01/10/2020

Recent Trends in Housing Investment — Cooperation between Properties and Services for Residents

On the surface, owning and renting of apartments is relatively straightforward and simple: the property is owned by a housing company, and the owner rents out apartments in the building to residents.

In practice, however, owning apartments demands more from both housing companies and investors. In addition to general administration, the housing company has to organise building management and maintenance and the necessary renovations. The landlord or housing company may also offer residents additional services to make life easier.

Cooperation between Neighbouring Buildings More Common

In new housing companies, some practical matters may be arranged together with neighbouring properties. The most common forms this takes is shared yards and parking garages or, for example, pipe collection systems for waste management. From a legal standpoint, there are many ways to arrange this kind of cooperation, for example, through joint arrangement agreements, divided possession agreements or jointly owned companies.

Jointly owned and maintained areas or systems can be more efficient and bring savings but can also be a risk to homeowners. For example, if zoning regulations have not been complied with, it may be difficult to correct the situation if the relevant rights to neighbouring properties have not been carefully agreed. However, these kinds of risks can be minimised through careful contract drafting and risk management.

It is particularly important that homeowners’ rights to the kinds of joint arrangements described above are permanent in all situations and that the division of maintenance and renovation costs and the responsibilities for joint arrangements have been agreed transparently and fairly.

From Housing Investor to Service Provider

Services provided by housing investors to tenants are a recent rising trend. A landlord or housing company may offer residents, for example, carsharing vehicles or gym services, but even personal training services, lobby services or apartment hotel services for the guests of residents.

With large numbers of people transitioning to working from home last spring, the need for shared, adaptable remote working spaces grew. Housing companies with shared spaces for residents were able to use flexible reservation practices to make it possible to use these spaces for meetings or quiet work.

Buildings may also have solar panels to provide electricity to residents or residents who handle the handover of keys and the final inspection of apartments on behalf of the landlord when moving out.

Services Require New Risk Management Expertise

Providing services requires housing investors to be able to manage risks in an increasing number of fields. Depending on the how services are provided to tenants, the landlord or housing company may bear significant liabilities beyond the typical scope of housing investment, such as in the realm of employment law or data protection. The tax treatment of services will also depend on how they are implemented.

Before offering or even marketing services to residents, housing investors should carefully review all of the different ways or implementing the services and the related obligations. Similarly, a thorough due diligence review is important when considering adding a housing property that provides services to an investment portfolio.

Services Improve Returns on Investments

Despite brining new administrative obligations and risks, offering services to residents is a trend that investors should not miss out on. Providing services to residents will enable housing investors to respond to demand from a good position on the market and get better returns on their investment.