RWA HOTO Audit by FMS — Will it serve the objective of Builder to Society Handover-Takeover audit

RWA HOTO Audit by

Builder to Society Handover-Takeover Audit if being performed by a Facility Management Service agency, will it serve the objective?

It is common knowledge that whenever an apartment complex, also known as society, is built and a substantial number of owners start occupying, then all the common areas and amenities will be handed over by the Builder to the Apartment Owners’ Association (AoA)/ Residents Welfare Association (RWA) for further operation and maintenance (O&M). While this Handover Takeover (HOTO) process begins , the RWA has to make sure that all the common areas and amenities being taken over are as per the promises made by the Builder specified in Deed of Declaration (DOD) and meeting the Quality as per standards laid out by National Building Code (NBC), Bureau of Indian Standards, National Electrical Code, Best Industry practice etc.,

Also the RWA may engage a new Facility Management Service (FMS) team to carry out the O&M. Question that arises now is who will conduct the builder to society handover-takeover audit to ensure the Handover of Assets is without snags (defects) which otherwise will have to be rectified by the RWA by spending their own funds rather than making the Builder rectify everything before handing over. Also one has to make sure that RWA gets all the required Documents in proper order for future operation and records as they will be the de facto owners of the property after taking over.

Builder to Society RWA HOTO Audit by

When RWA are in the process of engaging a FMS agency the easy choice they face is the offer by the FMS agency to conduct the Builder to Society Handover-Takeover Audit before takeover. Justification by FMS company is that they are the right people to check the assets they will operate and manage after takeover.

We differ on this concept.

There could be several reasons why a Facility Management Service (FMS) company may not be able to conduct a Handover Takeover Audit of common facilities and amenities in an apartment complex for a Resident Welfare Association (RWA). Here are  few explanations on why is it so:

  1. Lack of Specialised Knowledge: The FMS company are mainly involved in operation and maintenance of facilities and will not have the required specialised expertise or specialised experience in conducting handover takeover audits specifically for apartment complexes. Handover takeover audits involve detailed inspections, documentation, and assessment of various systems and facilities. These inspections can only be done if you have experience in Construction of projects and Installing the facilities as per National Building code, relevant standards and industry practices. As such mere knowledge in maintaining the facility would not suffice. If the FMS company lacks the necessary knowledge and experience in this area, they will not be able to effectively perform the audit.
  2. Conflict of Interest: This can be analysed in two scenarios:

    Case 1: FMS agency is in place, already engaged by Builder and RWA proposes to continue the engagement of the same FMS agency to make the transition smooth.

    In this case, the FMS company may have a conflict of interest that prevents them from conducting an impartial audit. FMS companies are responsible for managing and maintaining the facilities in the apartment complex on a regular basis. If they are also responsible for auditing their own work or evaluating the performance of their own services, it is a conflict of interest. Also as the FMS company has been responsible for managing these facilities, they may be held liable for any deficiencies or issues discovered during the audit.This conflict can compromise the impartiality and objectivity required for an independent audit.

    Case 2: RWA proposes to engage a new FMS company after Takeover and that FMS company offers to conduct the audit before takeover, making the job easy for the RWA. This FMS company offers to conduct the audit at a very low fee or even at no cost provided they are awarded the perpetual contract of FMS.
    This will sound very attractive to RWA as it will save not only the cost but also the hassles of the process in engaging another agency for the audit.
    In this scenario there could be a potential conflict of interest if the FMS company conducts the audit with the intention of winning the business and may not highlight the defects but later attributes any identified defects as operational issues where the rectification costs will be borne by the RWA thus causing unwanted financial burden which is loss to RWA.

  3. Independence and Neutrality: Handover takeover audits are typically conducted by independent third parties to ensure objectivity and impartiality. FMS companies do not fulfil this criterion. Hence RWAs often prefer to hire external auditors or consultants who have no direct affiliation with the FMS company or the apartment complex. This helps ensure that the audit is conducted fairly and without bias.
  4. Regulatory Compliance: In some jurisdictions, there may be specific regulations or guidelines governing the common amenities for apartment complexes. Independent auditors are often well-versed in these requirements with experience gathered over many projects and can ensure that the audit is performed in accordance with the applicable regulations.
  5. Comprehensive Report: External auditors typically provide detailed reports documenting their findings, including identified issues, recommendations, and potential areas for improvement. These reports serve as valuable references for the RWA and can help guide their decision-making process in further management of common areas and amenities.

Inference: Due to all facts explained above, it is prudent to engage an independent professional (Technical) consultancy firm with good lineage and impeccable track record to conduct  Handover Takeover (HOTO) audit and guide the RWA without conflict of interest or prejudice.

Builder to Society RWA HOTO Audit by

A word of advice, it is always prudent to engage a corporate firm or a Pvt. Ltd Company to conduct the audit due to their permanency rather than going with individuals who may offer the service at lower cost because of no overheads of an organisation, but may not be available after some time for any future support. Also the individuals may not have a comprehensive pool of knowledge encompassing all the areas requiring an audit.


Author: Mr R. Suresha, COO at