Management Companies & Common Areas

Fruit1985

Hello,

I am currently purchasing an apartment with a mortgage:

1. The common areas have not been signed over to the management company but they are in the process of transferring. We have that in writing.

2. One of the conditions of the mortgage is that it complies with MUD and this is the only exception.

3. My friends live in the same apartment complex and I can tell it's really well kept so this is a technicality for me - obviously not the solicitor and bank. I plan to live in the apartment for next 10 years.

The deal is currently stalled as I am waiting for my mortgage provider (KBC) to reply based on my solicitors enquiry.

Does anyone else have any experience here? Do banks tend to overlook this or is there a strong possibility they will reject the drawing down of the mortgage?

Thanks,

Kieran

athtrasna

Doesn't make sense to me? Transfer of common areas used to be after the last unit is sold, has this changed?

Fruit1985

- For all new apartment developments it needs to be transferred over from development company after a % of the apartments are sold (as far as I can tell)
- For existing apartments it was meant to happen 6 months after the act came into force in 2011 (as far as I can tell.)

I imagine given speed of legal issues in this country 6 months was probably an unattainable date.

Fruit1985

I just came across this.

"The act did not provide a sanction for failure by a developer to comply with these statutory obligations, but the obligation to transfer remains with the developer. In cases where no units had been sold before 1 April 2011, there should not have been any sales of units unless the common areas had already been transferred to the management company."

and

"Solicitors should, of course, bring any title issues present in advance of drawdown to the attention of a lending institution as early as possible, and certainly before any drawdown. This would necessitate a qualification to the solicitor’s undertaking – to be agreed with the lending institution in writing in advance of drawdown of the loan funds (or first drawdown in the case of stage payment loans). It would also necessitate a qualification to the solicitor’s certificate of title when lodging registered title and deeds with the lending institution at a later stage. The fact that the relevant parts of common areas had not yet been transferred to an OMC in a pre-2011 development at the time of a sale of a unit in such a development does not constitute a ‘blot’ on the title at the date of the certificate of title, and does not require qualification of the undertaking or certificate of title."

... so it looks like it's ultimately the bank's decision and my solicitor is following protocol. Has anyone else gone through this and what was the outcome?

Paulw

Our common area hasn't been transferred, and the last unit was sold in 2006. It's an ongoing issue, but hasn't stopped units being bought/sold at all.

Fruit1985

Paulw wrote: »

Our common area hasn't been transferred, and the last unit was sold in 2006. It's an ongoing issue, but hasn't stopped units being bought/sold at all.

So KBC tend to not approve mortgages due to this my solicitor has informed me. BOI tend to.

My solicitor informed me that if any bank says no then it's advisable to walk away from the property. If the common areas aren't signed over in 5 years time then it will be harder to sell down the line. Also the management company incurs legal costs of signing over so that may be passed on to me also down the line.

Kieran

Paulw

Fruit1985 wrote: »

My solicitor informed me that if any bank says no then it's advisable to walk away from the property. If the common areas aren't signed over in 5 years time then it will be harder to sell down the line. Also the management company incurs legal costs of signing over so that may be passed on to me also down the line.

I'm not sure how it will be harder in 5 years time than it is now.

Any costs of a management company are shared equally with all the members, which you would become part of. That is how the management company runs. All costs are shared - lights, maintenance, repairs, refuse, landscaping, etc.

Fruit1985

The point I was trying to make was

- if banks are rejecting now based on this condition and
- in 5 years time if the common areas haven't been signed

...then it's be harder for me to sell - as banks are less likely to approve for new potential buyers as this was meant to happen six months after the act came into force into 2011.

Anyway after asking a few other folks it seems like KBC are the only bank that have a problem with this.

P. Breathnach

I was at the "sale agreed" point on an apartment, and found that the common areas had not been transferred to the OMC (and, additionally, no sinking fund had been created). I didn't discuss it with the bank or my solicitor: I walked.

No point buying into potential trouble.

Lantus

The transfer can cost either party anything from 5k for a quick and simple transfer to 20k for larger more complicated ones. Adding in receivers makes it even more tricky.the bank is probably being prudent in looking at the huge legal hole that encompasses receivers and liquidators who quite possibly may have no legal obligation to undertake this. As an apartments value is dependant on the omc lack of title is a critical long term issue they are right to consider.

We almost need a receiver to burn an omc and all unit owners to clarify or reinforce the law.

seamus

Paulw wrote: »

Our common area hasn't been transferred, and the last unit was sold in 2006. It's an ongoing issue, but hasn't stopped units being bought/sold at all.

It'll get harder. The MUD act imposes certain obligations on management companies, so the longer the issue goes on, the more potential costs are building up for the owners which will ultimately have to be paid down the line in higher management fees.

I guess why the banks care is that this becomes a charge payable by each unit, which in effect becomes a lien on the property in addition to the mortgage.

In the event that, for example, a large common area between 20 units requires €100k of work before the council will take it in charge, each unit becomes liable for €5k.

Paulw

seamus wrote: »

It'll get harder. The MUD act imposes certain obligations on management companies, so the longer the issue goes on, the more potential costs are building up for the owners which will ultimately have to be paid down the line in higher management fees.

In the event that, for example, a large common area between 20 units requires €100k of work before the council will take it in charge, each unit becomes liable for €5k.

Obligations, yes, but there are no penalties for the developer who doesn't do it. We have been chasing the developer since 2006. It's worse than pulling teeth.

But, there are many developments (like ours) where nothing will ever be taken in charge by the council. It's an internal common area, not a public area. So, a space surrounded by units. Parking spaces, green area, play area, but no road, per se.