About five years ago, my wife and I bought our first home, a nice apartment outside of Cork. We love the apartment, but we’re growing tired of increasing management fees and worry that others are not paying their fair share and driving up costs for those of us that pay.
One of the reasons we wanted to get this place is so we could eventually save up for a house, but the increasing fees are making that difficult.
Is there anything we can do to agree a longer-term approach to fee payments with the management company? Or should we just try to get a smaller house with no fees?
Your conundrum is certainly not unique and is being replicated across the country to varying levels of concern. Without significant systemic improvement, this will continue.
‘I’m worried that a wind farm construction entrance close to my home will cause damage and disruption. What can I do?’
‘Apartment management fees are hindering our ability to save for a house. What can be done?’
‘How can we go about building a sustainable family home without breaking the bank?’
‘Is it true we have no legal right to our sea view?’
Service charges must be democratically agreed by the members of your owners’ management company every year at the annual general meeting.
It is not uncommon for the yearly budget to be generic in nature, and also underfunded, as members put pressing issues on the long finger with the intention that it will be better resourced “next year”.
Noncompliance with building standards and poor construction in many developments compounds the problem. The lifespan of apartment blocks requires significant funds to replace wasting assets. If they are not replaced due to inaction and failure to establish a separate and properly financed sinking fund, depreciation accelerates.
The best way to inform the members of what is an appropriate and sustainable sinking fund contribution is to have an independently drafted Building Investment Fund report drawn up as part of the annual budget process. This document will identify all depreciating assets within your development, how much it will cost to replace them, and when they will need to be replaced over a 20-year period. It will shine a bright light on future costs and demonstrate that a plan is needed to meet these challenges before an emergency situation arises.
Unfortunately, it is common knowledge among chartered property and facility manager surveyors that the process of service charge debt recovery is not fit for purpose. Those who do not pay service charges on time do not face proportionate consequences for their actions.
I think there should be a uniform interest penalty rate that is enforced by the courts for late payment of service charges so that they can be more easily recovered. Additional remedies such as recovery of service charges from rental payments or even forfeiture of the property in appropriate circumstances must also be considered, I believe, to deter noncompliance.
Buying a smaller house with no service charges may seem appealing, but it’s important to remember that all properties come with running costs
If some of these measures are to be introduced, it will take time, and that probably won’t help you in your present situation. One thing you could do – if you haven’t already – is to participate directly in the management of the development as a director. This will ensure that your views and concerns – and those of other responsible owners and residents who share them – are represented.
The process of setting proposed budgets each year would include your views as a director, and as a director you will receive all the information that is available on making up the budget for the next year.
This should enable you to make an informed decision about the future. If you can see progress being made or even a pathway to progress, you might decide to stay put. If having seen the figures you believe the situation is going to continue to deteriorate, you might decide it’s better to move on.
Buying a smaller house with no service charges may seem appealing, but it’s important to remember that all properties come with running costs. So, while you won’t have to depend on others, you will still have to fund day-to-day running costs, while also putting some funds aside to replace big-ticket items such as roofs, doors, windows and so on.
Do your market research, and work through the various financial scenarios of selling the apartment now and buying a home, or staying put for the medium term.
Paul Huberman is a chartered property and facilities manager and a fellow of the Society of Chartered Surveyors Ireland
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