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2018.02.07

Debate: Should property management fees be reduced if the services are defective?

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Should property management fees be reduced in case of defective services or long-term house vacancy? Should a property management company be fired if its services are defective? Do the parking spaces of a community belong to the developer or the owners? Those are all common controversial issues related to property management. Is there a right answer or not? To solve these problems, Vanke Service specially created the column of “Debate” where the pros and cons are presented. Although some problems may not have the right or only answers, through debates which create a way to discover truth, an increasing consensus will be reached by property management companies and owners, promoting industrial development and community harmony as well.

Pros

Reducing property management fees is a way to obtain better services.

(Jiang Bo, senior writer who mainly focuses on laws, real estate, and public policies, with articles being published in several media outlets)

In recent years, some local property management laws and regulations have specified that “property management fees for vacant properties shall be reduced”, and in some local court verdicts, property management companies providing defective services are ordered to reduce property management fees.

I can’t accept that “property management fees for vacant properties shall be reduced”. First of all, property management services are provided to maintain facilities in common areas, the costs of which will not decrease because of the vacancy of properties. Second, keeping properties empty is after all the choice of the owners, which means it’s unreasonable to ask property management companies to assume any responsibility. Here is an analogy which may be inappropriate. If you buy a pot and then directly put it in your cabinet without using it, is it possible that you ask the seller to charge less?

For the second issue, I think that if property management companies provide defective services, reducing fees is reasonable. First, defective products are always sold at a discount. Then, why should defective services be provided at full price? It’s against the free market principles. Second, for a long time, due to the lack of industry standards, having a good property management company is as hard as winning a lottery. In many cases, the owners do not know how to protect their rights when property management companies fail to provide services according to their needs, or even relevant laws and regulations. Therefore, reducing property management fees many be a way that forces property management companies to improve service quality.

Cons

Reducing property management fees will harm the owners’ interest

(Lu Jinbao, Shenyang Vanke Service Legal Manager)

In previous cases, property management fee reduction generally occurred after an owner complained to the property management company or sued in court for receiving defective services. However, a property management service contract is actually a collective contract in its nature, with the owners as one party, and the property management company hired as the other party. Therefore, in case defective services are provided by the property management company, it means the interest of all owners is harmed. In such a case, reducing the property management fees of an individual owner actually infringes the right of other owners to obtain the penalty, especially those who have paid the property management fees in full.

Property management fees are essentially a sum of money jointly paid by property owners in a residential community to hire a property management company to maintain the equipment and facilities in the community. If property management fees are reduced, on the one hand, equipment and facilities will age faster due to the lack of maintenance caused by reduced funds, and thereby lower the market value of properties, harming the economic interest of each property owner.

On the other hand, if a property management company insists on providing high-quality services after property management fees are reduced, for the purpose of maintaining brand value, and strictly fulfilling its obligations specified in the property management contract, in the long run, the company will necessarily lose money and fail.

In anyway, reducing property management fees is unreasonable. What’s more, if more and more property owners, being encouraged by successful cases, bring their lawsuits to the court, the number of cases will increase, wasting judicial resources.

Related articles

Related local laws and regulations, and court cases??

1. Beijing Municipal High People's Court??

Reducing property management fees harms the interest of property owners paid property management fees in full.

On November 28, 2017, the Beijing Municipal High People’s Court announced the “Civil Judgment on Contractual Dispute over Property Management Services Appealed and Applied by Mr. Zhang ”, saying, “If all property owners in the community refuse to pay in full or in part the property management fees due to defective services, the quality of services provided by the property management company will surely drop due to reduced income, harming the interest of both the owners and the property management company. Therefore, Mr. Wang may, after paying the property management fees, ask the property management company to continue to assume its responsibilities. Reducing property management fees will infringe the right of other property owners who have paid the property management fees in full.”

According to the judgment, the Beijing Municipal High People’s Court rejected Mr. Wang’s petition for retrial of the case where Mr. Wang sued a property management company for providing defective services, and claimed for a reduction in property management fees.

2. Henan ??

The provision of “property management fees for vacant properties shall be reduced” was proposed but not included in the final version.

In 2017, the Property Management Regulations of Henan Province was amended for the first time since its release 16 years ago. According to Henan Business Daily, in the draft for public opinions, the provision of “property management fees for long-term vacant properties shall be reduced based on an agreement reached between property owners and property management companies” was proposed; however, in the final version which was put into effect on January 1 this year, this provision is not included.

3. Qingdao ??

Property management fees can be reduced, but not for commercial housing.

In accordance with the Administrative Measures of Qingdao Municipality on the Charge of Property Management Fees, before the establishment of the Owners’ Congress, in case a common property with elevators has been vacant for one year since its delivery, the owner or the property user may submit a written application to the property management company for reducing the property management fees. Upon the approval of the property management company, it may pay property management fees (including the elevator maintenance fee) not exceeding 80% of that stipulated in the property management service contract.

However, officials at the Qingdao Municipal Price Bureau stated that “common property” mentioned in the Measures refers to indemnificatory houses subject to the government’s pricing restriction, or built based on governmental supports. Therefore, the above provision doesn’t apply to commercial properties, the pricing of which is decided by market.


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