The property trust model has far-reaching social significance and broad prospects for development by realizing the separation of management rights and income rights, clarifying the legal relationship between various stakeholders in the community, building a community governance community with the purpose of maximizing the interests of owners, and resolving the contradictions in the governance of residential communities from the perspective of institutional mechanisms.
Source | Contemporary Financier Magazine, Issue 1, 2022
With the continuous advancement of the restructuring process of the mainland real estate market, real estate will gradually migrate from the incremental era to the stock era, and the arrival of the real estate stock era will put forward higher requirements for the property management industry, which also means that the mainland property management industry will be in a steady and forward development range in the next certain period of time.
1 The current situation of the property management industry in mainland China
In recent years, the mainland property management market has grown rapidly. Since 2015, the industry's under-management floor area has continued to increase, and by the end of 2020, the construction area under management of mainland property management has increased to 25.9 billion cubic meters, an increase of about 2 billion square meters over the same period of the previous year, an increase of 48% over 2015, and an average annual growth rate of 8.16%.
The concentration of the property management market continues to increase. According to the development of the top 100 property management enterprises released by the China Finger Institute, since 2015, the construction area under management of the top 100 property management enterprises in mainland China has grown rapidly, and in 2020, the construction area under management of the top 100 business management enterprises in mainland China has doubled compared with 2015, growing to 12.9 billion square meters. At the same time, the proportion of buildings under management by the top 100 enterprises continued to increase, from 28.6% in 2015 to 49.8% in 2020, and overall, the market concentration of the mainland property management industry continued to grow.
At present, the satisfaction of mainland property management residents is low. According to the property service survey experience of 36 cities and 148 residential quarters released by the China Consumers Association and the China Consumers Association in 2019, the property service field experience evaluation score is 65.14 points, and the overall level is at the passing level. From the perspective of the scores of each management link, the equipment and facility management score was 84.70 points, which was relatively high; the environmental management score was 64.89 points, which was at the passing level; the order management and customer service management were relatively low, with 59.35 points and 54.47 points, respectively, at the failing level.
The current main property management model is enterprise-led, using a contract system or a remuneration system, both of which have more drawbacks. First, it is difficult to straighten out the relationship between the interests of the owner and the property enterprise, and it is easy to form a "prisoner's dilemma". Second, there is a lack of community governance structure, and the owners are in a weak position.
2 Property trust model management logic analysis
By separating the right to management and the right to income, the property trust model clarifies the legal relationship between various stakeholders in the community, builds a community governance community with the purpose of maximizing the interests of the owners, and resolves the contradictions in the governance of the residential community from the institutional mechanism.
The core logic: It lies in adjusting the legal relationship between various stakeholders in the community, building a community governance community with the purpose of maximizing the interests of the owners, and resolving the contradictions of residential community governance from the institutional mechanism. Different from the traditional contracting system, which is based on the relationship of sale and purchase, the trust system is based on the trust of the owners and property enterprises under the framework of the Trust Law, the Contract Law and the Property Law, in which the settlor separates the property rights and gives them to the trustee and the beneficiary respectively, that is, the management right and the right to income are separated.
Participating entities: (1) the settlor, that is, the owner (owners' assembly), the settlor has the property rights of the residential community and the joint management right of the property, that is, the property management right; (2) the trustee, that is, the property enterprise, the trust company, the trustee manages the entrusted property in his own name in accordance with the purpose agreed by the settlor in the contract; (3) the beneficiary (each owner), while enjoying the benefits of property management (safety, comfort and possible capital dividends, etc.), enjoys the rights of part of the settlor. In particular, the right to know all the information of the entrusted management affairs and the right to sue against the negligence of the trustee; (4) the supervisor, the trust supervisor has the right to file a lawsuit or carry out other legal acts in his own name to protect the interests of the owner, and there is no need to convene a general meeting of the owners to obtain authorization.
