Avalon Court sits on a strip lined with expensive real estate, shared by commercial and residential investors alike.

But Avalon is distinguished, to the chagrin of the people who manage the strata corporation, by its obvious deterioration and lack of proper maintenance, on the same street that is home to the historic Devon House and many more pristine gated communities.

Its apartments, as a result, are worth about a half or a third the value of other residences - all for want of maintenance fees to finance its upkeep.

Accountant Oliver Goldsmith, president of Avalon Courts Strata No 342, at 5¹/² Waterloo Road, says fee compliance is at about 30 per cent in a complex where only about a fifth of the owners occupy the apartments, while others have rented theirs to tenants.

maintenance fees

The maintenance fees, payable monthly, are $450 for the one-bedroom apartments, of which there are 72, and $550 for the two-bedrooms, numbering 27.

Avalon is uninsured, with estimates of $20,000 needed for each apartment for annual insurance premiums. It is in need of several new coats of paint, which Goldsmith states would cost an estimated $4.3 million, and paving, which requires another $1.5 million.

"If we upgrade the property right now, the two-bedrooms would double in price," said Goldsmith.

"In other developments in the area, two-bedrooms are selling for $14 million. In Avalon, they are priced at $6 million because of the condition of the place. One-bedrooms here are selling for only $3 million."

Avalon is something of a poster child for ongoing strata corporations, not because its problems are unique, but rather because the problems are obvious in its paint-peeling façade and visible to all from the heavily trafficked Waterloo Road.

most owners do not pay fees

Maintenance fees in general for strata apartments in Jamaica can be as low as $450, or as high as $40,000, according to Sunday Business checks with real-estate brokers.

At the higher end - condominiums - the cost ranges between $30,000 and $40,000 monthly.

But realtors say "nine out of 10" apartment owners in the high-end market do not pay their fees.

One realtor, who requested anonymity, said that there was a case in a St Andrew condominium complex where one owner refused to pay on the basis that she never used the tennis court or pool. She ended up owing $2 million, was sued by the strata committee, and forced by the court to pay the money.

So insidious is the problem that the National Housing Trust, which manages 15 strata schemes islandwide, in addition to wanting increased powers to collect maintenance payments outside of the court system, is pushing for the appointment of a 'strata czar' to bring order to that segment of the real-estate sector.

The trust did not exactly call it that, but proposed in written responses to Sunday Business, the "creation of an office, such as the 'inspector/commissioner of strata', to police breeches of covenant, and where possible, assume control of strata developments when the residents do not demonstrate the ability to manage".

Legal reform under way, which includes such an element, is meant to bring order to the system through an upgrade of the 40-year-old Registration (Strata Titles Act) of 1969 (see Financial Gleaner, June 26, 2009). In the meantime, prospective investors in apartment and townhouse complexes are coming up against roadblocks.

"If an owner wants to sell and there is outstanding maintenance, the unit won't sell," said realtor Valerie Levy of Valerie Levy and Associates.

On the flip side, prospective buyers "won't be able to get a mortgage," Levy added.

"If someone were to buy for cash, the maintenance fee stays with the apartment. It is important for the buyer to make sure that the original owners paid up."

contingent on proof

Jamaica National Building Society (JNBS), the largest private mortgage lender, says loans for strata purchases are contingent on proof that all maintenance fees, inclusive of water, are paid up, that the insurance is current, that the property is covered for its full replacement value, and that there is contingency insurance. If those conditions are satisfied, then JNBS will lend up to 85 per cent of the purchase value for residences, and 60 per cent for a commercial complex, according to Wanica Purkiss, mortgage and operations executive.

There are cases where fee delinquency is the result of genuine inability to pay, or to pay regularly.

Levy says in some cases, the costs of maintenance are higher than the mortgage, and may present a challenge to owners, even in upscale neighbourhoods.

"I know two-bedroom owners in Manor Court who had to switch to a one-bedroom because they could not afford the maintenance charge," she said.

Embassy Apartment fees are also high.

Said Levy: "What you pay is directly related to the service you get, which may include 24-hour manned security, pool, tennis courts, and maintenance of elevators. The more features offered, the higher the maintenance."

Also, the older the building, the realtor said, the higher the fees, because of the greater need for repairs and replacement dysfunctional facilities.

Indeed, at Avalon Court, where fees average $500 per proprietor, Goldsmith said the true cost of maintenance is $3,500 for a one-bedroom apartment, and $5,700 for the two-bedrooms - approximately seven to 10 times what is charged.

The money, Goldsmith said, is needed for common areas which are lit, landscaping, painting, roof repairs, public-liability insurance and property tax.

A major problem, he said, is absentee ownership, with 70 per cent-80 per cent of the 99 apartments rented.

"Owners are no longer here and they don't support us," Goldsmith said.

The Avalon strata president says that he has organised a series of barbecues with the intent to not only raise funds, but also to create a more integrated community where residents - including owners - see the necessity for their support. Fees, he said, would be increased by $1,500 across the board in the coming year.

An estimated 90 per cent of strata developments are uninsured because of unpaid maintenance fees, real-estate interests note.

Caribbean Palms on Spanish Town Road in Kingston - one of NHT's 15 strata complexes - also charges $500 monthly per owner for maintenance of the 186 apartments. President Michelle Smith says compliance varies.

"We have never got full payment," she said.

"Payment is at 80 per cent on a good month, and 40 per cent on a bad month."

The fees are collected by the NHT as part of mortgage payments, so when mortgages are not paid, neither are the maintenance fees - which Smith insists are already priced too low and are insufficient for repairs.

"Things get broken every minute by children. Persons want to paint on walls. You have to be constantly buying paint and fixing bulbs."

Junior Dunn, president of Donmair Apartments Strata No 23 on Red Hills Road, St Andrew, says owners pay a fee of $1,100, but only a third are compliant, with some residents owing as much as $34,000.

maintenance issues

The result, he said, is that sewage problems and other maintenance issues are piling up, along with his frustration.

"I am thinking of asking the EU to assist with refurbishing. I am thinking of going solo. I am upset because sewage has overflown into gullies. It requires about $70,000 to fix," said Dunn.

"Only two of us as executives are active. Nobody is interested in working."

State-owned NHT, which is Jamaica's largest mortgage provider, is pointing to cultural issues to explain the ongoing difficulties.

"Strata developments are peculiar because culturally, Jamaicans are not generally accustomed to living in a situation where there are several apartments on top of each other, and have shared facilities," the agency said in a prepared response.

Goldsmith of Avalon Court says whatever reforms are coming need to address more than the inadequacy of maintenance fees.

"Barbecues cannot fix this. I have a hell of task," he said.

"We need to have something that we can enforce."

avia.collinder@gleanerjm.com