Buying an apartment, management fees?

DrPhilG

I'm looking at buying an apartment, but I have a few queries related to management fees.

First off, how exactly does it work? The fees cover the maintenance of the building etc, I get that. In my instance there are no shared areas, only 10 apartments in the block and all have their own front door direct to outside. So what exactly would the fee cover?

I have read a few threads here on the subject and I see people mentioning the upkeep of the windows etc? Surely the windows of my own apartment would be my responsibility?

Insurance. Another thing I see mentioned is that fees cover block insurance. Does that mean I would not need house insurance? Or just contents cover?

Finally, and this is where it gets confusing... There currently is no management company. The apartments are currently still owned by the builder who maintains them himself. The estate agent says that a property management company will not take over until the apartments are sold, (5 gone, 5 to go). The agent has given an estimation for the fees based on the average in the area but admits that this is not a set figure yet.

Is that normal or something to worry about? The estimate that the agent gave was quote low given that there are no communal areas as such.

TooObvious

Hi,

There is in fact a shared area in any apartment block - that is the structure itself. The maintenance and upkeep of this structure, including the buildings insurance is generally paid for through a service charge (as opposed to a management fee), depending on the set up refuse charges may also apply. The service charge would normally include for these items as well as a management agent fee (if the OMC employ an agent). If there are any external common areas, with car parking, electric gates, landscaping - then there would be a need to look after this as well. There are lots of possible costs.

Insurance - as noted above the OMC should organise a block policy only, the apartment owner does not need "house insurance" though would be advised to arrange contents cover.

There should be an OMC in place already, what is likely is that the developer is not relinquishing his directorship until all properties have been sold. Thereafter there will be a requirement for a number of the owners of apartments to step forward as directors to effectively run the development! This will enable you to set service charges and employ a Managing Agent as you see fit or, alternatively, as it is a small development, take on the day to day management between yourselves.

BTW - OMC - Owners Management Company

Trizo

As TooObvious has stated there can be any number of costs which could include the following depending on what your development has(or doesn't)

Managing Agent fees
Insurance – block and public liability
Fire System maintenance
Electricity for common areas
Sinking Fund
Cleaning
Waste disposal
Window cleaning
Accounts
Auditors
CRO Fees
Directors Insurance
Landscaping
Security
Drains maintenance
Vermin Control
Lift maintenance & support
Gate maintenance

When a developer builds an estate they have to setup a Mgmt Company to run the estate and manage the above this is unless the development is managed by the co. council. typically the builder(s) will be a director of this company.

When a developer is finished building an apartment block or estate, they are supposed to hand over ownership to the management company – this is known as vesting and allows the owners full control of the day to day running of the estate. This mean that owners will have to become directors on the mgmt. company to then run the estate .

Its all very normal , sometimes the developer hangs onto control of the mgt company longer than they are supposed to and other times they are happy to hand over , when buying the apartment your solicitor should take you through all of this. The EA can tell you the name of the Mgmt company that has been setup to manage the estate and it would be worth looking at the health of this company to ensure you know what you are buying into.

Annual service charges can rise and fall btw and are set each year at the mgmt. company AGM.

Paulw

DrPhilG wrote: »

In my instance there are no shared areas, only 10 apartments in the block and all have their own front door direct to outside.

Shared space could be the path in front of your apartments, the buildings attic space, etc.

DrPhilG wrote: »

Insurance. Another thing I see mentioned is that fees cover block insurance. Does that mean I would not need house insurance? Or just contents cover?

You will need your own contents insurance. The building insurance is covered in your management fees.

DrPhilG wrote: »

Finally, and this is where it gets confusing... There currently is no management company. The apartments are currently still owned by the builder who maintains them himself. The estate agent says that a property management company will not take over until the apartments are sold, (5 gone, 5 to go). The agent has given an estimation for the fees based on the average in the area but admits that this is not a set figure yet.

Is that normal or something to worry about? The estimate that the agent gave was quote low given that there are no communal areas as such.

