Institutional
Indeed, the contradiction at the operational level has an institutional origin. Tire authoritarian political regime in China has placed the condommium governance system within its neighborhood control regime. The ciment rate of HOA formation in China is relatively low (Wu 2016), and the motivation for forming HO As is largely driven by collective dissatisfaction or grievances which result in collective action in defending properly or consumer rights. Hence, such actions are portrayed as a threat to social stability and set the residents’ committee on high alert. It is not surprising to find residents’ committees that perceive HOAs that are active in organizing then members as potential troublemakers and a threat to the state’s political authority.
At the same time, the way property management services generate their profit creates an intrinsic conflict of interest between the HOA and the property management agents. For example, obtaining information by condominium owners about the service quality of property management is costly. The cost is even higher for the enforcement of contracts since protection of consumer rights is almost non-existent in China. Hence, an ‘all-inclusive’ charging system in which a fixed charge is levied for all services in the service contract has dominated the market so condominium owners can place risks of unexpected expenses onto the property management agents.3
Yet to generate higher profits, the property management agents have an incentive to cut corners. For instance, head counts of labor-intensive operations are over-reported or there is under-spending on items that would ensure the long-term sustainability of the condommium but results in no immediate apparent negative impacts. This leads to constant mistrust of the information provided by properly management agents to condominium owners. Within such a context, alignment of interests and regular cooperation between the residents’ committee and the
Law on paper and law in practice 243 property management agents would be perceived by condominium owners as the residents’ committees taking the side the property management agents. Such dynamics further distance the HOA from both the residents’ committee and property management agents, while strengthening the alliance between property management agents and the residents’ committee.
