Owners responsible for upkeep of buildings, says BCA

When the air ventilation system collapsed across several rows of seats at Shaw cinema in NEX, two were injured and sent to the hospital. One had to be carried on a stretcher (seemingly unconscious). The other was conscious but seen lying on the floor clutching her head. George Yang of Goodyfeed remarked if not for social-distancing measures, someone may have lost his life. Indeed, just look at how many seats are covered from the picture below. (See more pics here)

Definitely no small piece~ Even an iPad hitting one’s head from such a height would have caused much pain.

Water that had collected in an air-conditioning and mechanical ventilation duct likely caused the structure to crash during a movie screening earlier this year, Minister Desmond Lee said
(https://www.todayonline.com/singapore/aircon-duct-collapse-shaw-cinema-nex-mall-likely-due-accumulated-water-structure-desmond)

While the maintenance of air-conditioning mechanical ventilation (ACMV) ducts within buildings is not subject to regulatory requirements, the BCA spokesman told Straits Times that “building owners are responsible for the maintenance of their buildings, by ensuring that all parts of their buildings are maintained in a state of good and serviceable condition”. (https://www.straitstimes.com/singapore/owners-responsible-for-upkeep-of-buildings-says-bca)

The unfortunate event is a stark reminder to many building owners. This includes some condos who have been turning a blind eye to overdue maintenance and replacement. My other Council member tells me one mixed development mall in Bukit Timah has repeatedly failed their air quality inspections and fire safety. To rectify and replace the core installations would cost $3-$5 million. I wonder if discussions are revived at their Council meetings.

It doesn’t matter if your MCST council choose to turn a blind eye, while the minority who insisted on doing right gets outvoted. When shit hits the fence, collectively all owners are responsible. Safety should never be compromised.

If your sinking funds are wafer thin, there are only two safe options.

1. Get all owners to agree to top-up from their own pockets. (Easier said than done?)

2. Shutdown the facility.

Decide quickly on which of the two before bickering over “How did we get to this?”. Matter of fact, you should have asked Is our condo running out of funds?” years ago. Read on about the poorly managed “Tyre Pancit” condo.

Evaluation of Property Managing Agent (MA) performance

Recently came across a detailed technical research on Managing Agents, written and published by Yung Yau and Daniel Chi. Skip the models and calculations if they don’t speak to you.

A few note-worthy excerpts:

“relationship between the board of directors and CEO is vulnerable to the classical principal-agent problems because of the diverse incentives of the two parties. The same also occurs in the case of MOH (Multi-owned homes a.k.a Strata) management. It is very common that PMAs (Property managing agents) act for their own benefits at the homeowners’ expense. Opportunistic PMAs may embezzle fund from the common financial pool (such as sinking fund and maintenance reserve) to their own pockets or make procurement decisions on their own instead of the homeowners. These malpractices of the PMAs have been widely reported in different parts of the world [29303132].

https://www.landlords.co.nz/article/976511044/former-acc-property-manager-pleads-guilty-to-corruption-charges

https://www.thestandard.com.hk/breaking-news/section/3/104629/Ex-manager-charged-with-bribery-over-Garden-Vista-renovations

https://www.domain.com.au/news/csi-corrupt-strata-investigations-20111202-1o9nd/

“Performance measurement and benchmarking are essential elements of strategic management. While there has been a large body of literature on benchmarking in the field of business management, little attention has been paid to benchmarking of housing or property management performance… various key performance indicators were employed or suggested in the literature for measuring or evaluating a PMA’s performance. These performance indicators or measures can be broadly classified into four types, namely input-based measures, output-based measures, process-based measures, and hybrid measures.”

https://www.intechopen.com/books/strategic-management-a-dynamic-view/evaluation-of-property-management-agent-performance-a-novel-empirical-model

Condo resident asks MA for transparency on facebook

A resident took to facebook group MCST and posted the following.

To which a few others replied…

I assume every seven years the residents re-accumulate the equivalent of 60% of their existing Sinking fund. Sounds like one of the following.

1. The condo has very few things to maintain, except for painting. 2. Condo is running out of funds after the paint job. (see previous post)

If only more residents start attending AGMs/ EOGMs, asking the right questions (“not the second parking lot”). Then will the prudent decisions be made.

As to Fand’s question about how an AGM can be conducted without sufficient owners. A quick reference to BCA will show you the criterion. See screenshot below.

Is your condo running out of funds? (part 2)

“Yah lar,” cries my friend over kopi. He laments the existing playground and landscaping are not properly maintained. Some parts of the rubber-floor lining had dislodged due to wear and tear. Nothing done. The greenery used to be tended by two gardeners, now only one.

Related posts: “How much for your green?”

But as he showed me the financial reports, I pointed out the total Strata funds are plentiful and robust. That is, the total of Sinking funds (SF) and Managing funds (MF).

How did I know? Well, let me show you a real-life example of one condo running out of funds. An almost twenty year old condo development in Upper Bukit Timah, I call “PanCit”. A relative had bought a unit and appointed me to take charge of it.

PanCit awakening from ten years of grandiose

In 2018, PanCit finally voted to raise their SF from $15 per share value to $25, and to increase MF from $72 per share value to $78. Managing agent had highlighted the operating deficit over the past two years. This resulted in drawing down from the existing MF. The SF had approximately $2.1 million(M). Taken together, total funds was $2.56M.

To put in perspective, this condo with about 350 units comprises of three blocks. Since TOP, the maintenance fees were largely unchanged. Annual contributions amounted to $1.16M for MF, and $0.24M for SF. Over the past 17 years, total collections are as shown below.

 Managing Funds (MF)Sinking Funds (SF)
Annual $1,160,000$240,000
17 years $19,720,000$4,080,000
Current $460,000$2,100,000
PanCit’s funds as of end year 2018

Most of the building, equipment and facilities were estimated to have a lifespan of 10-20 years. MA calculated weighted average of 16 years and projected $750,000 annual provision. In total that’s $12,000,000 replacement costs. It is already the 17th year. Assume all monies accumulated in SF since have been used for replacement. There is still a shortfall of $8,000,000.

MF isn’t doing too well either. The operating deficit raised earlier meant whatever was collected was spent, and more. No wonder both MF and SF were raised, albeit insignificantly, amounting to less than $260,000 annually.

How do we raise $8,000,000? Oh dear, now it’s clear. We could not afford those gardens, pools, guards, cleaners and fresh coat of paint for the past ten years. Not possible, unless we triple the recent increments from $260,000 to $780,000, ten years ago. We thought we could have our cake and eat it.

Related posts: “Sinking funds tell a tale of two cities”

Source: Jock McTavish on Quora