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Reform of Condominiums in Kazakhstan: Is it Going to be Better?

According to the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan, Kazakhstan has over 78 thousand apartment buildings. Out of them, 26% are in critical condition.

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Endless complaints

Currently, according to the law of the Republic of Kazakhstan “On housing matters”, article 2, paragraph 48, a condominium is responsible for the management of a multi-storey apartment house.

For your information: A condominium is a non-profit organisation, which doesn’t pay VAT and corporate tax. Most often, the management company is located in the basement level of one of the multi-storey buildings it manages, has a staff of fitters, plumbers and electricians.

Every month, tenants pay house maintenance fees as per tariff. Fees vary from town to town and depend on the tenants’ decision.  Based on the comparative information of the Ministry of Investment and Development of the Republic of Kazakhstan, last year the average house maintenance fees were 19-43 tenge per square metre across the towns of the republic (0.04-0.11 dollars).

There are examples when the tariffs were 8-10 tenge per square metre (0.020-0.025 dollars) by the decision of tenants.

Multi-story residential area of the city of Ust-Kamenogorsk. Photo CABAR.asia

Back in 1996, when condominiums were developing, the government thought that people in condominiums would manage and maintain their property. Owners would take responsibility for solving issues in their houses. These are the objectives formally specified in the law of the Republic of Kazakhstan “On housing matters” (chapter 6, article 31, paragraph 8).

However, condominiums have been constantly complained about for 23 years of their existence, which discredited the system as a whole. There were thousands of complaints from tenants, but the exact data are not available either in the relevant Committee for Construction and Housing and Utility Sector of the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan or in local akimats.

Large cities in the country have special housing departments, which are authorised to supervise apartment house management. However, these departments were established back in 2013-2014 and still have no information about condominiums.

A Kazakhstan complaint book zhalobakz.com, which contains 5,822 complaints in the section “Utility providers and condominiums”, can be set as an alternative source of information.

It doesn’t provide the generalised information, but it helps to specify the issues. People from different towns write on the website that heating system in their apartments functions badly, condominiums don’t do reconditioning works in summer. Internal heating systems function poorly: it’s too hot in the upper storeys, and too cold in the lower storeys. Sewer pipes leak in basements and cause dampness and constant unpleasant odour. In many houses, roofs leak and tenants of upper storeys cannot make condominiums collect fees to repair them. The outrage is increasing because chairmen of condominiums don’t report to the tenants and don’t explain what they spend money on and why works are not carried out.

The official document “On amendments and modifications to some statutes regarding housing and utility sector” – proves that officials recognise the failure of trust to the system of condominiums. It reads that Kazakhstanis are not satisfied with the quality of maintenance of their houses, don’t trust the managers of condominiums, don’t collect money for capital repairs.

A house with many owners, but without a host and repair. Ust-Kamenogorsk. Photo CABAR.asia

As to the chairmen of condominiums, the authors of the explanatory note – officers of the Ministry of Investment and Development of the Republic of Kazakhstan “charge” them with the lack of responsibility for the houses they manage, low performance and financial non-transparency.

One house – one association – one account.

The draft law “On amendments and modifications to some statues of the Republic of Kazakhstan regarding housing and utility sector”, which should totally change the system of apartment house management of Kazakhstan, was developed back in 2014 and has been discussed by the parliament and in the regions for five years.

We obtained information about key amendments from two sources: from the document itself and from the presentation of the draft law of the Mazhilis of the Parliament Thus, in addition to the liquidation of condominiums as a legal form of management, a totally new association of property owners (APO) will be created.

It will be based on the principle “one house – one association – one account”. Tenants of every multi-storey building must choose the board, chairman of APO, audit commission. Also, people will need to choose a maintenance company. Now, tenants don’t need to maintain technical staff as all necessary repair services will be provided on a one-time basis and paid upon provision.

All works will be performed on the basis of outsourcing.

For your reference: Outsourcing is a process of handing over some industrial or business processes to another company that is an expert in a given area.

If no tenant agrees to become the chairman of APO and take care of all matters, the town department of housing matters (state body that supervises apartment house management matters) will appoint the manager.

The regulation on the state institution “Department of housing matters” delegates this function to local executive bodies. Town maslakhats (local representative body in Kazakhstan) will specify the tariff for APO, while tenants did it previously.

