Property Maintenance Procedure -Agreement

Repo-rateHere is a description of the normal approach to Property Maintenance which is followed by almost all builders. This is what you should insist in your maintenance agreement as well

  • Maintenance by builder is usually for a period of 1-2 years from the start of handover of the first block of apartments
  • At the time of possession/handover, builder collects
    • A onetime fixed amount towards Property Maintenance by builder (NOT a recurring maintenance fee) till Owners Association is formed and takes over the Property Maintenance responsibility. This one time collection can for example be 5/- per sqft per month x 12 or 24 months depending on the planned completion of the ‘full project’
    • A onetime fixed amount towards Sinking Fund / Corpus fund. Corpus fund is NOT to be used for regular maintenance. It is meant for capital expenditure of common areas and amenities or building structure only. Corpus fund is typically kept in an instrument like FD or Money Market Fund to allow it to grow
  • Builder deposits the collected maintenance fees in a separate bank account to ensure that the use of money is clearly auditable and it is ‘only used’ for maintenance of the property and nothing else
  • Builder uses the maintenance fund (and its accrued interest) to maintain the property till minimum occupation needed for forming the Owners Association is reached. The minimum occupation is typically 55% of the property units
  • Builder facilitates the formation of Owners Association within 3-6 months of the minimum. Beware: Many builders attempt to keep the control of property maintenance for longer period and monetarily benefit from the maintenance funds even while providing sub-par quality of services! If this happens to you, you can form an Association of Buyers to force the builder to form the Association of Owners
  • Builder provides (or should provide!) a detailed audit of the maintenance funds collected vs. spent and transfers the remaining maintenance fund to the Owners Association’s Bank Account
  • Builder transfers the Corpus Fund to the Owners Association
  • Owners Association takes control of the property maintenance
  • Based on the actual data points on maintenance expenses and inputs from owners and experts, Owners Association determines the recurring maintenance charges, with a view on not-for-profit objective
  • Yearly revision of recurring maintenance fees by Owners Association, could be upwards or downwards. Example scenarios for downward revision of maintenance fees in future include,
  1. Diesel price reduction
  2. Diesel usage decrease due to improved power situation in future
  3. Need for Tanker Water reduces due to commencement of the supply of municipal water
  4. Increased occupation and ownership contributing to widening of maintenance charges collection base
  • Owners Association can decide to sub-contract all or part of the maintenance as deemed necessary. Association could also engage professional Property maintenance organizations like PropCare, JLL etc, as necessary

Let us know your opinions and experiences with different builders 🙂

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