Invest in a home not in a badly managed housing company

When you buy an apartment or a terrace house in Finland just reading the real estate management company’s report (Isännöitsijäntodistus) or listening to the real estate broker is just not enough to ensure that you are getting the right place to live in.

One of the biggest problems today is that many of the staff of real estate management companies (Isännöitsijät) are underpaid, too few in number, and not very well trained. It would be false to say that there is queue of skilled workers ready to take on the job! Staff turnover is high and individual real estate managers can have as many as 15 to 20 housing companies under their management. With such numbers, there can be no doubt that quality control of their work is weak, but the income charge by the real estate companies from the housing companies is fine! 

The Finnish Real Estate Management Federation claims to represent many of the real estate companies that operate in Finland. They point out in their website (only in Finnish) that the law relating to housing companies sets out that the real estate management company’s report must contain certain facts and that these facts must be collected and reported by the real estate management company that is chosen by the housing company’s board.

It all sounds very nice and safe to have real estate companies and their reports governed by law – and this is the crux of the problem… you just cannot rely on these reports for 2 good reasons:

  1. The real estate manager of any housing company may not be reliable in what they are reporting. There are many instances when they have not performed proper due diligence on the condition of the building. For instance they may be saying that a pipeline renovation (putkiremontti) is not needed for 10 years, or that the outside of the building or its roof is in poor shape. All of these cost anywhere between €500 and €1000 a square meter of the floor area of any apartment or house. Many real estate managers have many relationships with certain banks and builders. These relationships can easily be abused and the residents can be invoiced too much for bank loans, banking services and renovations. It requires that the board takes steps to ensure that such dirty activity does not take place, and that is not easy when time is limited. 
  1. There is also the possibility that the board and the real estate manager are in open conflict or negligent about managing these matters appropriately. Board members are seldom really good at real estate management and many prefer not to spend money until it is too late. The problem is that in a building with 20 or more apartments, it is difficult to find residents who are willing to spend the time on this activity. It is not very rewarding because bad-mouthed residents are always to be found in any housing company and listening to them is not pleasant when renovation work is necessary. The noisy residents tend to be much louder than the other well-mannered ones. Annual general meetings can be very unpleasant affairs when insults start to fly, and the position of the chairman and the real estate manager can be stressful.

Not every housing company has a bad board and not every real estate manager is bad either, but then proportion of bad apples is large and real!

The Finnish Real Estate Management Federation is a weak self-regulator, and housing companies have great difficulties in finding good board members. When you want to buy, try to talk with some of the residents about their views of the housing company and their appointed real estate manager and board. If people are not willing to talk or make negative comments then beware! 

There are many other matters to consider before buying, (like housing company debt, then state of repair, how many apartments are rented, etc…) but this has already been dealt with in other columns in FinnishNews…

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