Not unusual for the company to not be formed until all units are sold.

Your contracts should detail a lot about what you are liable for, what the management company is liable for, etc. It will also have a specific calculation formula which will show the percentage management fee you will be liable for. It usually is along the lines of the area of your unit compared to the whole area of the development. So, the budget is set each year and then apportioned to each unit.

Fees can vary. They will fluctuate a bit year on year, depending on what needs to be done.

DrPhilG

Thanks for the info folks.

The apartments were built/renovated a few years ago and currently the entire property is managed by the builder.

There are electric gates.

DrPhilG

I think I was just worried that I would buy the place and then be told that the management fees would be huge.

The average in town is €700-800 but the estate agent reckons these will be a bit cheaper because there is no lift, no communal areas inside etc.

riclad

You can ask the estate agent what are the fees,
the fees cover insurance, and a sinking fund ,those gates might need fixing in 5 years , There could be a leak in the roof, lights need fixing in hall ,etc

TooObvious

They'll possibly be a bit cheaper but not much, 10 apartments is a small development, so you'll be losing out on economies of scale.

DrPhilG

riclad wrote: »

You can ask the estate agent what are the fees

There are none set yet, that's my point. They won't be put in place until the units are almost all gone.

athtrasna

DrPhilG wrote: »

There are none set yet, that's my point. They won't be put in place until the units are almost all gone.

And when they are set they're only for the first year. Because of what they cover it's impossible to fix management fees

mickmac76

In my experiance places with electric gates and lifts tend to have higher fees as both can require high maintenance.

amtc

I pay just over 900. Own door duplex. No lift. Windows cleaned. Bins done. Grounds maintained block insurance. Quite happy. I had mice last year and they came round and deinfested me as I quivered upstairs.

amtc

Oh I also claimed on block insurance for leak from upstairs. Have contents insurance

DrPhilG

Thanks for all the info.

Despite the lack of a set figure I think I'm happy to proceed.

I've done the math and even if it's a higher figure than the estate agent expects it still all works out pretty well given the price and location.

dont bother

i bought an apartment, and was told yes they cover insurance, and sinking fund and any repair work within the shared spaces.

my apartment was flooded from above THROUGH the "fabric of the building" which is shared space, ie: the management company should pay. they did not. they are saying they wont, and just ask the EA whether or not they can check to see if there is a clause within their insurance with an EXCESS...

they have a specific mention in mine for FLOODING which means the excess (the amount i have to pay myself before any money comes from management co) is at a rate of €2500. the repairs needed was to the walls, floors, roof, plastering, and electrics and cost me just over that amount.

i'm taking them AND the owner of the apartment to court soon and it'll have been a year or more before i see the money back.

it is a TOTAL scam and management fees are set up to fleece you.

if i had the chance again, i would choose somewhere to live that does not have management fees. i would live in a house.

they are disgustingly irish thing to have. the amount some people pay.
mine are very cheap in comparison to some places.... at 2000 a year... my friend in another complex outside the city pays 2800 per year.

we really need to get management companies regulated by the government. it's sickening.

i have stopped paying them though since this happened, and i've also told them i will not be answering their calls, emails or any other communication seeking payment of my fees. they are scum. buy a house.

Samuel T. Cogley

dont bother wrote: »

we really need to get management companies regulated by the government. it's sickening.

YOU are the Management Company(TM).

The government doesn't need to regulate them*, the members do; shareholders need to get off their derrière.

*more than they already do through company law, the MUD act etc. etc.

