The choice of the most suitable form of house administration should be made by residents rather than municipality

The house community may freely decide as to how to take care of their multi-apartment building, regardless of recommendations of politicians, municipal representatives or the manager of a building administrator. However, if residents decide to take care of their house themselves, they risk facing far bigger challenges, for example, suffering from unprofessional acts of the chairperson of the association of flat owners. Meanwhile a building administrator does not care about the form chosen by residents; the administrator must provide high quality services in any case.

Legal acts regulate three forms of management and maintenance of multi-apartment buildings: activity performed under a joint venture contract, hiring of a building administrator, and the association of flat owners. All forms have their pros and cons, and it’s up to the residents to decide on the most suitable form. Meanwhile, an administrator must guarantee the quality of multi-apartment building administration services provided to residents.

“There have been talks that building administrators are against the establishment of associations of flat owners. We would like to deny this, because we have more than one example of successful work with associations: we have signed cooperation agreements with 16 associations in Vilnius and over 50 across Lithuania, and we have been smoothly operating for a number of years. However, although officials very actively promote the establishment of associations, they often forget to warn residents about the potential negative side of this activity: manipulation of residents or financial problems arising due to incompetence of the chairperson of the association,” - states Nerijus Šarauskas, Head of the Civinity Group of Companies, Lithuania.

Residents must assess risks

One of the sorest problems faced by multi-apartment buildings managed by associations is the lack of competence and knowledge of administrative activities. The functioning of an association equals the management of an organisation: the manager should have relevant competences of finance management and document administration and be able to manage. The media has covered a number of cases where the chairperson of the association of flat owners confused personal finance with the finance of the association due to the lack of experience or for other purposes.

According to Mr. Šarauskas, chairpersons of associations of flat owners frequently contact the companies owned by Civinity Group in order to consult on administration related issues. “We are always willing to help residents by answering their questions regardless of our cooperation form. There are cases when the chairperson of the association calls for advice on how to behave in one or another situation and we search for the best solution. The administrator aims at providing high quality services and having a satisfied client,” - claims the specialist.

An exhaustive price analysis is essential

Although residents mainly establish associations in order to be able to decide freely, not all potential costs of the activities of the association are assessed and in many cases the amount for the administration of a building paid by residents of the association significantly grows. Let’s take, for example, a multi-apartment building of 3,000 sq. m with 60 flats, and the administration fee paid by residents to the building administrator amounts to around EUR 30–40 per month, and the fee includes building maintenance, record-keeping and other ‘invisible’, yet necessary services. A question thus arises whether it is actually possible to hire an accountant, a chairperson and other necessary people for the maintenance of this building for this amount.

“It is difficult for the residents of the association to receive the same services as they could receive from the administrator for a fee of several dozen euros. According to the laws of economies of scale, private economic entities in most cases receive the best market price offers, whereas the possibilities of residents to receive services at competitive prices are smaller. There will always be those who claim that some services might be provided at a lower price, yet it often turns out that this proposed specialist does not issue invoices, does not pay taxes or cannot provide warranty for the works performed,”- states Mr. Šarauskas.