THE conditions of the asset management contract included in the listing prospectus of Cupar Properties are set to add a new dimension to the property sector of the JSE Securities Exchange SA.

Cupar is a property loan stock company that is expected to list next week.

The prospectus stipulates stringent performance-based conditions that will govern the contract between Cupar and Pica Property Management, the company that has been formed to provide asset management services to Cupar.

Many people who are active in the property loan stock sector have been voicing serious concern over the quality of the service provided to the property funds that are run by independent asset managers.

Their complaint is some asset managers tend to concentrate on their management fees at the expense of unit holders, especially in cases where the management fee is linked to net asset value.

The temptation is for managers to report an artificially high net asset value so as to attract a higher management fee, rather than by adding real value to the property fund.

In its management contract Cupar reserves the right to buy out the asset manager should Cupar's performance fall to within the bottom quartile of the JSE's property loan stock sector for two consecutive years.

The performance benchmark to be used to gauge compliance with this term of the contract is growth in net distributable income per linked unit.

The hope in the industry is that the prospect of such a penalty will prevent the listing of poor- quality portfolios by promoters who are looking only to secure income streams without the bother of having to actively add value to the assets.