How worried should I be about a management company?

errlloyd

Hey all. First time buyer trying to buy an apartment in Dublin. We found a place that's perfect in terms of location, layout, features etc.

We viewed it today and it was fine. But the hallways in the building were messy, like no one had cleaned them in a while. The lift was broken. A few of the units were accessed from a walkway. The decking on the walkway was warped. Some of the ceilings looked a little wrecked.

The block was nice. The issues seemed cosmetic (bar the lift). The EA said the management company had just changed. I don't know anyone who has ever bought an apartment before, I don't know how these things work. So basically do I need to be worried that the sinking fund is non existent. Or the management company sucks. Or anything.

Development is Wellington Court, Mountjoy St.

Dolbhad

errlloyd wrote: »

Hey all. First time buyer trying to buy an apartment in Dublin. We found a place that's perfect in terms of location, layout, features etc.

We viewed it today and it was fine. But the hallways in the building were messy, like no one had cleaned them in a while. The lift was broken. A few of the units were accessed from a walkway. The decking on the walkway was warped. Some of the ceilings looked a little wrecked.

The block was nice. The issues seemed cosmetic (bar the lift). The EA said the management company had just changed. I don't know anyone who has ever bought an apartment before, I don't know how these things work. So basically do I need to be worried that the sinking fund is non existent. Or the management company sucks. Or anything.

Development is Wellington Court, Mountjoy St.

You should worry about a management company.

If you go sale agreed, your solicitor will get information on the management company like accounts etc. You want to ensure firstly the company has money and people are paying their management fees. You also want to ensure they have a good sinking fund in place to deal with emergencies like a broken lift etc.

You also want to ensure the common areas are owned by the management company and not be original developer. This is a big issue as some developers would have gone bust before transferring it to the management company and can be a legal headache.

However if the common areas look as you have described, that’s not the best sign. You pay a management fee so they are kept in good order.

Issues with management companies can be a deciding factor if someone buys an apartment. When you buy an apartment, you legally agree to be part of the management company and to pay the fee. Also be aware even if a management company is fine now, it doesn’t mean they will be when you go to sale.

I don’t think a management company just changes. Each owner of a management company is part of the management company. But the company can pay an auctioneer etc to deal with issues.

Your legal advisor will be best to advise you on it once they get the paperwork. If you like the apartment go for it and then take the appropriate advice.

Also do check now the management fee you will have to pay.

Wanderer19

I would advise you find out who the old management company is, and the new company and get copies of the accounts, they may give an indication of what's going on.

Find out if there's a residents association/committee, contact them and find out what's happening.

Ask your potential neighbours about any issues.

If things were not getting done because people were not paying that may not change.

Caranica

I would worry about the state of the place if the apartment was in Sandyford. But given the location of the apartment, such poor upkeep has more serious implications in terms of who has access and what's going on in the common areas.

I'd run, not walk, away.

Hollybeg

errlloyd wrote: »

Hey all. First time buyer trying to buy an apartment in Dublin. We found a place that's perfect in terms of location, layout, features etc.

We viewed it today and it was fine. But the hallways in the building were messy, like no one had cleaned them in a while. The lift was broken. A few of the units were accessed from a walkway. The decking on the walkway was warped. Some of the ceilings looked a little wrecked.

The block was nice. The issues seemed cosmetic (bar the lift). The EA said the management company had just changed. I don't know anyone who has ever bought an apartment before, I don't know how these things work. So basically do I need to be worried that the sinking fund is non existent. Or the management company sucks. Or anything.

Development is Wellington Court, Mountjoy St.

Most management companies run apartment block via a legal entity which would have been historically setup by the developer or apartment owners (e.g. "XYZ" DAC / Ltd / Ltd by guarantee). Make it your business to find out the company name and download the latest set of accounts. Find out who the directors are as well... it's not uncommon for the developer to hang around as a director of the management company (not always a good thing IMO as it can lead to bias in favour of them). I definitely would be very worried if there was no sinking fund in place. Your solicitor should be assisting you with these matters. You don't want to end up owning an apartment in a block that has been neglected and then be landed with a massive bill for some issue (be it known or unforseen).

errlloyd

Thanks all. Not what I want to hear, but certainly what I need to hear.

(I think I was using management company, and managing agency interchangeably there. Meant the agency had just changed).

I'll make a few phonecalls during the week and ask some of the questions you've suggested above.

Ultima Thule

You pay management companies to keep bicycles and washing off balconies. That's about it really.

Graham

In an apartment development there are typically 2 entities involved in the 'management'.

The Owners Management Company (OMC) and a managing agent.

