Chapter 11: Altering the rules: homeowners' participation in legislation
In August 2003 the homeowners' committee in Dongyue Estate, Guangzhou, filed a lawsuit against their property developer when the elevator in their housing estate needed maintenance and the property management company, a subsidiary of the developer, declined to pay for it. The controversy was rooted in the inconsistency in regulations between different levels of government. The developer argued that, according to the national regulation, homebuyers should pay the sinking fund (for long-term maintenance) to the developer (2-3 per cent of the housing price) (Regulations on the Maintenance Fund for Common Facilities in Residential Areas, 1998). However, the homeowners' committee counter-argued that local legislation require property developers to transfer the sinking fund to the homeowners' committee once it was set up (Guangdong Property Management Ordinance, 1998; Interim Measures on Regulating Housing Maintenance Fund, 2000), but the developer had not complied. In fact, the exploitation of this regulatory loophole by real-estate developers was not only happening in this particular estate, but was also a rampant practice in Guangzhou at the time. In many cases the account for the maintenance fund had either not been set up at all, or the collected funding never reached the account. According to the best information, the total amount of missing funds was large - even the more conservative estimate provided by the Guangzhou municipal government put the total amount at RMB 0.9 billion from 1999 to 2003 (Han and Li, 2006). This indicates the severity of the problem.
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