Management of apartment buildings – which is the best way to choose

Recommendation points

• Direct management of house residents
• Establishment of a homeowners’ partnership or cooperative
• Management company under an agreement with the tenants of the house

Russian legislation allows for three main options for the management of apartment buildings. Consider the features, advantages and disadvantages of each of them, as well as situations in which each of these types of control will be most preferable..

The times when all the problems of an apartment building were dealt with by the housing office are gradually fading into the past. In 2005, the new Housing Code of the Russian Federation ruled that within a year from the date of adoption of this document, residents must decide who will manage the house:

• a private enterprise that will carry out its activities on a paid basis under an agreement with tenants;
• homeowners’ association (HOA), in which the house is managed directly by representatives of the tenants;
• the residents themselves in the form of direct management.

But in many houses, instead of an association of homeowners, there are ZhSK (housing construction cooperative), ZhNK (housing savings cooperative) or other types of residents’ associations.

Such cooperatives are not a separate form of management, the vast majority of them were created back in Soviet times, and, despite the age of formation, their activities in practice are no different from HOAs and do not contradict the Housing Code.

Consider the main advantages, disadvantages and features of these three forms of management.

Direct management of house residents

According to the Housing Code, only residents of houses in which the number of apartments does not exceed sixteen can choose this form of management. In this case, all questions on the management of the house are decided at the general meeting of homeowners. On it, tenants agree on the distribution of management responsibilities and select people who will represent the whole house when concluding contracts with third parties. At the same time, these representatives of tenants must work for free, otherwise they will have to change the way they manage the house. Each tenant enters into contracts with utilities for gas supply, electricity supply and water supply on his own behalf..

Benefits:

1. Direct management saves tenants from unnecessary expenses. After all, if the house was managed by a third-party organization or HOA, you would have to pay monthly for their services.
2. The conclusion of contracts with utilities on their own behalf allows each of the tenants to understand what and how much he should pay.

Disadvantages:

1. The more tenants in the house, the more difficult it is to come to an agreement on any issue. It is highly likely that the discussion of the choice of an organization that will be involved for major repairs, or an estimate for landscaping the local area, will take more than one month.
2. According to Russian legislation, with the direct management of the house, residents are not entitled to receive funds for capital repairs from a special fund for reforming housing and communal services.

Direct management would be ideal for homes with a small number of residents.

Establishment of a homeowners’ partnership or cooperative

In this case, the tenants create an association of owners and elect responsible persons (chairman and board members) who, on a paid basis, deal with the maintenance and operation of the house on behalf of all apartment owners. That is, concluding contracts with public utilities or contractors performing one-time work, it is the HOA or the housing cooperative, and not any individual tenant who are engaged.

Such associations are legal entities and have all the characteristic features (charter, mandatory registration with the tax office, the presence of a bank account, etc.).

Benefits:

1. Since the board members and the chairman of the HOA or HCC are residents of the house, they are not indifferent to his fate and the likelihood that they will neglect their duties is extremely small.
2. If residents come to the conclusion that the responsible persons are not doing their job, they can always be re-elected.
3. The spending of common funds by the chairman and members of the board can be monitored by the audit committee.

Disadvantages:

1. If the responsible persons turn out to be dishonest, they can waste a significant part of the funds for uniting tenants, and in this case, a long re-election procedure (agreeing on the date and time of the meeting, notifying all apartment owners in the house, etc.) is a significant disadvantage.

It makes sense to create an HOA in large houses with a significant number of tenants, provided that among the apartment owners there are people who want to be members of the HOA board and have the necessary experience.

Management company under an agreement with the tenants of the house

This option provides for the management of the common property of an apartment building by a specialized organization that operates on the basis of a payment agreement. In this case, contracts for the provision of utilities in such houses are concluded by the management organization, which acts on behalf of the homeowners. And one-time work on the repair of the building, landscaping the adjacent territory or its improvement can be performed both by the employees of the management company and by third-party specialists who will be hired by the management company.

Benefits:

1. Apartment owners are almost completely relieved of the worries associated with house management.
2. Specialists of management companies will certainly perform their duties more professionally than residents involved in the board of the HOA.
3. The management companies first eliminate the existing shortcomings at their own expense (repainting the walls, repairing the wiring, etc.), and only then demand from the residents the necessary amounts to cover the costs.

Disadvantages:

1. Employees of management companies are not residents of the house, therefore they have no personal interest in maintaining it in good condition.
2. Attraction of management companies is the most costly way for residents to manage an apartment building.

It is worth concluding contracts with management companies in cases where there were no people among the tenants of a large apartment building who would agree to manage the work of the HOA.

Thus, there is no ideal way to manage an apartment building. When choosing a form of management, it is necessary to take into account the number of residents, the presence of people among them who are willing to take responsibility for the maintenance of the building, as well as the degree of complexity of the tasks that the manager will have to face.