Outstanding mgmt fees - a good thing?

hmmm

I know of a well-run complex where most owners are paying their fees, and there is no concern about being able to service its current budget. It levies 15% interest on the small number of owners who don't/won't pay. The 15% is in the lease.

To my mind, this 15% is potentially going to bring in significant fee income for the complex over the coming years/decades when the apartments are eventually sold, and perhaps people shouldn't get too upset about carrying a small number of debtors. Am I missing something?

p.s. it's well past time that management companies had the right to force-sale properties owned by people who are coasting along on the backs of others.

godtabh

hmmm wrote: »

I know of a well-run complex where most owners are paying their fees, and there is no concern about being able to service its current budget. It levies 15% interest on the small number of owners who don't/won't pay. The 15% is in the lease.

To my mind, this 15% is potentially going to bring in significant fee income for the complex over the coming years/decades when the apartments are eventually sold, and perhaps people shouldn't get too upset about carrying a small number of debtors. Am I missing something?

p.s. it's well past time that management companies had the right to force-sale properties owned by people who are coasting along on the backs of others.

A recent four ruling means the interest can’t be collected

Lantus

Omcs plan for spending within a single year at a time. 15% less means some projects or sinking fund is neglected. Future money is not worth anything when a lift or roof needs replacing today.

Sonny noggs

Can you clarify what the 15% entails, is it 15% per annum or a one off of 15%?

Having apartments in long term arrears may encourage other owners to stop paying if they see there are no consequences, it may also make it more difficult for other owners to sell - if the arrears represent a significant percentage of the total service charges then a potential buyer may be put off.

Dav010

From experience of being a MC director, interest is virtually impossible to enforce/collect. If you could force a sale for non payment of fees, a majority of owners (in some developments this could be just a few people who own multiple units) could push up fees with the intention of forcing others out. The best that can be done if the owner can’t or won’t pay, is a lien on the property so that when it sells, the MC gets its money.

Homer

Dav010 wrote: »

The best that can be done is a lien on the property so that when it sells, the MC gets its money.

As far as I am aware, that is the only thing that can be done really.

Dav010

Homer wrote: »

As far as I am aware, that is the only thing that can be done really.

I was at meetings where owners wanted MC to go to court to force owners to pay, by the time you pay legal fees it wasn’t worth it and if the owner hasn’t the money to pay, you are just wasting more MC money. The application for a lien is cheaper and the owner knows that the MC has to be paid before sale completes.

DublinCJM

Dav010 wrote: »

The best that can be done if the owner can’t or won’t pay, is a lien on the property so that when it sells, the MC gets its money.

Presumably this is standard that service charges are paid when the property sells.

In ours, we employ APCOA to manage the parking spaces. Owners who pay their service charges get a parking permit which must be displayed on the car, those who don't pay can't park there or they get clamped.

Landlords who are renting their apartments, have to pay their service charges, or their tenants get clamped if they haven't got a valid permit.

Sorted it out quick enough.

Dav010

DublinCJM wrote: »

Presumably this is standard that service charges are paid when the property sells.

In ours, we employ APCOA to manage the parking spaces. Owners who pay their service charges get a parking permit which must be displayed on the car, those who don't pay can't park there or they get clamped.

Landlords who are renting their apartments, have to pay their service charges, or their tenants get clamped if they haven't got a valid permit.

Sorted it out quick enough.

I know one of the apartment buildings I own a unit in tried this, problem was the spaces came with the property so clamping a car in a space they actually own was problematic and the practice was abandoned. In developments where spaces are not owned by unit owners, it is a great, albeit very aggressive way of getting fees.

Lantus

Omcs ability to recover and enforce fees is dreadfully weak in relation to the value of property being maintained.

If I don't pay my 100eu road tax my car can be seized and removed from me on the spot. Don't pay your 2k fees 5 years in a row and the cost to recover can still be prohibitively high and result in no payment if its contested or owner has no money to give.

One rule for the rulers....

Bass Reeves

Lantus wrote: »

Omcs ability to recover and enforce fees is dreadfully weak in relation to the value of property being maintained.

If I don't pay my 100eu road tax my car can be seized and removed from me on the spot. Don't pay your 2k fees 5 years in a row and the cost to recover can still be prohibitively high and result in no payment if its contested or owner has no money to give.

One rule for the rulers....

Management companies can put a lien on the deeds of the property. Recently bought a holiday home which was repossessed by a lender. From talking to my solicitor there was 2-3 years management fees due. These along with 3-4 years property tax had to be paid by lender ( out of sale price) before deal could be completed.

