Powerful stratas feel powerless in soft real estate market
Avia Collinder, Business Writer
Local strata corporations now have the power under law to confiscate and sell property to cover outstanding member fees, but they are not celebrating because the process is onerous and quick sales are rare.
The soft demand in the real estate market is frustrating the intention of the legislation, strata owners say, which is to keep the strata corporations solvent.
Jamaica has 2,000 registered strata ranging up to 250 units in size.
The law as amended in 2009 allows strata corporations to recover unpaid maintenance fees from property owners by two means: applying to the Commission of Strata Corporations for 'power of sale' which is allowable when balances are outstanding for 30 days or more; and application to the courts for an order of possession.
"The power of the act is welcome but the process is not as successful as one would wish," said Keith Lonsdale, secretary and general manager of the Turtle Towers Proprietor Stata Plan 07 in Ocho Rios.
"Some unit owners care and some don't. There are those who try to become current and others are not coming forward. Strata corporations might wind up having a whole lot of apartments for sale without having buyers," Lonsdale said.
Turtle Towers has placed one unit on the market as a "test case", and is hoping, as Lonsdale indicates, for the best price.
The complex has 218 units, 25 per cent of which are behind in their payments, the strata manager said.
Where maintenance fees are unpaid, the strata corporation must give written notice to the owner or his agent and the mortgagee or lien holder of the outstanding amounts.
The notice must specifically stipulate that if the amounts owed are not paid within 30 days, the corporation may sell the strata property lot by auction or private treaty.
Maintenance fees will be paid out of sale proceeds, and funds left over after all liens are satisfied will be remitted to the original owner or lodged to an account in the CSC's name until it can be paid over.
Local corporation managers say they are seeing little change in compliance in fee payments following the enactment of the law.
Lonsdale says unit owners prioritise home bills and expenses before maintenance.
"On our part, we have to have a good rapport with delinquents who include owners. We do not treat them with disdain. We encourage them to make good on their standing," he said.
"The 25 per cent who are non-compliant hold up the financial well-being of the company. Over the years, we have maintained payment with our suppliers. But, there is more that could have been done, including landscaping."
Turtle Towers is one of many facing the same dilemma.
On April 26, Proprietors Strata Plan 452 in Rose Hall, St James, advertised five apartments for auction "under powers of sale".
The auction is set for May 16. Attempts to speak to members of this corporation about the standing of other unit owners were unsuccessful.
At Sandcastles PSP 401 in Ocho Rios, the strata corporation says it has filed suit in court against 16 apartment owners, seeking an order to rent their premises to recover maintenance fees owed.
Manager of PSP 401, Charmaine Clarke, said Sandcastles has applied to CSC for power of sale certificates for another five units.
"Sea Castles is not the only strata to apply for sale of apartments under the Strata Tiles Act. Turtle Towers and Columbus Heights have also placed units on the market and we have applied as well. But, these units are not selling by this method," said Clarke.
The process is complicated and there is no guarantee of a successful sale, she said.
"Selling under the act involves two public auctions, then a private treaty offering, and units must be sold at market value," said Clarke.
"You need to prove that you did everything in your power to sell at the highest value. There has been only one sale so far as I know."
The application for a 'power of sale' is a lengthy process, requiring the strata corporation to first obtain a certified copy of the title, then notify the mortgagor and the owner, hang a notice on door of the unit, email the owners, print the email for the record, and order a valuation to be done by two independent valuators - "while fees are still accumulating," Clarke said.
The second means of recovery under the law involves applying to the courts for an order of possession where maintenance fees are owed for a period in excess of 60 days and efforts to locate the property owner are unsuccessful.
The property may then be rented to recover outstanding amounts. If it is already rented, the returns from rental can be collected to cover the debt.
"If the strata's main objective is to get the maintenance fee paid, that alternative is to get order to rent the property and apply the income to the maintenance, and when paid up, turn over proceeds to owner," said Clarke.
30 per cent delinquent
The 16 units for which the Sandcastles strata has applied for rental rights do not include any of the 16 units managed by Sand Castles Resort Limited, for which maintenance fees were last paid in 2008, Clarke said.
About 50 per cent of the 174 units at the Sandcastles complex are current with their monthly fees; five per cent are paid in advance and about 30 per cent are delinquent, the strata manager said.
Maintenance fees vary from J$8,000 to J$31,000 monthly to cover utilities, maintenance of common areas, and insurance for the property and its grounds, Clarke said.
One member of Strata 401, who requested anonymity, said the strata's average monthly bills for water is J$500,000, sewage J$800,000, electricity to power office and grounds only, J$150,000, waste collection J$40,000, security J$250,000 and telephone and internet for J$15,000.
Additionally there are salaries including grounds people of about J$400,000 monthly, and maintenance of the pool and other facilities which is around J$300,000 monthly, the source said.
The strata corporation has another court date on June 12 in its case against Sand Castle Resort Limited to retake possession of the restaurant, bar, reception area and the laundry at the complex, said Clarke.
The money owed by the hotel management company, reportedly J$6 million, will be pursued as a separate lawsuit, she said.
"We are the last one standing with a hotel operation. All the other stratas in Ocho Rios evicted the hotel-type set up," Clarke said.
Several attempts to reach Lanzie Wedderburn, head of Sand Castles Resort Limited, for comment by both telephone and email were unsuccessful.
The Commission of Strata Corporations has also not responded to queries sent since April 26 for an update on the scope of the maintenance fees problem, and the number of powers of sale applications.