Management basis: First, realize the effective isolation of the public attributes of common funds from property enterprises. Property fees operate in the form of special accounts, and special funds make it impossible for property companies to profit by reducing the quality of property maintenance. The second is to give beneficiaries the right to know and the right to supervise. Each owner has the right to complete the financial situation, management service standards, management service records and all other information in the whole process of management services. The third is to straighten out the relationship between the interests of the owner and the property enterprise. Property enterprises work under the principle of altruism and receive public, market-eligible honorariums (fixed amounts or percentages), and the annual property fee balance is enjoyed by the owners, avoiding conflicts of interest between the property enterprises and the owners. The fourth is to achieve community co-governance through trust arrangements. Based on the rights and interests granted to the supervisors by the Trust Law, the community and community party organizations, as the supervisors of the property trust model, enjoy the same supervision and prosecution rights as the owners and beneficiaries, and transform the main body of community governance from the binary opposition between the owners and the property enterprises to the cooperative co-governance relationship between the community, the community party organizations, the owners, the property enterprises and the trust company.
3 Property service trust model analysis
In view of the governance crisis of the decline in social credibility in the property service industry, the trust property model has developed rapidly in many communities across the country, but the trust property model cannot fundamentally solve the problem of independent, safe and long-term custody of funds. In this context, the unique advantages of the trust system such as bankruptcy isolation and account management have made the property entrusted property service trust model and the double trustee property service trust model develop into a new type of trust system property management model. The three modes are described in detail below.
Trust-based property service model
Based on the Property Law and the Contract Law, the trust-based property service model uses the trust concept to solve the shortcomings of the traditional "contract system" and "remuneration system" and other property management models, and re-establish the trust relationship between owners, industry committees and property enterprises. In 2007, The Langqinyuan Community in Xuanwu District, Beijing became the first community in China to pilot the property management right trust. Wuhou District of Chengdu has innovated and promoted the service model of "trust property", and reconstructed the pattern of diversified co-governance of community governance by clarifying the core leadership position of party organizations, promoting bottom-up mass consultation and participation, and information openness and transparency. All owners shall establish a general meeting of owners as the settlor, and entrust the property fees and public benefits to the property enterprise as trust property. As the trustee, the property enterprise shall use and manage the trust property in accordance with the agreed standards and receive remuneration from the manager. As beneficiaries, all owners receive services such as community governance, activity organization, environmental sanitation management, safety management, coordination and communication provided by the property company to maximize the interests of owners.
Universal Trust - Property Entrusted Property Service Trust Model
In September 2021, Wanxiang Trust and Chengdu Zhile Property signed the "Sunshine Property Series" service trust contract, realizing the landing of the first property service trust in China. As the trustee of the "Sunshine Property Series" service trust, Wanxiang Trust receives the property fee obtained by Chengdu Zhile Property from the owners' meeting of a community in Jitouqiao Street, Wuhou District, Chengdu, and through the institutional advantages of the trust account property independence and bankruptcy isolation, it safely and efficiently manages the stakeholder funds such as community property fees and public benefits, and provides professional services such as asset preservation and appreciation, bankruptcy isolation, safety management and capital utilization information disclosure for the owners of the community. The characteristics of the property service trust are that the property fees and public income funds of the community are supervised by professional financial institutions, the property company returns to the role of the housekeeper, withdraws the expenses required for the maintenance of the community as needed, and the income and expenditure of the funds are open and transparent, so as to protect the rights and interests of the owners to the greatest extent.
