Simon Says: Can Management fees be increased without consent of owners?
Published11/03/2017 by Simon Choi
This is the thirty-sixth in a weekly series of legal advice provided in a short and entertaining story format.
每周轻松有趣法律常識故事系列 - 第36篇
Keywords: contract, property management contract, management fee, change of term
Can Management fees be increased without consent of owners?
Carrie lives in the Twin Towers, a classy community in Hangzhou, which is managed by Swindle Property Management. Swindle initially charged a management fee of 2 Yuan per square meter for a period of five years at the time it was appointed, but they decided to increase it to 4 Yuan per square meter in order to increase earnings a year later.
Intrigued, Carrie went up to them to inquire about this sudden increase. Bob, the general manager of Swindle, replied, “Inflation, Carrie, inflation. Everything is getting more expensive this year, and so do the management fees.”
“I know inflation exists, but surely not by one-fold? I am definitely not paying for this increase, and I am sure other owners will not pay as well.” Carrie spat. “Don’t pay then, we will be forced to cut down costs by half, like laying off half the security guards. How would you like that? And the security cameras too, I will sell half of them.”
“We chose Swindle because you’ve pledged a fair price and quality service. Try raising the fee by one penny, and you shall receive nothing at all.” Carrie said.
Can Carrie and other owners refuse to pay the management fee?
Prof Simon Says:
Among others, management fee is a contractual term of the property management contract and, like other terms, such term can only be adjusted by taking considerations of customer price index (CPI) in general together with other factors.
The property management contract determines the rights and obligations of the Property Management Office and the owners and if the property management company increases the management fee on its own merits, it amounts a change of contract terms unilaterally. Any amendment of a contract term, it needs explicit consent from owners or it needs displaying the notice of increase with justified reasons, for example CPI, failing which the owners have the right to refuse to accept such change.
However, if management office provides its services in accordance with the terms and conditions of the Management Contract, and the owners should pay the management fees in full and on time. Also under China’s Contract Law, there are the principles of integrity and creditability imposed to the parties.
Therefore, Carrie, as an owner may refuse to pay the increased portion of the fee but not all. The reason is such portion is changed unilaterally by the Property Management Office without consent of the owner.
Contract Law of the People’ Republic of China (1999)
Article 8 Binding Effect; Legal Protection A lawfully formed contract is legally binding on the parties. The parties shall perform their respective obligations in accordance with the contract, and neither party may arbitrarily amend or terminate the contract.
For more about this or to contact Professor Simon Choi at www.acmeardent.com, firstname.lastname@example.org, +86 13823677853 or by WeChat: simonhkchoi.
About the Author: Professor Simon Choi
Prof Simon Choi, solicitor and linguist, is an international lawyer, qualified to practise law in England & Wales and in Hong Kong, China. Simon graduated from law schools of the Peking University, the University of London and the University of Hong Kong respectively, with an in-depth knowledge of Chinese laws and common laws and with more than 20 years experience in China practice and international trade, investment, finance, merger & acquisition. He is an adjunct professor of laws at the Zhongnan University of Economics and Law. Simon is the founding partner of Acme Ardent and can be reached at email@example.com or +86 13823677853.
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