Residents’ Welfare Association Handover Takeover Audit – Why it is necessary!
It is common knowledge that in any newly constructed Apartment complex or a Villa enclave, the Builder collects a corpus fund from each of the Flat / Villa buyer and forms the Apartment Owners Association or generally termed as Residents’ Welfare Association (RWA). Once majority of the units are sold and after a period of say 1 year, the operation and maintenance of all common areas and amenities like Basements, Gardens, Lifts, Generator Sets, Sewage Treatment Plant (STP) , Swimming pool, Clubhouse etc., are handed over to the RWA who will be the De Facto owners of the common areas and amenities.
Why is a HOTO Audit necessary?
The most important part here will be the Handover Takeover (HOTO) process. Till the assets are Handed Over, the Builder has to maintain all assets in good working condition and RWA is supposed to Take Over all assets in good working condition. If due diligence is not followed, the RWA may end up in spending Association money on an asset which was taken over in not so good condition.
What does the HOTO process consist of?
Main components of HOTO are
- Quality Audit of the facilities : ensures that all the installations are done properly
- Design Audit of the facilities : checks for the adequacy of the provisions
- Documentation Audit: ensures that all documents are handed over
- AMC advisory: ensures that required AMC are in place
- Any in depth audit of Specific facility / issue desired by RWA
How do we ensure a foolproof HOTO process?
This is where professional advice becomes necessary as most of the Office bearers of RWA are preoccupied with their own Profession or Business and cannot spare full time for this process. Even if they can spare time, the HOTO process is complicated as it involves various disciplines of Engineering like Civil, Mechanical, Electrical, Plumbing, Sewage Treatment Plant (STP), Fire Fighting etc., and RWA members may not have to capacity or knowledge to Audit and collate various data.
Legal and technical guidance on Documents to be handed over, only an experienced professional can help to mitigate future problems.
Who are the right people to assist in the HOTO process?
Firstly the resource conducting the Audit should have thorough knowledge of the construction process of Apartment / Villa project including the expertise on various Building services like Plumbing, Electrical, Fire fighting to name a few.
Secondly it can not be done by lone professionals as He/She cannot have complete knowledge of all the disciplines involved. Even a small size Complex requires substantial mandays to conduct audit thus making it impractical to rely on one professional to conduct audit for months together.
Thus it is wise to conduct an audit through a Company who has the domain experience and expertise in the required disciplines. Further a Company only can deploy enough resources to handle the large assignments and complete it in time planned. Finally a company has more longevity to address any issues in time to come as against individuals.
Can the Facility Management company not perform the HOTO Audit?
Many RWA s are facing this dilemma. In most of the cases a Facility Management company is engaged to run the facilities after the RWA takes over. It looks logical that they conduct the HOTO process. Here the problem lies in unearthing the issues in a transparent manner. They will definitely help in counting and take over but may not have the expertise in the construction process to understand the issues that may crop up later. Also their priority will be to take over with least rift so they can start their engagement smoothly. In this scenario, any snag / deficiency which is not highlighted but passed on, will surface after take over and Association funds will be spent as operational cost which in reality should have been detected before hand over and made good by the Builder. For these reasons it’s less expensive in the long run to pay and engage a third party with expertise who have no conflict of interest.
What are the implications of improper HOTO without Audit?
It is seen in cases when a leaky Electrical Transformer or a malfunctioning Gensets are taken over without proper checking and the Association ends up spending money for rectifications.
When a STP is taken over without proper verification about working, the RWA may end up with Notice or even levy of Penalty from the Pollution Control Board.
Without guidance in collecting the As built drawings, the maintenance will be a horrendous task.
Failure to obtain statutory documents may land RWA in a legal mess with Authorities.
What needs to be checked during the HOTO Audit ?
It is recommended to check the following as part of HOTO.
- Quality audit of Civil Engineering aspects of the project
- Quality audit of MEP (Mechanical, Electrical, Plumbing) aspects of the project
- Design audit of MEP facilities
- AMC advisory for Equipment and Facilities
- In depth Audit of STP
- In depth Audit of any particular facility where necessary
- Audit of all the Documents handed over to the RWA
- Guidance on the Documents to be collected for future running of the RWA
Thus it is wiser and less expensive in the long run to get the HOTO process done by a professional company who have domain expertise and a good track record.