Facility managers may raise service charges as energy bills skyrocket in estates

These are not the best of times for facility managers as increasing energy prices have shot up maintenance cost of estates in the country.

The rising cost, which is due to increase in price of diesel from the pre -December rate of between N250 – 300 per litre and over N350 per litre in the open markets is now overwhelming many property managers.

With the proposed increase of fuel to N403 by March, hard times seem ahead for most facility managers, as consumers often have very little control over the services they receive, and limited ability to challenge agents when they do not have the quality they expect or deserve. Tenants and leaseholders can be exploited and subjected to exorbitant charges.

Power is one of the major problems small, medium and large corporations face in Nigeria. It is a major constraint on ease of doing business in Nigeria with about $12 billion spent yearly by businesses and individuals on generators.

In some of the estates in Lagos, Abuja, Kaduna and Port Harcourt, discussions have begun between the property agents, leaseholders and renters on ways to cut maintenance cost. Service charges are the fees most leaseholders pay to cover their share of maintaining their building and frequently the subject of controversy.

The Guardian gathered that some estates are considering adopting renewable energy in some common areas, while others were reducing timelines for usage and increasing their charges. For instance, instead of the usual 24-hours electricity in some estates, some are cutting it to 18-20 hours daily.

According to United Nations estimates, real estate accounts for about 40 per cent of the world’s energy consumption and a third of all carbon emissions. Because of this, achieving double-digit reductions can have a significant impact on environmental sustainability.

The Royal Institution of Chartered Surveyors’ (RICS) Code of Practice document said service charge enables owners of estates to recover the costs of operating a property from the occupiers as well as any other persons who benefit from and use the services/facilities provided.

The fees, also covers car park or shared driveway, reception areas, corridors, lifts, grass cutting/gardening, general repairs and maintenance, Close Circuit Television (CCTV) equipment and block insurance and others.

The most worrisome aspect of the issue is the astronomical increases and lack of fixed charges for such services, which often result to regular cause of disagreement between landlords and tenants.

The Managing Director, Global PFI, Dr. M.K.O. Balogun, told The Guardian that energy cost is just a component in the mix of issues and cost that managers worry about, especially with inflation and its impact on purchasing power of employers and cost of other goods and services.

Balogun, who is a facility manager said, increase of service charge is inevitable. “There is going to be some level of increase. However, a well-managed building will always have opportunities for cost management.

“Improvement in services leads to asset life extension, which enables the facility managers to make changes that eventually will lead to efficiencies and cost reduction ultimately,” he said.

According to him, technology is also helping in the management of estates, adding, “reducing resources by using technology will ultimately lead to cost reduction.”

A past president, Nigerian Chapter of the International Facility Management Association (IFMA), Mr. Stephen Jagun, said: “The increase in energy prices is a big cause for concern in the industry. “This has naturally increased the cost of providing services, which translates to increased service charge. This is causing friction between facility managers and tenants.

“This is making facility managers to be innovative, and most importantly, embrace alternative power sources; particularly, sustainable power sources. These may entail high initial capital outlay but the life cycle cost is very attractive. It entails proper planning to implement.

Jagun, who was also a past Chairman, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos branch, advised facility managers to adopt strategies that will include changing equipment to energy saving ones; such as air conditioning and lights. “Likewise, energy audit need to be done to see what to discard, alternate and spread or re-arrange,” he added.

Credit: The Guardian (24th January 2022)