Every APO will need to open a current and accumulation account. The latter is needed to accumulate funds for capital repairs. According to vice minister of Ministry of Industry and Infrastructural Development of Kazakhstan, Kairbek Uskenbaev, at first, the fee for capital repairs was suggested at the rate of 51 tenge per square metre (0.13 dollars), but during the project works, the fee was decreased to 12 tenge (0.031 dollars). All the money for capital repairs should be accumulated on accounts with Zhilstroisberbank (national bank).

If tenants accumulate at least one half of the amount required for repairs of their house in eight years, the remaining 50 per cent will be provided by the bank as a loan at 3-4 per cent per annum.

In some houses, residents to this day do not have the opportunity to repair the roof. Photo CABAR.asia

Legislators provide three years – until July 1, 2022 – for the transition period, when condominiums and APOs will be co-existing. Condominiums will officially remain the same, but in fact, they will function only as management, service companies.

“The new draft law is not only poor and unviable but also violates the constitutional rights of citizens.”

The draft law is mainly discussed at house meetings and in the media.

Nadezhda Yakovleva, the resident of the town of Altai. Photo provided by the respondent

Society expresses various opinions about the forthcoming reform of condominiums. A resident of the town of Altai, East Kazakhstan region, Nadezhda Yakovleva, hopes their life in APO will become disciplined unlike the current form of management with no management at all.

“We don’t have any condominium or a house manager. When some utility accident occurs or money is needed for repairs, we collect money only from those who suffer from the problem. When we need to wash the heating system or test it to pressure, we collect money from the same tenants. Some tenants refuse to give money as they say their apartments are fine,” Nadezhda Yakovleva said to the journalist of CABAR.asia.

The woman is sure once the new law is adopted, it will bind all owners of apartments to gather money at least for current expenditures, not capital repairs. The resident of the mining town liked the initiative of appointing the APO chairman once the tenants fail to do the same.

Ilya Alekseev, the resident of Ust-Kamenogorsk, Photo provided by the respondent

The resident of Ust-Kamenogorsk, Ilya Alekseev, doesn’t have bright hopes about the forthcoming reform of condominiums. The man faced the problem of collecting money to repair the roof in his nine-storey building. According to Ilya, the chairman of the condominium refused to solve this issue and the apartments of upper storeys were flooded. Activists failed to collect the amount required for the repair from all tenants. Instead, they wrote a letter to the regional akimat and joined the state programme of thermal modernisation of houses. They were granted an interest-free loan for the repair of their roof for seven years.

“The fact that they offer to accumulate money for capital repair on accounts of Zhilstroisberbank resembles our ailing saving pension system. We pay the tenth portion of income every month, but the low yield of the pension fund doesn’t even cover inflation. The same will be with capital repairs. While we’ll be gathering a dab of money for eight years, this money will depreciate even more, and we won’t be able to do capital repairs in the house. I am sure the system won’t work because there are no levers of pressure – no one would sue anyone for not giving money for capital repairs,” Ilya Alekseev said.

However, the resident of Ust-Kamenogorsk agrees with the opinion that the existing system of condominiums needs to be modernised. The man thinks that a condominium is a poor form of management, it is not intended for development, but just keeps house systems in good order.

Many remarks and modifications have been expressed in five years. Compared to the initial draft law, the last version contains about 400 amendments.

To understand the attitude of the expert community to the reform, we asked them some questions.

The executive director of the Society of Legal Entities “Association of condominiums of Ust-Kamenogorsk”, Gulnar Abisheva, thinks the draft law is not only poor and unviable but also violates the constitutional rights of citizens. The state interferes into the lives of tenants of multi-storey buildings, dictates its terms of how to manage the property and how much to spend on its repair and maintenance. If the same terms apply to owners of detached houses, mansions, we would deem it the invasion of personal privacy and violation of the inviolability of private property.

“It’s wrong to estimate the condition of the existing system of condominiums by the number of complaints. We should look at the level of preparedness to the heating season, the technical condition of houses. By the way, service companies that are similar to the ones suggested by the draft law were opened in our town a few years ago. I can say that they have complained about just the same as condominiums. The point is not the way of condominium management, but how responsibly tenants take their duties, if they have any debts, if they take part in decision-making, etc,” Gulnar Abisheva said.

The association of condominiums of the regional centre of East Kazakhstan region submitted its remarks to law drafters – to the government. The open letter was signed by more than 40 chairmen of town condominiums. They think that Ust-Kamenogorsk doesn’t have so many managers who are ready to manage nearly 1,700 towns APOs, while appointed managers won’t be careful about other people’s property.

