In 2020, the State Audit Office in the audit of legality and effectiveness “Are the prerequisites for compliance with safety requirements in the management and control of municipal buildings accepted for operation?” concluded that since denationalization, an effective approach to housing security in the country does not actually exist. So, care for apartment buildings has been neglected since the beginning of the 90s.
Currently, the new law on the management of multi-apartment residential buildings is under development, the purpose of which will be to create legal prerequisites for the efficient management of multi-apartment residential buildings. It must be remembered that the creation of prerequisites does not guarantee that something will improve.
One of the tasks of the upcoming law will be to ensure the timely repair and maintenance of the buildings to the residents of multi-storey residential buildings in order to protect them from collapse. But what will be the price of this task?
At the beginning of 2020, the State Audit Office considered that the funds needed to refurbish buildings exceed the owners’ ability to pay, and that one of the solutions would be the creation of a financial support mechanism for those building owners who want to invest in improving the security of their homes. At the same time, everyone involved must work actively, promoting the understanding of apartment owners that the apartment is a part of the whole house and that everyone should take care not only of their own space, but also of the common property or the entire building.
How many earners and how many payers in one house?
If you think about subjects involved in the everyday life of apartment buildings, you should definitely not limit yourself to the owner of the apartment. The only thing that the apartment owner and all co-owners of the house do is pay.
At the same time, we cannot forget about a number of other subjects who earn, for example, the manager, the municipality, the state, banks, insurers, real estate appraisers, service providers.
An interesting situation is emerging – the State Audit Office claims that an effective approach to housing security does not actually exist in the country, apartment owners pay for all services, while a number of legal subjects receive money, which, among other things, also have their own rights and obligations.
Let’s start with real estate appraisers – the property price determined by them is further used by banks, insurers, and the state. Appraisal disclaimers about the property’s technical condition may not be observed by anyone. However, if it turns out that research results reflecting the technical condition of the engineering systems are added to the evaluation, the overall quality of the evaluations would definitely improve and all involved parties would be given a true picture not only of the specific apartment, but also of the overall technical condition of the apartment building. It may be worth making this a mandatory requirement for apartment property valuations if the building in which the apartment is located is, for example, older than 15 years.
Appraisals prepared by real estate appraisers of the bank are accepted willingly, because the price of the property is determined, on the basis of which clear financing relationships are formed and interest is earned. The fact that there are reservations about the main used assumptions and limiting factors in real estate valuation does not really confuse anyone. Especially because real information about the technical condition of the property rarely appears in the evaluations. It remains to choose one property group – apartment buildings built during the Soviet era – and it will be clear that there is a large enough housing stock, where, adding to the evaluation the results of the technical survey, it could turn out that the real value of the property is much lower than the value actually determined. And the State Audit Office has publicly expressed its opinion on this in the aforementioned audit report.
Rules of the MK No. 907 – formal and uncontrolled?
Rules of the MK No. 907 determines the procedures and conditions for the inspection, technical maintenance and regular repairs of multi-apartment residential buildings, the equipment and communications therein. In fact, the mentioned rules are quite understandable and even easy to follow, unless there are significant disagreements between the owner and the manager in their implementation.
At the end of 2018, a norm was incorporated into the aforementioned regulations, which stipulates that the maintenance, visual inspection, technical inspection and damage prevention of the residential house, the equipment and engineering networks in it are provided by the manager of the residential house. In a very critical assessment of the mentioned regulations, the question arises – what is the most effective thing that managers have done in the field of technical survey in the last five years? For instance, Manager of Riga buildings.
More than 900 service providers are registered in the register of residential houses, which is too large a number of service providers for Latvia. At the same time, it could mean that the owners do not trust the managers or for some other reason often choose to manage their properties themselves. However, it could just as easily mean that the managers perceive the mentioned MK rules only formally and the state should solve this problem.
Be that as it may, judging from a very superficial point of view, it is clear that the responsibility for the problem identified by the State Audit Office should be borne not only by the owners, but by a much wider range of subjects. In addition, it is clear that the implementation of the mentioned Cabinet regulations is weak or not carried out at all.
What to do and how much does it cost?
It will take some time until the issue will be resolved with the entry into force of the new law and until it will actually start working. There is very little time to deal with the legacy of the Soviet era. Therefore, the question is – what to do and how much it might cost?
There are several technically easy solutions that do not depend on the planned new regulation. A lawyer in the survey of industry experts conducted within the framework of the “Building for the Future” project, answering the question – what are the costs of conducting a full technical study of Soviet-era multi-apartment typical series houses? – the costs vary from 3 to 30 thousand euros for one object and the price directly depends on the amount of work to be done – on the technical condition of the building. It should be taken into account that it is a survey of engineering systems, which is a technical and in-depth study, providing for a complex assessment, such as study of outcrops, tests, laboratories must be involved, monitoring must be carried out, which cannot be said without inspecting a specific object.
Perhaps, the State Audit Office very correctly identified the problem in its audit report, emphasizing that the funds needed to refurbish the buildings exceed the owners’ ability to pay, so one of the solutions would be the creation of a financial support mechanism.
It would be useful for the state to agree with the apartment owners that the technical examination of the buildings must be carried out within the next year or two. In addition, it must be agreed that in the event that this does not happen within the specified time frame, the state will carry out this research itself, but it will cost, for example, 25% more in interest. If every building that has not been evaluated for a long time is studied, it will be possible to obtain real, reliable data. And with one, it will be possible to assess the real problems and their volumes, as well as the quality of the work of the numerically numerous managers.
For this to happen, all studies must be available in the Building Information System’s Register of Residential Property Managers. In addition, the information must be available to absolutely any interested party who has or may have a connection with the particular object.
In conclusion, the state should create a temporary regulation regarding real estate valuations, stipulating that technical research opinions of apartments and buildings must be added to the valuations. It is clear that in that case, the harsh reality would appear in the evaluations, at least with regard to engineering systems, and the real price of the Soviet heritage would turn out to be overestimated, since the value of the properties would most likely fall significantly. However, this would be fair to everyone and would destroy the apparent illusion that the apartment owner has to pay for everything. At the same time, it would be interesting to see how the real estate market would change and whether the opinion would not arise that despite the crisis in the 2000s, we still lived in a kind of bubble where the payer or owner is the only real sufferer.
Returning to the original question about the 30-year gap in the development of housing security, the answer can be gradually unraveled that the sole payer for all mistakes cannot be the apartment owner. However, the main thing to be able to do is to separate the real tasks from the dispute resolution, who should be blamed for what. Some suggestions like in-depth technical survey of buildings, posting their results in BIS are proposed in this paper. Disputes about the distribution of responsibility should probably be left to the courts or simply postponed until it is clear to all of us that the apartment buildings built during the Soviet era, in which enough Latvian residents live, are safe to live in and are managed by the best and most professional managers.
The authors are Jānis Uzulēns, A lawyer manager, Zanda Zariņa, A lawyer Development manager
