Running and maintaining a residential unit may be different from running an office condominium building. Regardless if it’s office or residential, however, one can first look into the cost of operating a building, since association dues are primarily cost-based. The costs could be found at what is called the Chart of Accounts for condominium buildings.

This was disclosed by Berna R. Santiago, director and head of Colliers International’s property and facilities management division, retail operations.

Chart of Accounts

The Chart of Accounts, or CoA, dictates (or should dictate) the association dues of a condominium property, or any property for that matter.

The CoA is basically an accounting tool, cost monitoring tool, or an accounting ledger where all the items spent for in a condominium are listed (whether the money comes from the developer’s pocket or shared by tenants or owners).

The CoA is broken down into two general sections: technical (which covers the building equipment) and administrative.

Santiago said a CoA is generic, and depending on the product (office, residential or retail), it can be tweaked to fit the product requirement. The basic costs, however, should still be accounted for, such as repairs and maintenance, staff cost, and utilities—the key items in association dues.

Santiago stressed that what is accounted for in the CoA is dictated by the Master Deed and Declaration of Restrictions.

Enrique Soriano, who used to head one of the major property players that include condominium projects, said the rule of thumb in computing association dues is to look at the economics of managing the condominium. He enumerated several factors such as facilities maintenance, security, taxes, depreciation, fund buffer or savings, utilities and personnel.

“When you gross these variables, you pretty much have a complete picture of the assessment,” he said.

‘Locational’ qualities

The other factor playing on association dues is the current assessments of neighboring condos. If you do the legwork, the final dues are benchmarked on the surrounding areas and closest competitor.

The computation, Soriano said, is based on a per square meter basis. The demographics and location are important considerations, he explained, as he cited a satellite city in Makati that charges a relatively higher premium because its market profile is defined largely by expatriates and heads of multinational companies

“This market expects exceptional service and facilities management, therefore they will pay (higher dues),” he said.

Soriano said high-end developments would assess a homeowner P80 to P100 per square meter for the association dues alone. He added that real estate tax, power and water charges are then billed separately.

Another top developer situated in the Makati central business district charges a premium because of its brand equity. Asked what regulates this premium, Soriano said all rules are prescribed in the master deed of restrictions. Election and policy making are formulated by the appointed board of directors of the condominium corporation.

Unsold units

Property broker Enrico Cruz, a civil engineer-lecturer of the Urban Institute of Real Estate and Construction, said developers who still own units in their properties (given that the unsold units in the condominium project fall under their ownership) should be sharing in the maintenance cost of the project. The developers should also be paying condominium dues, as they also are considered unit owners.

Cruz said there are condo projects where majority of the units are still unsold, and therefore the condo corporation is still majority controlled by the developer instead of the unit owners with the management of the project still being run by the developer.

Cruz stressed that in this situation, the unit owners, therefore, should be able to distinguish, or should be informed, of costs incurred due to repair of unit wear and tear and costs incurred for preventive maintenance.

Unit owners, furthermore, should be able to distinguish these costs from repair due to defective construction. If costs are incurred due to repairs of defective construction, it should not be shouldered by the condominium corporation but by the developer because it is the fault of the developer from the beginning.

Ultimately, the value of the condo project and of each unit will depend on how religiously the project is maintained. If property management is mishandled, the value of the unit slides down. On the other hand, the value of condominium units would appreciate if every unit owner contributes his or her knowledge, legal and technical expertise.