Q I am on the board of the owners' management company of a development in south county Dublin which recently took control of the common areas from the developer in line with the Multi-Unit Developments Act. However, to our shock and dismay when we checked the bank account we realised that there is a high proportion of service charges outstanding (some for two to three years) and very low funds in the account.
We understand that as directors of the management company we have an obligation to continue the services to the scheme such as gate and lift maintenance, block insurance, cleaning and other bills which we are committed to doing, but we will shortly find ourselves with little or no funds to meet the ongoing expenses.
We are unsure as to whether we should use some of the sinking fund to help us meet day-to-day expenditure until we can collect the outstanding service charges (which will also cost us in solicitors fees etc) or call an EGM and ask everyone for a once-off payment between now and the end of the financial year (February 2014). Any advice on protocol in terms of our next steps would be appreciated.
A When the common areas to a multi unit development are transferred to an owners’ management company, the owners management company becomes the lessor or landlord to each apartment in the estate and as such takes responsibility for the lessors obligations detailed in the long lease for each apartment.
These obligations will include such items as building insurance, lighting, waste collection, fire and life safety system maintenance, lift maintenance and other services provided for the benefit and enjoyment of the unit occupiers.
In addition, the normal costs associated with the operation of the owners’ management company, such as audit fees, companies office fees, management agents fees and legal fees, must also be funded from the service charges collected.
You should carry out a review to ascertain the following:
- What measures have been taken to recover service charge arrears and what engagement has the owners, management company had with the owners in arrears.
- Is the service charge being levied adequate – have you undertaken a review to see if the expenditure incurred is in line with the budgeted outlay in each category?
- If the owners management company has a negative balance sheet at the end of the last financial year, you may consider levying the deficit amount in accordance with Section 18(14)(c) of the Multi-Unit Developments Act.
- Is the money in the sinking fund properly apportioned as sinking fund monies are ring-fenced for the purposes of expenditure detailed in Section 19 of the Multi-Unit Developments Act.
- Have you carried out a forecast analysis of income and expenditure to the end of your financial year to give you a clear indicator of funds required to operate until year end.
It is important to note that the Multi-Unit Developments Act 2011 prohibits the use of sinking fund monies for any expenditure other than those prescribed in the Act. In the event that you wish the funds to be re-apportioned you may make a request to the circuit court under Section 24 of the Act.
I think it would be a good idea to call an annual or extraordinary general meeting of owners. In addition to it being a requirement before you can levy any further charges, it would also be good practice in order to consider a service charge budget for the next financial year and to generally update the owners.
Protocol for convening an annual general meeting or extraordinary general meeting are contained in the Companies Acts and also in each individual memorandum and articles of association for each company. The Office of Director of Corporate Enforcement issues many helpful guides to companies and the Company Law Handbook on Residential Management Companies is available free online or in hard copy. (odce.ie)
It is important that when a general meeting is convened that the purposes of the meeting are contained in the agenda issued to owners and that as much information as possible is made available with the notice and prior to the meeting.
One of the main benefits to the directors in calling a general meeting of owners is to measure the sentiment and support of the unit owners and to receive a clear mandate from them as to what actions the directors should take. It is also an opportunity to make owners aware of the circumstances of the company so that until the financial circumstances improve they should lower their expectations regarding services.
Buying an apartment in a multi-unit development places a contractual, and in my opinion, moral obligation on the purchaser to take part in co-operative living. Whether an owner gets involved in the operation of an owners’ management company by becoming a director or supports its board by attending meetings and offering support is down to their own time commitments and personal circumstance. However, the least an owner should be expected to do is pay their service charges promptly. It is worthwhile remembering that those unit owners who do not pay service charges are enjoying the services because their neighbours and co-owners have paid.
Paul Mooney is a chartered surveyor and member of the Property & Facilities Management Professional Group of the SCSI
Q My wife and I have been renting a two-bed apartment for three and half years. The landlord has been very nice in the past and we believe we have been good tenants. We are expecting a baby next month and have asked the landlord to remove the spare bed in the single room to facilitate the cot if possible. He declined as he has nowhere to store it. I suggested that we could store it safely in a family member's spare room. His reply was that the bed must remain in the apartment. Can you advise please if the landlord is in the right here and if there is anything we can do?
A This is a delicate question and it’s unfortunate that the landlord appears not to be able to accommodate you or be somewhat flexible in his approach. However, if you rented the apartment furnished then you took the property with that position. It is not within the standard leasing arrangement incumbent on a landlord to remove or incur a cost to store items of furniture because a tenant wishes to free up some space. In your case it is a genuine request. I note that you have offered to store it in a family member’s room but this comes with full responsibility should anything happen to it. You should speak with your landlord again and reassure him that you will take full responsibility for it if you are prepared to do so. If he does not agree then unfortunately there is very little you can do about it.
Fergal Hopkins is a member of the Society of Chartered Surveyors Ireland, scsi.ie
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