Del2005

dont bother wrote: »

i bought an apartment, and was told yes they cover insurance, and sinking fund and any repair work within the shared spaces.

my apartment was flooded from above THROUGH the "fabric of the building" which is shared space, ie: the management company should pay. they did not. they are saying they wont, and just ask the EA whether or not they can check to see if there is a clause within their insurance with an EXCESS...

they have a specific mention in mine for FLOODING which means the excess (the amount i have to pay myself before any money comes from management co) is at a rate of €2500. the repairs needed was to the walls, floors, roof, plastering, and electrics and cost me just over that amount.

i'm taking them AND the owner of the apartment to court soon and it'll have been a year or more before i see the money back.

it is a TOTAL scam and management fees are set up to fleece you.

if i had the chance again, i would choose somewhere to live that does not have management fees. i would live in a house.

they are disgustingly irish thing to have. the amount some people pay.
mine are very cheap in comparison to some places.... at 2000 a year... my friend in another complex outside the city pays 2800 per year.

we really need to get management companies regulated by the government. it's sickening.

i have stopped paying them though since this happened, and i've also told them i will not be answering their calls, emails or any other communication seeking payment of my fees. they are scum. buy a house.

The excess on all block insurance policies is always that high if not higher.

Any country that has apartments has similar, how else does the building get maintained?

You know that you'll never be able to sell until you pay the money you owe.

caviardreams

dont bother wrote: »

i bought an apartment, and was told yes they cover insurance, and sinking fund and any repair work within the shared spaces.

my apartment was flooded from above THROUGH the "fabric of the building" which is shared space, ie: the management company should pay. they did not. they are saying they wont, and just ask the EA whether or not they can check to see if there is a clause within their insurance with an EXCESS...

they have a specific mention in mine for FLOODING which means the excess (the amount i have to pay myself before any money comes from management co) is at a rate of €2500. the repairs needed was to the walls, floors, roof, plastering, and electrics and cost me just over that amount.

i'm taking them AND the owner of the apartment to court soon and it'll have been a year or more before i see the money back.

it is a TOTAL scam and management fees are set up to fleece you.

if i had the chance again, i would choose somewhere to live that does not have management fees. i would live in a house.

they are disgustingly irish thing to have. the amount some people pay.
mine are very cheap in comparison to some places.... at 2000 a year... my friend in another complex outside the city pays 2800 per year.

we really need to get management companies regulated by the government. it's sickening.

i have stopped paying them though since this happened, and i've also told them i will not be answering their calls, emails or any other communication seeking payment of my fees. they are scum. buy a house.

"they"?
"them"?

More accurately, you. You are the management company, along with the other owners.

It scares me a little that some people make such a significant purchase without realising how it works.

Paulw

dont bother wrote: »

my apartment was flooded from above THROUGH the "fabric of the building" which is shared space, ie: the management company should pay. they did not. they are saying they wont, and just ask the EA whether or not they can check to see if there is a clause within their insurance with an EXCESS...

they have a specific mention in mine for FLOODING which means the excess (the amount i have to pay myself before any money comes from management co) is at a rate of €2500. the repairs needed was to the walls, floors, roof, plastering, and electrics and cost me just over that amount.

i'm taking them AND the owner of the apartment to court soon and it'll have been a year or more before i see the money back.

we really need to get management companies regulated by the government. it's sickening.

i have stopped paying them though since this happened, and i've also told them i will not be answering their calls, emails or any other communication seeking payment of my fees.

YOU are part of the management company. You are a member of the company. You taking them to court effectively means you are also taking yourself to court, and any winnings you get (if any) from a court case, you will also have to pay your share of.

Every insurance policy anywhere has an excess. On a block insurance policy, an excess of 2500 is actually small. Some policies have an excess of 10,000.

Management companies are totally regulated, through the Companies Act and also other OMC acts. You probably need to educate yourself more by reading up on management companies.

With regards you not paying your fees - you can't sell your unit until fees are paid in full, the management company can remove services from you, possibly including removing you from the block insurance policy, which would then require them to notify your mortgage company, causing you to be in default of your obligations. They can also take you to court, which they will win with ease, and then you would be liable for your outstanding fees, plus all legal costs.

So, ultimately, you will have no choice but to pay all your management fees.

TooObvious

OP, unfortunately you will always hear stories like those of Dont Bother.

