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5 Reasons why you should not hire Property Management Services?

As i mentioned in my previous articles that Indians go abroad, copy the concept & try to implement in India…Property Management Services (PMS) is again one such foreign concept…In metro cities, these firms are mushrooming in every nook and corner of the city. As usual these companies forgot to understand the basics behind this concept..You must be wondering what’s wrong with Property Management Services; I am listing down 5 reasons why u shud not hire Property Management Services

1. Subletting not allowed as per Law in many Indian States: In simple terms subletting means “To let or lease all or part of a already leased or rented property” There is no single Rent Act in India, governing this subject as it is a state subject therefore all states have their own rent acts like The Karnataka Rent Act 1999, The Delhi Rent Act 1995 etc. In a nutshell there is no single law governing all states and each state has its own rules and regulations. According to me The Maharashtra Rent Act is most stringent among all.

Hiring Property Management service is equivalent to Subletting the premises becoz you are letting property to Property Management Company (PMC) and they are further subletting (In Legal terms “Not on ur behalf”)…You may go through following case related to subletting, which took 30 years to decide despite the fact that it was done without owners consent but in the case of Property Management Services u r indirectly consenting for same.

Some states have not addressed this issue in their rent act so Property Management Company project that it is allowed in that state but it’s not true..If Govt has not addressed this issue, it doesn’t mean that Govt allow this practice…

Legally, 2 parties which enter into an agreement are legally bound to each other e.g. if Person A is the owner of property legally let out property to Property Management Company (2nd Party) through agreement…Now 2nd party i.e. Property Management Company enter into an agreement with Person C for subletting…Legally Person A i.e. owner A and Person C i.e. who sublet the property from Property Management Company does have any direct legal connection therefore in case of any legal dispute between Property Management Company and Person C, the owner can’t do much legally…It is very dangerous situation & fighting legal case for 30 years needs lot of patience and courage. In nutshell these agencies/companies act as pseudo owners of property.

2. Property Management Company sublet to Bachelors or convert accommodation into PG: Normally Property Management Company earn money simple by renting to Bachelors or convert accommodation to PG..Suppose a 3 BHK can fetch a rent of 20k in decent locality by renting to family but if u rent out to 6 Bachelors charging 5k from each then u can earn 30k per month therefore if owner is getting 20k from Property Management Company and Property Management Company is earning 30k then its cool profit of 10k per month per property…Now u can imaging, in what shape u will get ur house back. In almost 90% of cases these services are hired by owners who are abroad so they don’t know what going on in their flat.

3. Property Management Company pays less than Market rate to Owner: Normally these contracts are based on Fixed price model and owner is paid 20-25% less than market rates.

4. Property Management Company’s try to create monopoly: Suppose there is a supply of 20 flats on rent per month in a specific pocket and all are hired by Property Management Company…In this scenario they create monopolistic situation and try to manipulate rents of the area….Owners will be at loss as they will get less rent

5. Agreement terms of Property Management Services are stringent: Normally agreement terms are bit stringent for owners and it is always advisable to get the agreement vetted from local legal expert to avoid any future legal hassles.

The concept of Property Management Services in India is different from original Property Management concept in foreign countries which is more transparent & beneficial for owners…Indian companies have actually molded the same as per their convenience..In foreign countries, Property Management Services are more like Indian brokers, who advertise available property, find clients, additionally manage monthly repair and maintenance of property etc etc..In lieu of these services they charge fixed monthly commission from rental varying from 10-20% e.g. if rent is 20k then Property Management Company will charge 2k per month and will take care of ur property but legal agreement will be executed between owner and actual tenant therefore they actually provide property management services in real terms..In india, Property Management Company’s have changed the concept & is non transparent and risky proposition for owners…

Just a word of caution, Kindly consult local legal expert before entering into any such agreement…Be doubly sure before u sign below the dotted lines as little convenience of today might cost u very heavily in future.

*Pls note all references of property are of residential property only…There are separate rules and regulations for commercial property. Kindly consult local legal expert for rules and regulations, governing ur state.

Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.

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