The OMC is owned by the homeowners, 1 share per home. The OMC has a board of directors usually drawn from the homeowners by vote. The OMC usually holds a vote on important decisions at an AGM or EGM where the shareholders (homeowners) get to vote.

A managing agent is generally appointed by the board of the OMC for a fixed period (e.g. 2 years).

The managing agent carries out the day-to-day tasks involved in running the development. E.g. collecting fees, organising insurance, fire safety, cleaning, enforcing house rules etc.

paul71

Ultima Thule wrote: »

You pay management companies to keep bicycles and washing off balconies. That's about it really.

Seriously, if you have no idea what you are talking about why would you post disinformation?

errlloyd

Dolbhad wrote: »

You also want to ensure the common areas are owned by the management company and not be original developer. This is a big issue as some developers would have gone bust before transferring it to the management company and can be a legal headache.

However if the common areas look as you have described, that’s not the best sign. You pay a management fee so they are kept in good order.

Thanks for this.

I did some digging and a note on the financial statements of the OMC says that the ownership of the common areas was not transferred to the OMC before the developer went bust, and the OMC has contracted a solicitor to assist with it.

Without going into specifics, I get some confidence from the annual reports. It seems directorship was taken over a few years ago by people with addresses in the building, and since then the net assets of the OMC have increased (though still feel quite small). It looks like the block may have been a bit of a mess, but there is a reasonable effort to get everything on track.

Buying house2020

Hi OP,

Walk away without hesitation, this place sounds like bad news, possibly a lot of issues going on there with the management company. No guarantee that the new management company will be able to improve things so swiftly either. A lot of the time the various apartment owners might not be paying the annual management fees, which leads to a decline in the facilities and general maintenance. So much could be going on behind the scenes.

Look elsewhere would be my advice.

the_syco

errlloyd wrote: »

We viewed it today and it was fine. But the hallways in the building were messy, like no one had cleaned them in a while. The lift was broken. A few of the units were accessed from a walkway. The decking on the walkway was warped. Some of the ceilings looked a little wrecked.

Check with someone who lives there when the lift broke. If it happened in the past few weeks/month, okay, but if it's been like that for a few years then ensure you check if the building itself even has insurance.

Oh, and did the "wrecked ceilings" look like water damage from above?

errlloyd

Do you mind if I pm you a picture? It does a little, the ceiling damage was in sort of quasi outdoor spaces though.

pinkypinky

It may well be that you're viewing it at a time between when an old agent was running things very badly and a new one has just taken over. It can take time to turn buildings around. The fact that the directors live in the building is a great sign. I would do some more investigating and try talk to a director if possible before making a final decision.

I moved into a building with similar problems and took it as a challenge to improve the place. It took a couple of years to make serious progress and I became a director of the OMC, but we did it.

wildwillow

Walk away unless you are absolutely sure that the Management can be sorted and the problems solved. But once places fall into disrepair it is difficult to reverse. There should be a high percentage of payment of the annual charge and a good sinking fund for future repairs.

You are likey to be selling on in a few years and will have huge difficulty if things remain as they are or get worse.

kooreczka

Caranica wrote: »

I would worry about the state of the place if the apartment was in Sandyford. But given the location of the apartment, such poor upkeep has more serious implications in terms of who has access and what's going on in the common areas.

I'd run, not walk, away.

Why Sandyford?

Caranica

kooreczka wrote: »

Why Sandyford?

I used it as an example of an area thought to be safe and affluent, not North Inner City and all the associated social issues as is the case of the apartment the OP is looking at.

Lantus

So the financial statements should indicate fee income which based on development size could indicate an issue. Lifts usually have maintenance contracts and phone lines and are really expensive. A broken one could indicate the absence of funds to run. Cosmetic issues are less expensive but the first to be cut when fee income drops.

It could be a blip but it could be like that for another 10 years.....

WacoKid

wildwillow wrote: »

Walk away unless you are absolutely sure that the Management can be sorted and the problems solved. But once places fall into disrepair it is difficult to reverse. There should be a high percentage of payment of the annual charge and a good sinking fund for future repairs.

You are likey to be selling on in a few years and will have huge difficulty if things remain as they are or get worse.

If there is a low percentage of annual payment from apartment owners then the monies collected will quickly be used up with insurance, essential maintenance etc. leaving little or nothing for the general upkeep.

Lord Glentoran

Given my own experience over the last fifteen years with a management company that has yet to be transferred to the owners, because the builder overinflated the management fee in the good times, I would say to anyone looking to buy property in the Republic to think long and hard before buying any property with a management company. If you can’t avoid such properties for whatever reason, do a search on CRO for filed accounts and returns. If the builders have any involvement walk away.

pwurple

Sounds like arrears from the units. Lack of funds cripples any management company.

errlloyd

Thank you for all your guidance so far. It has been very helpful. I do not want to over ask but for anyone who finds these things interesting, this is what I have uncovered.

