Most Irish apartment blocks do not have enough cash for essential maintenance, leaving property owners facing serious financial risks, experts warn in a new report.
Apartment owners contribute cash to special “sinking funds” to pay for maintenance and replacing services and structures in shared areas in individual blocks.
However, the Society of Chartered Surveyors Ireland (SCSI) says that almost nine out of 10 apartment block managers claim they do not have enough cash to cover these costs.
Separately, 9 per cent of managers confirm they have no such funds for this purpose.
How does VAT in Ireland compare with countries across Europe? A guide to a contentious tax
‘I was a cleaner in my dad’s office, which makes me a nepo baby. I got €50 a shift’
Will we have a tax liability if Dad gives us his home while he is alive?
Finding a solution for a tenant who can’t meet rent after splitting with partner
Sinking funds are reserves used by property managers to maintain or replace apartment blocks’ common areas and lifts, stairs, roofs, alarms or other structures and services.
According to the SCSI, apartment owners contribute regularly to these funds, but most of those analysed for a report, which the organisation will publish on Wednesday, found that these reserves did not have enough cash.
Society president Kevin Hollingsworth warned that it was not sustainable to leave these funds short of money and that apartment owners would face future financial risks if they failed to plug the gap.
The report, Real Cost of Apartment Block Maintenance – Examination of Sinking Funds, calculates that apartment owners should contribute about €2,000 a year to maintenance.
However, surveyors found they generally give €200-€300 annually to pay for a block’s upkeep, leaving a significant shortfall.
The study covered 495 individual blocks, with about 38,000 apartments.
More than half the property managers that answered said less than 30 per cent of the apartment complexes for which they were responsible had adequate sinking funds.
Mr Hollingsworth said 40 per cent of property managers blamed owners for not wanting to pay higher charges.
Others argued that owners lacked knowledge of the real long-term costs of maintaining apartment blocks while a fifth of managers said owners would rather pay “as and when” costs arise.
The report used real building costs to analyse nine blocks of varying size and age in Dublin to calculate the funds needed to maintain them over 20 years.
It calculated that for a building with up to 49 apartments, maintenance costs were €2,042 annually per home, but owners were contributing €237, leaving a €1,805 gap.
Estimates for bigger blocks showed similar shortfalls, ranging from €1,431 for complexes with up 99 homes to €1,756 for those with more than 200 apartments.
Mr Hollingsworth argued that owners should recognise that inadequate funds undermined managers’ ability to do essential repairs and replacement.
“As a result, the standard of the property will decline, residents’ living standards will decline and their health and safety may even be compromised,” he said.
The report highlights that more older developments lack adequate upkeep cash or have no funds at all, according to the society’s president.
He predicted that this would pose real challenges to properties approaching 20 years of age.
Mr Hollingsworth noted that many of those were built during the Celtic Tiger era.
Consequently owners may already be dealing with wider defects. However, he cautioned that it was “crucial that they prioritise building an adequate sinking fund” to ensure there was enough cash to replace key structures and services when needed.
Mr Hollingsworth said it was “disappointing” that owners and managers had failed to tackle the problem since the society’s last report on the issue in 2018.
- Sign up for the Business Today newsletter and get the latest business news and commentary in your inbox every weekday morning
- Opt in to Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Join The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
