What apartment building management should you choose? Pros and cons of Apartment Building Co-Owner Association (ABCOA) and Property Management Agency

A clean and well-cared-for yard, a new playground, garbage taken out, working elevators, normally working heating and hot water supply, painted benches near the entrance, a pavement without holes and corrugations, courtyard landscaping – all this creates comfort and cosiness. However unfortunately, decent living conditions and a well-cared-for adjacent territory will not create themselves.

Not so long ago, the entire outdoor area was the ​​responsibility of the public utilities office. It was the public utilities office that was engaged in cleaning, repairing and other pressing issues. But over time, it became obvious that this form of management became obsolete and ineffective. Residents could wait for months, and sometimes for years, for repairs to be made at their entrance halls or, at least, to make a modern playground. That is why the law “On peculiarities of exercising ownership right at apartment houses” was adopted in Ukraine in 2015. Due to this law, apartment building residents can change their form of management. In this regard, the issue of choosing a Property Management Agency in new buildings and old houses has become relevant.

To make the right choice and not regret it over time, apartment building residents must clearly understand the specifics of the different forms of building management.

What are the kinds of building management? Types of Property Management Agency

There are the following types of Property Management Agency:

1. Co-owners self-management. This form of management is used mostly in small apartment buildings, when all residents are well acquainted with each other.
2. Property Management Agency, which can be both individuals and legal entities.
3. Apartment Building Co-Owner Association (ABCOA).

Since the form of co-owners’ self-management is not quite suitable for apartment building management, we are not going to consider it in this article. Although let's take a closer look at property management agencies and Apartment Building Co-Owner Associations (ABCOA). After all, most apartment building residents choose exactly between  Apartment Building Co-Owner Association and Property Management Agency.

What is Apartment Building Co-Owner Association and what are the features of this form of management?

Apartment Building Co-Owner Association is a legal entity created by the initiative group of apartment building owners. Such legal entity represents the interests of all residents. In simplest terms, this is a form of management in which the residents are united in order to manage the house and the adjacent territory. They make monthly installments, which are set at the residents general meeting.

Any decisions about the building are made by a majority vote of the owners. For example, if it is necessary to allocate some amount of money for renovation, most of the residents have to agree to this.

In theory, everything looks so good, because in fact the residents make their own decisions and do not spend extra money. However, in the real world, everything looks a little more complicated. The core problem is that everybody has his/her own concept of comfort, and income is also different for every household. Due to the difference of opinions and the lack of free time for many residents, especially when it comes to new buildings, where a lot of young people live, it is extremely difficult to make decisions. Besides, residents of new buildings rarely know their neighbours well, which is why difficulties may arise right at the first stages of creating an Apartment Building Co-Owner Association, because an unqualified, dishonest or simply irresponsible person can receive an authority to manage a house.

Considering all the difficulties, the Apartment Building Co-Owner Association is mostly created in the buildings of the old housing stock. This is due to the fact that many initiative pensioners live in such buildings, who can deal with issues of improvement and join in associations. As a rule, neighbours are acquainted with each other in such buildings, so it is a little easier to elect authorized representatives and make decisions together.

Property Management Agencies features

Property Management Agency is a structure that assumes the responsibility for providing home improvement and landscaping. A Property Management Agency can be a legal entity or an individual (private entrepreneur). As a rule, there are dozens of buildings on the balance sheet of one Property Management Agency.

Despite similar responsibilities, Property Management Agency differs markedly from public utilities offices. The main difference is that they have a clear list of responsibilities and their costs. In other words, the residents always know what they pay for. At the same time, the obligations of the Property Management Agency in Ukraine are mandatory, and if the Criminal Code does not fulfill or performs them poorly, the residents always have the opportunity to choose another Property Management Agency. That is, any management agency is interested in providing quality services.

Choosing of a Property Management Agency in a new building mainly falls on the developer. Many developers have created such agencies, and are engaged in house maintenance by themselves. However, it happens so that a new house was put into operation, and the developer did not transfer the housing to the fixed assets of the management agency. In this case, the residents of the building can create an Apartment Building Co-Owner Association or choose a Property Management Agency on their own. For this, a general meeting of residents is held, at which 51% of residents should vote for the agency. If the voting is successful, then the representative of the building enters into the building maintenance service contract with the management agency.

Responsibilities of Property Management Agencies in Ukraine

A matter of interest to many apartment building residents are the responsibilities of Property Management Agencies in Ukraine. Legislation stipulates the following list of responsibilities that a Property Management Agency should undertake

• Cleaning of entrances and surrounding grounds of the building;
• Deratization (comprehensive measures for rat extermination);
• Plumbing systems maintenance;
• Disinsectization;
• Chimney flues maintenance;
• Cleaning of fallen leaves and snow, mowing grass;
• Power grids maintenance;
• Current repair of structural elements;
• Emergency services;
• Elevators maintenance;
• Lighting of common facilities (staircases, entrance hall, porch, playground, and so on);
• Minor repair of entrances, roofs, building façades;
• Round-the-clock call-centre, which receives complaints from residents.

Pros and cons of Apartment Building Co-Owner Associations

With a mind to better understanding what an Apartment Building Co-Owner Association is, it is necessary to consider all the advantages and disadvantages of this form of management. Consider the pros and cons of the Apartment Building Co-Owner Associations.

