Service charge

Property managers raise service fees by 50% in Nigeria

Lamenting the high cost of diesel, property managers have increased service charges for apartments by 50%.

According to the findings of the Nigerian Tribune in Lagos, the new increase in service charges is already causing controversy among tenants/customers.

Justifying the action, some property managers blamed the high cost of diesel from N300 per liter in January to around N800 per liter currently.

While property/facility managers are desperate to increase apartment service charges, tenants/guests are struggling to cope.

Lamenting the situation, Global PFI Group Managing Director Dr MKO Balogun said the situation had gotten out of the property managers’ control, adding “nothing can be done about it”.

He explained that in one of the areas the company serves, everyone in the area has adapted to change.

Furthermore, he said the company has adopted the “Pay as you go” model when it comes to power supply, adding that the generator is currently running fewer hours.

“Where they used to pay N50,000 as a service charge for power supply, they are now paying N75,000 due to the high cost of diesel.

“People have to adjust their livelihoods and control what they use,” he said.

Further, Mr Stephen Jagun, a Lagos-based property practitioner and property manager, said the high cost of diesel fuel has caused confusion among practitioners.

“It causes a lot of problems,” he said.

He explained that most property managers have already budgeted based on historical costs, but the current rise in diesel prices has thrown those calculations into the wind.

Recounting his ordeal, he said every arrangement to let clients see reason with him as property manager by adjusting to working fewer hours to cut costs has not yielded positive results.

“We establish a budget based on historical costs. The price of diesel threw those calculations into the wind.

“If you now ask your customers to work later and tell them you want to turn off the generator at 2 p.m., they don’t want to hear it. They don’t want to hear the deficit,” Jagun said.

Due to the situation, he explained that most service providers are now avoiding supplying electricity to apartments.

“By June the reality will be upon us and the calculations will be thrown into the wind except we opt for alternative energy sources such as solar or by bringing in gasoline generators because gasoline is cheaper than diesel now,” he said.

For property managers, Jagun said they are trying to see how they can take advantage of an alternative and sustainable power supply.

“We want to do a power audit and turn the appliances into power savers,” he said.

Another practitioner, Mr. Femi Oyedele, pointed out that the increase in the price of diesel has really affected the management of serviced apartments in major cities.

According to him, property managers who levied a fixed amount or budgeted their service charge on N270 per liter in December 2021, are already biting their fingers.

As a result of this, he said, “controversy is looming and some will certainly lead to disagreements and litigation.

“In the near future, there will be a lot of variation claims by contractors due to the remarkable increase in the price of diesel.”

Regarding the implications on the general economy, Oyedele explained that the increase in the price of diesel would certainly affect the price of transporting food from farms and other daily needs.

He pointed out that most manufacturing companies rely on diesel to power their machinery, saying that an increase in the price of production inputs will affect their cost of production and demand.

“For example, a production manager, who is not sure about getting variations from his management, may decide to settle for less diesel than expected (rationing) and this will affect the production volume.

“This can lead to downsizing and, in some organizations, closure. Diesel, being a major source of energy, has a great influence on the general economy of Nigeria as the country has an epileptic power supply,” the property consultant said.

According to him, the increase in the price of energy would certainly affect the prices of other products in the economy due to the “ripple effect”.

Suggesting a way out, Oyedele urged property developers to embrace the use of local building materials and drastically avoid the use of cement as block and binders as alternatives.

“For example, as a tropical country, Nigeria is blessed with extensive laterite. The whole of central and southern Nigeria, except part of the Niger Delta region, is covered by laterite. The use of red bricks will definitely stabilize the prices of our real estate products.

“We also have a large volume of waste that can be used as fuel for thermal power generation and as wall and roofing materials in modern construction,” he said.

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