Chanpen Tawoncharoenpon, director of asset services at CB Richard Ellis, said this week that his company had studied the challenges facing condominium management committees and condominium co-owners.

Most condominiums have two sources of funds - the common-area management fees paid by co-owners normally on a monthly or quarterly basis, and the trend of a capital replacement "sinking fund" prevalent in some buildings - he said.

The sinking fund comprises contributions made by co-owners when the ownership title was transferred by the developer. The fund is supposed to be deposited in an interest-bearing account and technically should be used for replacement of capital equipment in the building.

Common area management fees were, in many buildings, set when the building was completed and costs have gone up since.

CB Richard Ellis estimates that electricity costs for a condominium, one of the largest single expenses, have risen significantly.

It is not only the daily operating costs that have shot up but, as buildings age, the cost of repairs increases as it also becomes necessary to undertake improvements. For example, the renovation of the main lobby and common areas.

Some repairs are critical and cannot be delayed. Lift ropes, for example, have a life span of 10-15 years, after which they need to be replaced. Smoke detectors and lift safety devices also start to fail about 10 years after installation.

"Condominium management committees have two ways of raising funds; they can either raise the common area management fee or ask co-owners to make a capital contribution to finance the repairs and improvements," said Chanpen.

The Condominium Act requires that 75 per cent of all co-owners agree to an increase in common-area fees. This is difficult in many cases where less than 75 per cent of the co-owners attend the annual general meeting. There is a proposal to amend this to a simple majority vote of all co-owners but it remains unclear when this amendment will become law.

Despite the difficulty in getting a 75 per cent vote, co-owners need to take action because, in many cases, expenses will now exceed income, resulting in funds from the sinking fund being drawn to pay for day-to-day expenses.

Property, whether owner-occupied or held for investment purposes, needs to be actively managed to preserve value. Improvements and repairs have to be undertaken to maintain or enhance value. The challenge of multi-ownership condominium property is to persuade co-owners that the common area fees need to be increased to cover expenses and that additional funds may have to be raised, to improve the property.

"These are some of the challenges that currently face condominium owners and members of condominium management committees. The decisions taken will have a significant effect on the future value of the properties," said Chanpen.