Advantages of the Apartment Building Co-Owner Associations:

1. Apartment Building Co-Owner Association can independently choose contractors and performers. For example, to hire construction companies for minor repairs or cleaners who will clean the entrances and the surrounding areas. If the contractors do not cope with their duties well, they can always be replaced.
2. The Apartment Building Co-Owner Association has the right to receive the adjacent territory in the ownership of all residents or to rent it. Various projects can be implemented on the territory, including commercial projects aiming to make a profit and improve living conditions.
3. Apartment Building Co-Owner Association can participate in various government and city programs. Participation in such programs can significantly improve living conditions with minimal contribution on the residents’ part.
4. Residents determine the amount of in-payments themselves. Calculations are carried out as follows: an estimate is made and a fixed amount is determined per 1 square meter of the area. This amount is multiplied by the living area of each apartment, and thus the amount of contributions from all apartments in the house is determined.
5. Beneficial categories of citizens living in the buildings with the Apartment Building Co-Owner Association receive their benefits in full.

Disadvantages of the Apartment Building Co-Owner Associations:

1. Difficulties with verifying the signatures placed under this or that decision. The building has a huge number of apartments, which gives corrupt chairmen of the Apartment Building Co-Owner Association Board to commit illegal and fraudulent actions. At the same time, there is often just no one to control their work.
2. There is a huge number of precedents for stealing residents' money. Because of this, a huge number of Apartment Building Co-Owner Associations have declared themselves bankrupt in Ukraine in recent years.
3. Almost all problems arising from the Apartment Building Co-Owner Association’s activities (for example, misuse of money, forgery of signatures, and so on) are resolved only in court. Because of this, solving such problems can be greatly delayed and complicated.
4. When making collective decisions, conflicts will always arise. The interests of the residents may not coincide; people have different incomes and an understanding of what contributions to make and what the money should be spent on. Because of this, separate groups of residents may even be created that oppose each other. All of this impedes effective home management.
5. It may even happen so that the money is spent on those things that some residents do not need. A simple example: the majority of residents vote to equip a parking lot near the house, and a certain amount of money needs to be allocated for this. And everyone will have to pay for parking, even people who do not have a car and who oppose parking in the yard.
6. It is necessary to independently resolve issues with the residents who do not pay for services. If some apartments do not pay for, for example, heating or water, then the question should be resolved with them in a personal conversation or in court. Otherwise, everything can get to the point that, due to several defaulters, the entire house will no longer be provided with utilities.
7. Lack of qualified specialists. Effective home management is a daunting task, and not everyone can handle it. You have to be able to make tough decisions, prioritize correctly, and understand the fundamentals of economics. Unfortunately, it is often the case that the buildings are run by people who do not understand anything at all. While all the residents suffer.

Pros and cons of Property Management Agencies

The features of concluding an agreement with the Property Management Agency in a new building is of interest to many residents of new houses. Although fewer than all understand what advantages and disadvantages the conclusion of an agreement with the management agency gives. Let's try to figure it out.

Advantages of the Management Agency:

1. Low maintenance cost. Most management agencies serve many homes, so they can get discounts from service providers. Accordingly, the residents of the houses will have to pay less.
2. On average, one apartment in five has utility bills in arrears. The Property Management Agency has its own lawyers who deal with defaulter issues in court. Therefore, these situations are not other residents’ concern, and they may not worry that, due to several defaulters, the entire building  communications will be cut-off.
3. Round-the-clock buildings servicing. Apartment Building Co-Owner Association representatives may take a weekend break or be slow to respond to requests. While the Property Management Agency has a call centre that receives citizens appeals around the clock and responds promptly.
4. Given the high competition, management agencies are interested in providing quality services, otherwise residents can always conclude an agreement with another Property Management Agency in a new building. The contract with the management agency is concluded for only 1 year, and after this period it is always possible not to renew the contract.
5. The management agency mainly employs qualified personnel who understand the issues of effective building management. They know how to properly distribute finances, what the money are to be spent on in the first place, how to reduce the cost of certain utility services.

Disadvantages of the Management Agencies:

1. Residents cannot influence the rates setting.
2. Management agency is an intermediary, and it is often much more profitable to conclude contracts with contractors and performers directly. Although it’s not all that simple in this matter, because the chairmen of the Apartment Building Co-Owner Association can specially buy services at inflated prices, and put the difference in their pockets.
3. The Property Management Agency makes all the important decisions itself, so the opinion of the residents is often not even taken into account. Although it all depends on which management agency to choose.
4. The management agency may not take into account the building features. Often, standard contracts are concluded, and the Property Management Agency acts with all the buildings on the balance sheet in approximately the same way. To take into account the peculiarities of the house and the interests of the residents, it is better to take care of adding extra clauses to the contract.
5. It is rather difficult to bring agreement with the management agency to an early termination. In most cases, it is possible to change a Property Management Agency only after the expiration of the agreement, which is usually concluded for a year.

How to choose a Property Management Agency for a new building?

We examined the types of Property Management Agency, their features, advantages and disadvantages. But how to choose a management agency for a new home? Basically, the developer independently chooses the first Property Management Agency. If the residents of the house are dissatisfied with the rates and/or the quality of the provision of services, then in a year they can independently choose another management agency. 51% of apartment owners must vote for concluding an agreement with another management company.

When choosing a management company, you should:

• Check if the Property Management Agency has license to provide services;
• Check if the management agency has initiated the bankruptcy process;
• See how many houses have declined the Property Management Agency services and how many houses are still on its balance sheet;
• Communicate with the Property Management Agency;
• Read the management agency reviews on the Internet.

One of the easiest ways to find the management agency is to take a walk around the city and find buildings that really look well maintained. After that, you can talk to their residents, find out if they are satisfied with the rates and quality of services. If you managed to find a house, the residents of which are completely satisfied with the work of the Property Management Agency, then all that remains is to find out its name.