The (annual) general meeting of a housing company is important. It is simply not worth ignoring. I have already previously written on its importance. And its importance has continued to grow.
So have the standards for the boards and management of housing companies in general. Hesari published an article on 21.3.2024 on the subject article (for subscribers), which discussed, for example, the requirements of management in changed circumstances. Perhaps the biggest increase in the need for change and in the speed and sensitivity of response has been the shocks caused by the sharp rise in costs in various areas. Shock is a strong term, but not overused in this context. On the same date, YLE also raises the issue in an article.
At the moment, housing companies are facing upward pressure of 5-10% on their management fees. The upward pressure is driven by heating, but equally by water and property taxes. Annoyingly often you hear owner-occupiers in a housing companies saying that it’s not them, but the company that has the problem. Forgetting that he is one of the owners of that company. It should go without saying that every owner of a housing company should be entitled to a share of the costs in proportion to his or her shares.
In practice, housing companies have one Annual General Meeting per year. Among other things, this meeting is legally required to discuss fee levels. So the levels are reviewed annually. The cycle is too slow to help. If the company does not want to change the meeting arrangements to make them more flexible, it would be a good idea to give the elected board the power to react to changing situations also between general meetings. Failure to react can easily result in a situation where the company’s liquidity collapses as buffers are eaten up by normal maintenance bills. Every housing association should hold on to the recommended buffer of three months’ contribution.
Typically, AGMs grant boards of directors the power to charge or not charge additional fees of one or two months. It does take courage for boards to use the mandate they have been given, even if it is in everyone’s interest. Obviously, it is no fun to impose “extra” charges on your neighbours, but it is even less fun to present an ugly financial statement at the next general meeting.
Anticipation and preparedness are the hard tick boxes. This is evident from the recent rapid rise in inflation, which took pretty much everyone by surprise. It is also clear that a responsible board must seek to avoid unexpected situations and thus provide shareholders with the greatest possible predictability. Uncertainty in the economy is not attractive to anyone. That is why everyone should be able to predict their own costs as accurately as possible, especially those related to housing. Because they are unavoidable and typically top the list of household expenses. That’s why – even for myself – I would rather pay a little more on a steady basis than suddenly have to pay two extra fees.
Times are tough and understanding and humanity are needed in many areas. However, pity is a disease, and should not be left untreated. If the company starts to experience growing fee debt, it must be addressed as early as possible. It is usually easier to find a solution before the situation escalates. And if it has already escalated, more radical action must be taken to take control of the apartments that have accumulated fee debt. This is another issue where both managers and boards need to take the bull by the horns. Otherwise, the problems of one will fall on all of us, and it won’t be any easier to manage the situation.
Why do I, as OUN, want to raise these issues? That’s why we continue to stress to every home buyer the importance of finding out as much as possible about the housing company under consideration. This applies to finances, governance in general and the physical condition of the company. In particular, banks have also started to pay more attention to the repair history and potential repair debt. If the company has managed to accumulate renovation debt and there are several major renovations on the horizon, the bank will have little interest in lending not only to a poorly managed housing company, but also to someone planning to buy a home from one. The old adage “better safe than sorry” applies here too, so if you don’t think you can sort it all out yourself, visit our shop and buy yourself some knowledge and peace of mind!