You though seem to be doing your homework and taking the matter seriously. Many people bought houses and apartments in managed developments back in the good old days without reading documentation or indeed getting adequately advised by solicitors, I can tell you that many would have paid more attention to buying a pair of shoes!

These are generally than the same people who with-hold Service Charges (for that is what they are) and expect others to pick up the tab. I'm a director on an OMC and every AGM we are greeted by the same empty vessels requesting us to get the development handed over to the council - not something we want, and also as directors why would we seek to do disband the company - we continue to ask the same people to come back with a proposal to do so and every year - nothing.

That's my rant over - good luck with your purchase!

Konka

is that per year?

DrPhilG

Update, too many things smelled fishy with this deal so I backed off.

Thanks to all for the advice.

DrPhilG

Wee bump with a related question.

My solicitor advised me back at the time of this question that they would not act as my solicitor for the purchase of an apartment without a management company in place, because they said it was not legal to sell an apartment in that situation.

I've since had that conversation with an estate agent who was selling an apartment without a company in place and he said the solicitor was talking crap.

Who is right?

Michael D Not Higgins

For new apartments, the developer is not allowed to sell any units until the OMC is set up. Keep in mind your solicitor works for you, the estate agent doesn't.

happyfriday74

i bought an apartment, and was told yes they cover insurance, and sinking fund and any repair work within the shared spaces.

my apartment was flooded from above THROUGH the "fabric of the building" which is shared space, ie: the management company should pay. they did not. they are saying they wont, and just ask the EA whether or not they can check to see if there is a clause within their insurance with an EXCESS...

they have a specific mention in mine for FLOODING which means the excess (the amount i have to pay myself before any money comes from management co) is at a rate of €2500. the repairs needed was to the walls, floors, roof, plastering, and electrics and cost me just over that amount.

i'm taking them AND the owner of the apartment to court soon and it'll have been a year or more before i see the money back.

it is a TOTAL scam and management fees are set up to fleece you.

if i had the chance again, i would choose somewhere to live that does not have management fees. i would live in a house.

they are disgustingly irish thing to have. the amount some people pay.
mine are very cheap in comparison to some places.... at 2000 a year... my friend in another complex outside the city pays 2800 per year.

we really need to get management companies regulated by the government. it's sickening.

i have stopped paying them though since this happened, and i've also told them i will not be answering their calls, emails or any other communication seeking payment of my fees. they are scum. buy a house.

A property managing agent is(or should be!) regulated by the PRSA.

Your solicitor would have got the full details of the Management Company and what is covered buying the unit as part of the conveyancing process when you bought the apartment.

Withholding fees is foisting the costs of services onto your neighbours which is completely unreasonable.

DrPhilG

Michael D Not Higgins wrote: »

For new apartments, the developer is not allowed to sell any units until the OMC is set up. Keep in mind your solicitor works for you, the estate agent doesn't.

Ah, I see.

The 2 examples I'm thinking of, one in my OP and another one I saw recently are different.

In the OP the developer had built the block, rented some out and was then looking to sell them all. So in that situation the solicitor is correct in that the developer and/or estate agent was in the wrong.

I enquired about an apartment the other day which I think was built 15 years ago so I'm guessing is a sale by someone other than the developer. Not sure in that case why it doesn't have a company in place now.

Michael D Not Higgins

DrPhilG wrote: »

Ah, I see.

The 2 examples I'm thinking of, one in my OP and another one I saw recently are different.

In the OP the developer had built the block, rented some out and was then looking to sell them all. So in that situation the solicitor is correct in that the developer and/or estate agent was in the wrong.

I enquired about an apartment the other day which I think was built 15 years ago so I'm guessing is a sale by someone other than the developer. Not sure in that case why it doesn't have a company in place now.

I'm not fully aware of the MUD Act and how it applies to developments before it was enacted. Also, there are some developments that don't need to have an OMC, e.g. if they have fewer than 5 units.