City Living: Residents should watch their service charges, warns Edel Morgan
Eddie Hobbs' Rip off Ireland exposé on rampant overcharging by many sectors has tapped into mounting public fury over the issue but one area he didn't delve into - and which is a huge expense in many people's lives - is inflated service charges in apartment and housing developments.
The unwitting residents of some developments are being fleeced by management agents who are not being held accountable for their profligate spending. Independent management consultant Michael Noonan, whose role is to advise and trouble-shoot in residential developments, says management agents are under no legal or moral obligation to get value for money for residents.
"If a residents' committee is not strong it may get ripped-off by failing to ask questions. They are effectively giving the management agent a blank cheque book. The Irish can be shy about asking hard questions, because they don't want to be seen as a troublemaker."
A management agent is often appointed by a developer before a scheme is complete to oversee maintenance and repairs. "At this stage the agent may have to be able to spend funds as they see fit without having to answer to a resident's board. The developer may not get involved, although some developers have approached me to ask my opinion on good agents and are taking a responsible approach."
Generally, when an apartment or housing development is sold, the freehold is handed over to the management company which is made up of a committee of residents. In a new estate or apartment development that is partially occupied but isn't complete, it is a good idea to form an ad-hoc residents committee to keep tabs on expenditure by the agent.
Noonan advises that when residents are given control, they should exercise it fully.
"The key to avoiding problems down the line is to form a strong residents' committee and to give the agent a clearly defined role. It's a complex arena and many things can go wrong if residents don't get involved. With ownership comes responsibility but some people don't want to step up to the plate or sit on a board."
The intricacies of running a management company are such that estates around the country are dealing with the fall-out of failure. When things go wrong, the vitriolic finger-pointing that ensues can make it difficult to find a resolution.
"Rumour, innuendo and suspicion on the part of the residents can be misplaced," he says. "There are some costs the residents will query that are actually legitimate. For example, the agent has a legal requirement to maintain the lifts. If there are 10 lifts in a complex, it will cost €4,000 to maintain each one, amounting to €40,000 per annum, which can seem a huge sum to residents.
"Most blocks will have an emergency service and a call-out can be costly. In one complex over a weekend, the emergency service had to call out several times to fix a door which was repeatedly broken by people attending a party. At around €300 per call out, the bill came to €1,800.
"When these kind of costs arise, the residents ask questions, the agent can get defensive and the rows spiral. People stop paying their service charge and the development runs into difficulty."
However, if a management company is less than vigilant, a crooked agent can trump up imaginary call-outs - by cleaners, alarm maintenance people and repair people - and charge the residents for them.
"It's an unregulated market and there are cowboys who think to themselves that they'll only be doing it for three or four years, so they'll make as much as they can."
Incompetence can also prove costly. Bad planning and inexperience can cause an agent or its staff to make errors of judgement.
Noonan recalls an instance where residents in one development were spending €4,500 a year repairing locks. On foot of advice they subsequently made a considerable saving by installing a new locking system for €2,800 which has needed no repairs. "There needs to be forward planning. It's better to paint a whole building for €18,000 than to do it one corridor at a time for €3,000 a pop."
"You need an established person who is up to speed on good practice. Good staff are also essential.
"Sometimes contractors look at management companies as an endless bucket of money. If they sense a management agent's staff are inexperienced, they won't look a gift horse in the mouth and will charge more."
Michael Noonan is involved in setting up a new representative body for management companies called the Institute of Residential Management Companies. Anyone looking to find more details can contact him on IRMC@operamail.com
