Jamaica
News - Real Estate - Services
Source: Jamaica Observer, Vaughn Davis, February 7, 2007
Home owners at risk
Owners of homes in the majority
of Jamaica's approximately 3,000 registered strata corporations
stand to lose millions of dollars if their property is damaged by
natural disasters because the stratas are not paying insurance.
The problem, according to the
Rev Fr Gerard McLaughlin, secretary of the Jamaica Association of
Strata Corporations (JASC), results from the stratas not being
able to collect maintenance fees from residents.
"Right now, there are probably
90 per cent of the Strata Corporations, big ones too, that have
not paid their insurance. and most of them are not paying their
insurance because the people refuse to pay [maintenance fees]. So
as a result, if there is a hurricane or earthquake or something
like that, thousands of stratas are going to fall down and have no
money," said McLaughlin.
The maintenance fee normally
includes the payment for the insurance, McLaughlin stated.
Attorney Robert Ramsay, who does
legal work for the JASC and specialises in strata corporation
matters, corroborated McLaughlin's claim. He said that the issue
of delinquent maintenance money payment affects nearly every
strata corporation in the island.
Under the Strata Titles Act
(1969), owners, after purchasing their strata unit, are obliged to
pay management/maintenance fees to a board of officials elected
from among the owners themselves. The fees are to be used to pay
for property tax, insurance of the building(s), as well as the
maintenance of the common spaces within the strata, such as
gardens, stairwells, roofs and corridors.
However, according to McLaughlin,
widespread delinquency in maintenance money payment has obtained
since the inception of the Strata Act. This, he said, was due to
weaknesses in strata boards and the need for amendments to the
Strata Act.
The strata boards, McLaughlin
advised, have the power to take delinquent owners to a Resident
Magistrate's Court. However, they consistently fail to do so in
order to avoid the potential embarrassment or friction it may
cause between owners and/or tenants.
"If you had a friend next door
to you in your apartment and he owed $10,000 in management fees,
and you were on the board of directors and the board of directors
decides to take him to court, would you be able to face that
neighbour?" McLaughlin asked. "It's a question of human
respect, you know."
He said the owners must pay
their mortgage, because the law gives the company the power to
foreclose on delinquent owners.
"But when they made the
[Strata] bill they did not include the management fee," said
McLaughlin. "You make a law that says if you don't pay your
mortgage you can lose your house, they can foreclose. But when you
don't pay your management fee, then the board has the right to
take you to the RM court, that's the only penalty there is to it.
And as a result, there's tremendous millions of dollars in
management fees owed all over the island because [the act] is not
strong enough."
McLaughlin related an incident
in which a strata board member was stabbed by a delinquent tenant
after the board member had the tenant taken to court.
"What board of directors is
going to do anything when that kind of danger is around?" he
asked.
In September 2005, the Jamaica
Information Service, the state news agency, reported that the
Registration of Strata Titles Act was being amended to address the
problem of non-payment of maintenance fees and to give the Real
Estate Board responsibility for the supervision of strata
corporations.
Under the proposed amendments, a
department was to have been created within the board to look into
complaints brought by strata owners and for the board to confer
and report to a proposed Commission of Strata Corporation.
However, the amendments are
still with the legislature.
McLaughlin stated that the
maintenance payment delinquency was creating difficulties in the
real estate industry as prospective purchasers were, in many
instances, turned off from buying strata units because of the
mismanagement and the disrepair of the buildings.
At least one mortgage company,
he said, was refusing to issue loans to persons seeking to buy
strata units because of the mismanagement of the buildings.
"In 1969, when the [Strata
Act] was passed, the parliamentarians knew it; they knew that if
Jamaicans knew that it was only voluntarily that you pay your
management fee that the people wouldn't pay it," McLaughlin
charged. "They knew that, and they should have put in
protections immediately."
Local real estate doyen Valerie
Levy also confirmed the insurance problem caused by maintenance
payment delinquency. However, she argued that in many cases the
premiums were exorbitant .
"In many of the units now the
insurance premiums are so high that it is prohibitive to persons
paying maintenance," said Levy.
She said that in order to bypass
the maintenance payment while still paying insurance premiums,
residents in some stratas were charged a cess, which, in turn is
paid over to insurance companies.
Levy also pointed out that in some
complexes the high cost of maintenance contributed to the
delinquency. "As the [house] values increase, in some
instances people have to be paying maintenance monies as high as
their mortgage," she said.
Owners in the Oaklands Strata
Corporation in St Andrew are paying in excess of $8,000 per month
in maintenance fees.
McLaughlin said that the JASC's
efforts to have legislators approve amendments to the Strata Act,
such as making maintenance payments mandatory, have encountered
several setbacks, chief among them, the reticence of the
Government to address the issue in Parliament.
According to McLaughlin, in 1974
the then minister of development, PJ Patterson, commissioned a
committee to outline a programme of amendments to the act. A full
report was issued but, according to McLaughlin, up to today the
matter has never been addressed, despite several meetings between
the JASC and government officials.
McLaughlin said he often wondered
whether the delay was a deliberate tactic by parliamentarians who
owned strata units and were themselves delinquent with their
maintenance fee payments.
Meanwhile, in 2005, the JASC was
forced to liquidate itself after being notified by the Registrar
of Companies that it owed $40,000 in fees and penalties. The
Registrar of Companies, however, allowed the fees to be waived
when the company opted for 'voluntary dissolution', McLaughlin
said.
He promised, however, that the JASC
would return in the future, with a stronger resolve to have the
Strata Act amended.
"An association is just a
group. It is very weak. We want to set up a company, with an
office and staff," he said.
Among the amendments they are
seeking to the Act are:
. the seizing or foreclosure of
a strata unit by the Government once the owners have maintenance
payments outstanding;
. the right of the strata board to
recover maintenance monies from the rent tenants are paying to
owners of strata units; and
. the prevention of persons from
establishing informal businesses in their homes.
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