It should be emphasised that chairmen of condominiums of the largest regional centre not only criticise, but also offer their proposals. In particular, today managers think condominiums should stay and tenants need to have the right to choose.

If they choose to keep the condominium, they are free to do it; otherwise, they will create an APO and hire a manager. According to Gulnar Abisheva, the draft law should be first discussed with participation of the wider population and agreed by them before the president approves the law.

“The costs will definitely increase”

Arkady Rubtsov, director of data portal “Newsletter of the owner and entrepreneur of the housing and utility sector”, a member of the working group of the Committee for Economic Reform and Regional Development of the Mazhilis of Parliament of Kazakhstan, noted that the draft law has both positive and negative amendments.

“I don’t think the situation with house management will get better after condominiums are abolished and APO is created. The quantity of money for house maintenance won’t increase. People will have to pay not only for maintenance but also for future capital repairs.

And owners will remain responsible, as ever. The costs will definitely increase. This is not my personal opinion; the deputies also share my opinion. Moreover, after the new law becomes effective, tenants will have to pay salary not only to the administrative staff of the association, which will be transformed into service organisations but also to the chairman of the board and the chief of APO.

After all, only rich residential complexes will afford to hire a manager or pay high salary to the chairman of APO. In most cases, there will be few candidates to become house managers, and usually, they don’t have the necessary knowledge of house management. Therefore, I am sure the chairman of APO will either work free of charge or delegate their powers to the service company. So, we’ll get back to what we had,” A.Rubtsov said.

– Do you agree with the opinion that the new system is not designed for decaying and repair houses?

Heating systems in houses do not work. People have to heat the stove so as not to freeze in the winter. Photo CABAR.asia

– I’ve said a few times in the parliament that the reform of condominiums is a left-bank war (new residential districts in the capital of the country, Nur-Sultan – author’s note). In fact, the new draft law almost perfectly fits only new large residential complexes. The amount only to 10 per cent of the whole residential stock of the country. Now they will be quietly renamed, for example, Topolek condo will turn into Topolek APO, and will continue functioning. The rest don’t need the new operational scheme, all they need is ordinary partnerships and house boards. By the way, it will be easier to transform to those who function as an ordinary partnership. They won’t see any changes. The share of such independent houses is higher in regions than in metropolitan cities. For examples, in Taldykorgan about 30 per cent of houses don’t have condominiums, they have house boards instead. Independence is good, but often tenants prescribe very low tariffs. They are not enough to maintain the house in good order. Now the minimum tariff of maintenance will be approved by local maslikhats.

– Will regions agree to save money for capital repairs? The problem of shabby houses is most pressing for small towns.

– I am not sure. In the regions, they will soft-pedal this issue. The law doesn’t bind anyone to pay fees for capital repairs and doesn’t hold anyone liable for not paying. The norm of opening accumulation accounts was adopted back in 2011, and all these years has been adhered to by the residents of Nur-Sultan and Almaty only. Chairmen of condominiums have made monumental efforts to collect 30 and even 50 tenge per square metre for the capital repairs (0.07-0.12 dollars). And after the law becomes effective, people would say we won’t pay more than 12 tenge per square metre. And all these efforts will become void. Those who haven’t paid will not pay in future.

– But they need it first of all: they need to accumulate money for capital repairs not to let the house fall to decay…

Residential building on the street Guards in the city of Ust-Kamenogorsk, without heating and water. Photo CABAR.asia

– Once they need to do something, tenants collect money secretly. They are the ones who suffer from such “independence” and savings. Instead of making capital repairs of the roof, they will collect some money and repair only 40 metres. This is why the housing stock is degrading now. But what they propose to do now – accumulations in Zhilstroisberbank – triggers many questions. The system is originally designed so that the money collected won’t be enough for the capital repairs even given the savings amount.

APOs will be first saving money for a few years and then take a loan. In the cities, there were cases when condominiums that managed to save some money on their accounts withdraw it urgently to pay for repairs now, not waiting for the new law to become effective. People fear that their money will be blocked and will depreciate on bank accounts with low yield rate in eight years.

Despite great efforts made to draft the law, the expert said the document will need to be revised. The last version of the law was submitted to the deputies of the upper house of Parliament; they made their proposals and submitted it again to the Mazhilis.

The draft law amended and modified will soon be submitted to the Senate and then to the president.

Once Kassym-Zhomart Tokayev approves the law, the life of Kazakhstanis will change.

It’s not going to be better, but definitely more expensive.

This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project. The opinions expressed in the article do not reflect the position of the editorial or donor.

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