Maintaining a Condo you’ve bought in Bangkok
How do you go about maintaining a condo you’ve bought in Bangkok?
The common areas of most condos in Bangkok are maintained by a management company engaged by the collective owners of the condo. The management company is usually appointed through an entity known as the “juristic person”. This is the legal entity (or person) engaged by the collective owners to administer and comply with the legal requirements of multi-owned properties. Such person may also be the onsite manager of the building.
A management company may be appointed to undertake a variety of functions and provide various services at the block where you’ve bought a condo.
We’ll take a look at those in a moment but first: how do management companies get paid?
Under the terms of their contract, a management company will usually receive a fixed amount every month to provide management services to the condo.
But how do owners pay for the services of the management company?
The cost of engaging the management company and of maintaining and repairing the condo block will be calculated on an annual basis. These costs may be based on past actual annual expenses in the event the condo you buy is pre-owned. If you are buying new these costs will be fresh estimates.
The total annual costs will be divided by 12 to bring them to a monthly basis. They are then allocated to condo owners on the basis of the number of shares their unit represents out of the total number of shares allocated to the whole condo block. It may sound complicated but is not! However, to make it easier most sellers and buyers think of management fees as so much per m2 per month. This rate may be anywhere from Baht 40/m2 pm to Baht 60/m2 pm for condos in Bangkok. In any event, it’s wise to do a quick check on the rate of management fees for the condo you are buying to make sure it is within a reasonable range.
A condo with a low management fee is unlikely to be well maintained (usually older condos). For a condo with a high management fee, it will usually be apparent if the money is being well spent and will reflect the quality of the building and, importantly, of the staff manning the property. The management fee for a condo will usually be higher than for a house but this is partly as all repairs in a house are for owner’s account. There are also far fewer staff engaged to manage a typical housing estate.
Some condo blocks offer a discount (say 3-5%) on management fees if you pay them annually or six monthly, some do not. There is usually a penalty in the condos Article of Association for late payment but sometimes this is not enforced.
So, what is being provided by the management company or, in other words, what exactly are you paying for in your management fees?
Staff of the condo
Typically, the staff of the condo belong to the condo, that is they are employed directly by the condo. The exceptions to this will probably be:
- the manager who may be employed by the management company, and possibly the accountant, but not always, and
- the security guards who invariably will be employed by a specialised security company and the condo will contract with such company.
In any event, all of the salaries and insurances and social payments will be covered by the condo so to the typical buyer it doesn’t really matter who employs who! Obviously, if the management company changes, any key personnel they engage directly will move on.
On the other hand, some condos self-manage and have directly employed staff;
Key operating costs covered by management fees
- cleaning of common areas, such as the main lobby, corridors on each floor, recreational facilities, car parking areas and so on. Some condos allow their housekeeping staff to clean the inside of units by arrangement with the condo owners but this will be at an extra charge;
- removal of rubbish from a collection point on each floor to the main rubbish area; pest control within the building and surrounds;
- electricity and water charges for common area lighting, air conditioners and, of course, the swimming pool, which will also need salt or chorine and, perhaps, maintenance by a specialised pool company;
- routine repairs and maintenance of the common areas, such as fixing broken light bulbs, touching up paintwork and repairs to air conditioners etc; plus, of any garden or green areas;
- basic accounting covering the calculation and collection of managements fees, plus preparation of an annual budget and tracing the performance of actual vs budget. An annual audit of the books will be required and this audit fee will be in the costs somewhere;
- building insurance and third-party liability costs. Usually, owners need to take out content’s insurance for their possessions in their units.
It should be noted that maintenance of the interior of a condo unit is the owner’s responsibility. However, some condo blocks allow their technical staff to do minor repair and maintenance for owners inside units for a small fee or even for free. Sometimes the staff get and keep “tips” from owners. The condo management can usually also help with arranging more significant repairs but it’s always wise to have your own contact with a contractor in case the condo cannot arrange such works.
Capital items/major repairs and sinking fund
Major repairs such as a lobby or recreation room renovation or replacement of an air conditioning chiller for the lobby or even painting the outside of the building, as you might expect, are not included in the monthly management fees.
When buying a condo in a brand-new building you may well be asked to pay an amount into a “sinking fund” (sometimes called a “capital reserve fund”). This is a lump sum of money ostensibly to be used for major repairs sometime in the future life of the building. Arguably, the unspent portion of our contribution is yours to reclaim when you sell…. but don’t count on getting this back…
Let us further explain the “but”… historically, many condos collected the sinking fund when the building was first built. But instead of spending it on major repairs some condos often raise a “special levy” on all owners to cover major works. The Owner’s Committee sometimes prefers to keep the sinking find earning interest in a deposit earning account in the bank, instead of using it for major works. Quite why or how this has happened is not clear (and the money is still there) but the decision rests with the said Owner’s Committee. So, in short, if you have to contribute to a sinking fund when buying a new or old building, do your best to ascertain the policy for usage of this money. But also bear in mind that Committees change, as may the policy.