Developers as Property Managers?
22 Jul 2010 Leave a Comment
in Mexico Real Estate, Property Management in Mexico Tags: condominiums, home owners associations, homes, mexican real estate, property management, rentals, retirees; investors; invest, snow birds
There are different types of property management, so it is important to distinguish them and clarify which we will be discussing before commencing.
1) Condominium or residential development management – involves working through a Home Owners Association or Strata Council. The Property Manager facilitates management of common area maintenance.
2) Management for individual units, generally involving cleaning, paying bills on behalf of owners and sometimes renting out the property on behalf of owners
3) Commercial property managment: involves maintaining and leasing commercial space.
Today we will be discussing the first two types of management as they partain to recreational real estate in Mexico.
In Mexico, as in the United States and Canada; developers are in charge of the development’s maintenance until a certain amount of units are sold. Once the legal number of units has been sold management of the development’s common areas become the responsability of a home owners association (HOA) which is the equivalent of a Strata Council.
Sometimes the developer will take on the role of property manager even after the HOA has taken over, and other times a third party management company is hired. The first option has been common in many Mexican resort destinations because it is only recently that the recreational real estate construction boom has created a larger demand for property management companies. This of course, varies from destination to destination.
Whether or not it is a good idea for the developer to continue as the property manager is up to each HOA and their experiences with the developer at the time they acquired their individual units. Sometimes it works out wonderfully and other times not so much.
It is quite possible in our opinion that the developer may have the most to loose if it taking on the role of property manager does not work out. As anyone who is a property manager or has been on a HOA board or Strata Council will tell you, property management can be prickly business. More than anything it is because in an HOA there are different personalities that come together to make decisions that affect peoples homes and relationships with their neighbours. Often the Property Manager will bear the brunt of dissatisfied homeowners complaints- regardless of whether he or she is at fault or able to resolve the issue at hand. I guess it is probably healthier to shift pressure on a property manager than on neighbours that have to live near eachother longterm.
So if a developer takes on that role, the company is putting itself in the position of receiving real or misdirected dissatisfaction complaints. This could affect the companies likelyhood of benefiting from repeat business from clients as buyers. And if it truly does a poor job of managing, it will affect the company’s reputation on many levels.
In this case, it is likely best for the company to separate itself in someway from property management; or atleast create a subsidiary company that focuses on management in order to put some space between the quality of the unit sold and other issues partaining to every-day management.
In any case, it will be up to the owners to decide whether or not they are satisfied with the quality of the service. It is important for owners to choose a company that is aware of laws regarging property management, and inclined to assist HOAs in finding appropriate insurance and creating an emergency fund that will be available for a rainy day or for larger maintenance issues that arise as buildings get older. The better the building is managed, the more likely it is that owner’s investments will maintain and increase their value.
Other developers offer individual unit property management for clients who are do not live in their units full time. This is very common for recreational realestate owned by snow-birds, retirees and foreign investors. This situation is different because the success of the relationship largely depends on the quality of service of the company and the level of satisfaction of the client. It is less likely that other external factors or relationships will determine if the arrangement works out of not.