AVIC Trust – Dual Trustee Property Service Trust Model
In October 2021, AVIC Trust signed a contract with Chengdu Xiangcheng Liyuan Community, Xiangjiang'an Community, Fuzhuyuan Community Industry Committee, Chengdu Yiminyuan, Chengdu Chengzhi Property and Chengdu Zhile Property to establish a property management service trust. The biggest feature of the property service trust is the "double trustee", the property enterprise and the trust company together as the trustee, giving full play to the professional advantages in their respective fields, both mutual cooperation and mutual restraint, so as to ensure that the interests of all owners of the community as beneficiaries are maximized. In this trust business, the owners' general meeting will hand over the funds involved in the property fee and public income to the trust company, and the trust company and the property company will act as dual trustees to jointly establish a property service trust to carry out unified management of the collected property fees and public benefits and other stakeholder funds. Among them, the property company undertakes the role of the community property service steward, responsible for the community safety guarantee, environmental maintenance and facility maintenance and other basic property service work; the trust company undertakes the role of the housekeeper of the owners' common funds such as residential property fees and public benefits, with the owner's common fund trust account as the carrier, according to the wishes of the client, to carry out property custody, rights and interests registration and apportionment, payment and settlement and liquidation, supervision and implementation, information disclosure and other professional custody and operation financial services, under the premise of ensuring the safety of funds, Realize the account affairs management and value preservation and appreciation needs of the common funds of the owners of the community. On this basis, the owner of the community can regularly understand the changes in the funds in the account and effectively supervise the expenditure and use of the property fee.
4. Suggestions related to the development of property service trusts
Compared with the property management models such as the contract dry system and the remuneration system commonly implemented in the community, the property service trust is an important measure for community service with the construction of grass-roots party organizations as the key, government governance and community governance as the mainstay, residents' needs as the orientation, and reform and innovation as the driving force, which is a useful exploration and practice to promote community governance, and a new management model for building the community into a harmonious and orderly, green civilization, innovation and inclusiveness, co-construction and sharing of happy homes.
Strengthen the top-level design of business and promote the innovation of community governance models
Trust companies should strengthen the top-level design of property service trust business. The first is to actively call on the regulatory level to promote the development of service trust businesses such as property service trusts and fund depository trusts, obtain effective support from the policy side, and achieve top-down promotion. The second is to focus on the service of the overall ecological chain of the community. Trust companies can enhance their community governance capabilities through the property service trust model, so as to take the community as an important ecological scene, introduce pension service trusts, prepayment trusts, family trusts, etc., and deeply provide full-life cycle financial services for community owners. The third is to increase the in-depth tracking, market research and resource supply of community property services in first-tier and key second-tier cities, and effectively seize emerging business development opportunities. The fourth is to promote and support the innovation and exploration of such businesses, and actively cooperate in reviewing risk control, compliance audits, and innovative reviews to promote business landing.
Carry out hierarchical management of property companies, and focus on tapping market opportunities from the demand side
It can be seen from the above cases that the reason why Chengdu has become an important demonstration area for property service trusts is because of the urgent need for high-quality property services from owners in Chengdu residential areas. In view of this, trust companies should segment the property management industry and focus on exploring market opportunities from the demand side. Property communities are mainly divided into three categories: the first type of market-oriented operation properties for medium and high-end residential real estate, which are mainly profit-making and have public welfare functions; the second type is social security properties that are mainly public housing, sold public housing and affordable housing communities, and partially supported and helped by social organizations and government policies; the third type is pure public welfare properties that have experienced the epidemic crisis and have no professional property communities and non-closed communities. It is recommended that trust companies give priority to strengthening the attention of the first two types of business, and jointly carry out services with property companies according to the needs of owners.
Strengthen trust account management and scientific and technological support capabilities, and promote the transformation and upgrading of property services
In the future trust property service trust model, account management and technology support may become the core and cornerstone of the property service trust industry. First, in terms of account management capabilities, the efficient development of property service trusts must rely on systematic and standardized account operation and management. By forming standardized management processes and operation methods in terms of structural design, process control, transaction management, etc., and effectively carrying out professional custody and operation financial services such as property custody, equity registration and apportionment, payment and settlement, execution supervision, liquidation, and information disclosure, can we improve the efficiency of property services and expand the scale of future entrusted management; second, at the level of scientific and technological support, trust companies carry out property service trusts to manage relevant information within the scope of trust accounts, and the information that needs to be processed is massive. For the timeliness and accuracy of information and data processing, and higher requirements are put forward for the efficiency and stability of the technology system, so it is necessary to improve the ability of scientific and technological support, improve the quality and efficiency of information processing, increase the satisfaction of owners, and promote the transformation and upgrading of property services.
| The authors' affiliations are Everbright Xinglong Trust Co., Ltd
This article originated from contemporary financiers