A lien stay on a property for ages. Usually those that do not pay have financial issues and property goes for sale sooner rather than later

DublinCJM

Dav010 wrote: »

I know one of the apartment buildings I own a unit in tried this, problem was the spaces came with the property so clamping a car in a space they actually own was problematic and the practice was abandoned. In developments where spaces are not owned by unit owners, it is a great, albeit very aggressive way of getting fees.

I don't think it's aggressive. You're obliged to pay your management fees.

In ours, a portion of the annual service charge is allocated against maintaining the property, a portion towards sinking fund contribution, and a (much smaller) portion to the car space (or two if you bought two spaces).

Parking was an issue, in that people who rented, and then left, held onto fobs to access the car park and parked there even though they had moved out or you had tailgaters driving in and parking. So people had unauthorised vehicles in their allocated spaces.

We needed to manage that, so needed clampers and parking disks with allocated space numbers on them, then decided as a Board that if you wanted your disk, you needed to be up to date on your management fees. Not sure if it could be legally upheld, but if you're not paying your service charges for financial reasons, you're not going to challenge it in court.

Worked really well. Only a couple of defaulters, but they already owed thousands of unpaid charges, legal fees etc, all of which we got when the receivers sold their properties.

OU812

godtabh wrote: »

A recent four ruling means the interest can’t be collected

Have you a link for that?

Fol20

Dav010 wrote: »

I know one of the apartment buildings I own a unit in tried this, problem was the spaces came with the property so clamping a car in a space they actually own was problematic and the practice was abandoned. In developments where spaces are not owned by unit owners, it is a great, albeit very aggressive way of getting fees.

Normally you dont own the parking space but it is a lease as part of your contract with the OMC.

Lantus

Bass Reeves wrote: »

Management companies can put a lien on the deeds of the property. Recently bought a holiday home which was repossessed by a lender. From talking to my solicitor there was 2-3 years management fees due. These along with 3-4 years property tax had to be paid by lender ( out of sale price) before deal could be completed.

A lien stay on a property for ages. Usually those that do not pay have financial issues and property goes for sale sooner rather than later

Wel its normal to get up to 6 or 7 years fees paid when a unit is sold with no lien. Getting a lien usually requires 2 trips to court to secure and still requires sale of unit. And no money for omc despite spending on legal fees.

It's a small win but not a solution. Try suggesting to the gov that they collect tax on the same basis as management fees.....

Bass Reeves

Lantus wrote: »

Wel its normal to get up to 6 or 7 years fees paid when a unit is sold with no lien. Getting a lien usually requires 2 trips to court to secure and still requires sale of unit. And no money for omc despite spending on legal fees.

It's a small win but not a solution. Try suggesting to the gov that they collect tax on the same basis as management fees.....

But what other solution is there. As other posters pointed out going to court to recover is prohibitive cost wise. All that might happen is you win and defaulter cannot/will not pay. In a building where it's an issue best course of action seems to be to put lien in place and work through the situation in time. As long as the management company stays on place the back money can be recovered. If the management company is dissolved the defaulters can get away without paying back money.

It's not ideal carrying defaulters but it seems to be the best choice for mgmt companies. In general most places have worked through this issue. There was an issue historically where builders controlled the mgmt companies and did not account for the money properly. However the law has changed and owners not control these companies.

L1011

If the management company is dissolved, the defaulters (and everyone else) are going to have rather more problems than a lien on the property!

Lantus

Well one option is a super fast track low cost route in court where with just a few standard forms and documents the omc turn up and get an initial judgement. Follow on action could also be simplified after all its the same identical action being repeated by all.

Another option is to bundle fees into mortgage payments and the bank processes the payment as similar to US.

Bass Reeves

Lantus wrote: »

Well one option is a super fast track low cost route in court where with just a few standard forms and documents the omc turn up and get an initial judgement. Follow on action could also be simplified after all its the same identical action being repeated by all.

Another option is to bundle fees into mortgage payments and the bank processes the payment as similar to US.

Except that takes a change in the law. Lads are discussing what the best process is at present and how to deal with it

pinkypinky

There's no way other than to wait them out. Eventually they'll have to sell and then be forced to pay up. In my building (I am a director) we get judgements on all units over a certain amount. Sometimes we've had to go back to court a second time for a second top up amount. We'll get it it in the end but it's a very very long game. We also apply all the legal fees of getting it on to their account. The one strength is that an OMC can refuse the requisitions on title if the money is not paid so the property cannot be sold.