Strata corporations, owners stressed - 5-10% compliance on fees - 40-year law lacks teeth, amendments on the way

Published: Friday | June 26, 2009


Avia Collinder, Business Writer


Left: Sandra Watson, general manager of the Real Estate Board, says amendments to the law will go a far way in solving some of the problems of strata complexes. Right: Robert Ramsey of the Jamaica Association of Strata Corporations says very few owners pay up the required fees.

It is becoming increasingly difficult for property owners in some strata developments to unload their units as mortgage lenders and banks become less inclined to grant loans for acquisitions that are afflicted by unpaid maintenance fees. Many are uninsured.

Jamaica National Building Society, the largest private mortgage lender with 44 per cent of the market, says, for example, that it requires applicants for unit purchases to provide documentary proof that property maintenance, water and insurance fees are paid up before the mortgage will be considered.

The problem is that of the 2,345 strata developments nationwide, industry experts say the maintenance fees on an estimated 90 per cent are largely unpaid and consequently the properties are uninsured for natural disasters.

Robert Ramsey, attorney at law associated with the Jamaica Association of Strata Corporations (JASC) said the fee delinquency could be higher.

"A conservative guestimate is about 95 per cent," he said.

"Five per cent of owners pay their maintenance."

Ramsey has evangelised in the past that the strata association should have education programmes for new strata members "about what is required by a proprietor as very few understand the necessity of not one but two insurance policies for the mortgage."

Pointing to what he sees as a culture of addiction to home expansion, Ramsey says Jamaicans cannot help but expand their properties - adding roofs, third floors and other new features which create problems for new mortgagors within stratas.

Investors complain

On the other side of the equation, however, which is reflected in letters and emails to The Gleaner newsroom, apartment/townhouse investors complain that their properties are left to deteriorate because strata managers do not follow through on their responsibility to pay utility bills and tend to the property.

In general, strata corporations are now characterised by irregular meetings, poorly-kept accounts, absent managers and in some cases none, fee delinquency and a lack of government oversight.

But there is also another side of the problem often reflected in letters and emails to The Gleaner newsroom from apartment/townhouse investors who complain that their properties are left to deteriorate because unscrupulous strata managers pocket the fees paid, instead of tending to the property.

Strata corporations are generally ham-strung if members do not turn up to vote.

But the lack of oversight - the most recent email complained of being shunted from one agency to another - allows the inefficiencies in the system to continue unchecked, though a shake-up is anticipated under proposed changes to the law that will establish a 'Commission of Strata Corporations' to police strata communities.

"We are fully aware of the challenges with strata properties in Jamaica, and these factors guide our decision making," said Simone Hull, communications officer with Scotia Group Jamaica, the second largest banking group by assets and owner of the third largest of four building societies.

"We don't 'blacklist' any strata, per se, but do reserve the right to refuse to offer a mortgage if specific requirements are not met."

Problems arising in relation to the management of stratas were what led some years ago to the appointment of a committee by government to review and make suggestions for amending the 1969 Registration (Strata Titles Act), which obliges owners, after purchasing their strata unit, to pay management/maintenance fees to a board of officials elected from among the owners themselves.

The fees are to be used to pay for property tax, insurance of the building(s), as well as the maintenance of the common spaces within the strata, such as gardens, stairways, roofs and corridors.

Sandra Watson, general manager of the Real Estate Board, said the amended law should have been tabled in early June but "minor adjustments were needed".

But it should be back before the House in the first week of July, Constance Trowers in the Office of the Prime Minister said.

Watson, whose agency is expected to have a more structured role in policing stratas when the new law passes, says two of the more widespread issues are unpaid maintenance and uninsured properties.

Chief problem

The Jamaica Mortgage Bank, a financier of real estate develop-ments, notes similarly on its website that non-payment of maintenance fees by homeowners is the chief problem affecting such properties.

"The non-payment of such fees often leads to non-payment of insurance premiums, arrears in utility bills, and neglect in the upkeep of the common facilities. All of this, of course, results in the deterioration in the value of the strata properties," the bank said.

In 2007, JASC called publicly for jail terms for delinquent apartment owners with maintenance payments outstanding.

Attempts to get an update on their position failed.

The strata law as it now stands allows for recovery of money paid through court action, but JASC considers it an inadequate remedy saying it often takes months for such matters to go to trial and then for a judgement to be handed down.

Some changes proposed in the new bill include: allowance for the lodgement of a caveat against the title for the strata lot if the fees are outstanding for more than 30 days; and the conference of 'a power of sale' on the strata corporation over the strata lot of the delinquent owner.

There is also the suggestion that strata corporations could charge interest on the arrears of such fees.

However, the absence or opposition of even one homeowner would deny the corporation that course of action. Most corporations have 'absentee' owners who reside overseas, do not attend meetings and have no designated agent.

Unanimous agreement

Under the present law, strata corporations cannot deal with expenses other than those of a routine nature without unanimous agreement from property owners.

But the new law, if passed, will establish a fund to be known as a revenue fund into which would be paid 2.5 per cent of annual contributions to finance major repairs to or renovation of the common property in the complex.

The legislative changes, said Watson, are very useful.

"In my mind it will go far towards addressing the problem," said the Real Estate Board boss.

avia.collinder@gleanerjm.com

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