount of float or sinking fund is dependent on the age of the estate, what major repairs is has planned in the next few years etc. But in the example I gave, it was medium sized estate of 300+ units, reasonably well maintained with no major repairs coming up. During the AGM, it was voted for sinking fund contribution to be reduced to zero for that year (which really makes sense because they have accumulated too much cash, can't articulate what they plan to do with the money in the next 2 years and place in fixed deposits!). But of course monthly maintenance fund contribution remains and any excess gets tranferred to the sinking fund.

[CCR]

Full overhaul of lift will comes at 20 year mark... Plus lobby upgrading swimming pool tiles etc.... Total easily 10m

[Poloclub]

There is no model answer. What is "optimal" amount of float or sinking fund is dependent on the age of the estate, what major repairs is has planned in the next few years etc. But in the example I gave, it was medium sized estate of 300+ units, reasonably well maintained with no major repairs coming up. During the AGM, it was voted for sinking fund contribution to be reduced to zero for that year (which really makes sense because they have accumulated too much cash, can't articulate what they plan to do with the money in the next 2 years and place in fixed deposits!). But of course monthly maintenance fund contribution remains and any excess gets tranferred to the sinking fund.

To me this is a dangerous move. Once residence are used to paying nothing, it will be difficult for them to start paying again.

The argument of sinking fund is akin to arguing, how often do you mop your floor, or change your bedsheet. For some household they will mop it everyday, while other might not even do it in a week. etc.

Personally, I would prefer to own estate with solid sinking fund as it give the management team more budget to maintain the estate and let it age gracefully. And this will play a big part when tenant / visitors visit the place.

[buttercarp]

Your theory contradicts facts. As an investor myself, I want to increase maintenance funds to improve the condo estate's facilities and landscaping, and in return I can rent out at higher $PSF rate! My experience and what my eyes see, those badly maintained condos are the ones which are owner-occupied since owner-occupied can't recoup the higher maintenance funds from rentals, hence will always try to keep maintenance funds lowest possible. Make sense right?

I agree with you that I would prefer to increase the monthly maintenance fees to improve the condo.
This was what happened last year at the AGM when some SP went around to collect signatures of other SP. I was one of those silly ones who signed the proxy form. Later the resident committee and the management held talks to explain why they had to increase the funds by $12 per month, so I realized that for a small increase in amount, at least there will be sufficient funds to maintain the estate. So I attended the AGM personally to cast my vote in favour of increasing the maintenance.
However due to the proxy signatures collected, the maintenance was not increased and we are in status quo.
That was it.
That was the push factor and my husband and I decided that we had enough and therefore we went to buy a landed.

[Wild Falcon]

Not really. The AGM 2 years later start the sinking fund contribution with not much argument. As I've said, it's no different from running a company.And I've seen this is another condo as well. In this case, there is no point feeding millions of cash into a condo sinking fund with no major works coming up. Its like if a company is asking for more funding from shareholders, please show me your plans and cash flows. Shareholders are not going to just keep increasing funding unless it is necessay, esp when the fund already has substantial cash hoarded. in this case, the condo fund is never meant to be a "fund manager" and they shouldn't be greedy asking for more funds unless major repairs are planned for in the next few years. its like some HDB funds has so much money they collected from residents they end up buying Lehman Minibonds. Ridiculous. In the first place, don't collect so much lah. And there is no direct linkage between high maintenance and beautiful condo. And if you feed the management too much money, they become complacent and anyhow spend.

To me this is a dangerous move. Once residence are used to paying nothing, it will be difficult for them to start paying again.

The argument of sinking fund is akin to arguing, how often do you mop your floor, or change your bedsheet. For some household they will mop it everyday, while other might not even do it in a week. etc.

Personally, I would prefer to own estate with solid sinking fund as it give the management team more budget to maintain the estate and let it age gracefully. And this will play a big part when tenant / visitors visit the place.

[Poloclub]

Not really. The AGM 2 years later start the sinking fund contribution with not much argument. As I've said, it's no different from running a company.And I've seen this is another condo as well. In this case, there is no point feeding millions of cash into a condo sinking fund with no major works coming up. Its like if a company is asking for more funding from shareholders, please show me your plans and cash flows. Shareholders are not going to just keep increasing funding unless it is necessay, esp when the fund already has substantial cash hoarded. in this case, the condo fund is never meant to be a "fund manager" and they shouldn't be greedy asking for more funds unless major repairs are planned for in the next few years. its like some HDB funds has so much money they collected from residents they end up buying Lehman Minibonds. Ridiculous. In the first place, don't collect so much lah. And there is no direct linkage between high maintenance and beautiful condo. And if you feed the management too much money, they become complacent and anyhow spend.

Sinking fund contributions and expenditures are 2 different issues all together. It doesnt mean that when you have healthy level in your sinking fund you will allow the management to spend it freely without control and justification.

[teddybear]

Heard too many stores about this. In many condo estates, there are always 2 major problems:

1) Nobody want to be in MCST, put in hard work with ZERO pay, and yet get blamed when things went wrong or against any owners' liking (eg suggestion to increase maintenance funds). Usually MCST members will be slandered with siphoning off money etc blah blah blah which is why not enough money to maintain the estate and estate not maintained properly blah blah blah.

2) Forever never get enough maintenance fund to maintain the estate because majority of owners won't agree to increase maintenance fund! And it is very difficult to increase maintenance fund in majority owner-occupied estate as you need >75% of owners to say "YES" (not just >50%!). Is it any wonder that majority owner-occupied estates usually are in very bad condition since why would they say "YES" when they can't get any return in terms of rental?

I agree with you that I would prefer to increase the monthly maintenance fees to improve the condo.
This was what happened last year at the AGM when some SP went around to collect signatures of other SP. I was one of those silly ones who signed the proxy form. Later the resident committee and the management held talks to explain why they had to increase the funds by $12 per month, so I realized that for a small increase in amount, at least there will be sufficient funds to maintain the estate. So I attended the AGM personally to cast my vote in favour of increasing the maintenance.
However due to the proxy signatures collected, the maintenance was not increased and we are in status quo.
That was it.
That was the push factor and my husband and I decided that we had enough and therefore we went to buy a landed.