The owner's management company only recently came under owner control (2016 or so). For a long time, the only two shareholders were people with an address outside the building. They seem to be from an asset management company that potentially managed the development on behalf of a receiver. In 2013 the OMC assets were at -20,000e. They have steadily risen and in the 2019 FS were at +35,000e. A swing of 55k across the 6 years. I dunno if those "net assets" are supposed to be the sinking fund but they are what they are. The notes to the FS confirm that the communal areas were not transferred over to the OMC and that they have hired a solicitor to sort that.

The OMC has also become cash-rich in that time. It had a huge receivable on the balance sheet two years ago, but that got paid last year. It still has significantly liabilities, but it definitely has the cash to meet those liabilities. I have no idea what sort of liabilities it could have, or why it might have been owed so much. So any guidance would be interesting.

There are 52 residential units and at least three commercial units in the building. A Spar and a Pharmacy are occupying two, the other is unoccupied. I say "at least three" because I believe the Spar may be occupying more than one.

It seems every apartment and commercial unit may have one share of the OMC since 2018. Of those it is interesting that;

21 gave addresses in the building, we can assume most of them are owner-occupiers.
9 individuals gave addresses elsewhere, we can assume most of them are individual landlords.
5 shares are held by DCC, so probably some state housing.
20 shares are held by a group of companies all owned by one one landlord (basically an individual, not a company).
4 shares are held by another mystery entity

15 apartments in the building changed hands on the same date this year. Presumably in a single transaction. So there is a chance that the building is pretty exposed to the financial risk of one landlord. That doesn't make me feel great right now.

But on the other hand charting the history of the block has made me appreciate that there are a dozen or so residents in there who have made good progress taking control. So while I think it is clear there are problems, the progress on fixing them is well underway.

daheff

pinkypinky wrote: »

It may well be that you're viewing it at a time between when an old agent was running things very badly and a new one has just taken over. It can take time to turn buildings around. The fact that the directors live in the building is a great sign. I would do some more investigating and try talk to a director if possible before making a final decision.

While directors living there is a positive, the fact an owner is trying to sell now rather than wait a little until the place looks better (and hence more saleable) would worry me a somewhat. Why won't they wait??

errlloyd

daheff wrote: »

While directors living there is a positive, the fact an owner is trying to sell now rather than wait a little until the place looks better (and hence more saleable) would worry me a somewhat. Why won't they wait??

The current seller was not an owner occupier. He had the place rented through an agency. The agency had been renting it at 1,500 because it was RPZ'd. The apartment itself looks unloved. Loose fittings, broken handles. All cosmetic, but the owners choice is fix it up and rent it again (maybe not for this market) or desperately try sell before a crash. I'm guessing he hasn't even been in there in years.

Graham

Have to say errlloyd, I'm impressed with the amount of homework you've done. Makes for interesting reading.

the_syco

errlloyd wrote: »

20 shares are held by a group of companies all owned by one one landlord (basically an individual, not a company).

I find it odd that the one landlord has multiple companies. Possibly for tax reasons. It does seem to mean that they would have 20 votes on anything that gets voted on, and if there isn't many at the AGM I wonder can he push stuff through on account of that?

errlloyd

the_syco wrote: »

I find it odd that the one landlord has multiple companies. Possibly for tax reasons. It does seem to mean that they would have 20 votes on anything that gets voted on, and if there isn't many at the AGM I wonder can he push stuff through on account of that?

It is divided between about 5 different companies. Not 20 individual entities. But yeah it occurred to me that he holds a lot of power in the block, and if his entities went bankrupt it could mean a lot of missed management fees.

paul71

errlloyd wrote: »

It is divided between about 5 different companies. Not 20 individual entities. But yeah it occurred to me that he holds a lot of power in the block, and if his entities went bankrupt it could mean a lot of missed management fees.

The would a cashflow issue but not necessarily a bad debt for the management company. In the event of such a bankruptcy a liquidator would seek to sell the properties and the proceeds of the sale would need to be used to pay off outstanding fees or else the title to the leaseholds would be in danger.

what recession?

OP, aside from the obvious management issues with the block, have you actually lived in that immediate area before?

I stand to be corrected, but I recall the last number of times I passed that development there was at least one person sitting on the ground outside the development / Spar begging for money. If that is constantly the case, that would make some people uncomfortable. Walk around the area, streets like the adjoining Blessington Street, North Frederick Street and Hardwicke Street (all of which you would pass walking to O'Connell Street) often make for interesting watching... very, very densely populated streets. Blessington Street in particular seems to have rubbish strewn across the footpaths and street constantly.

It's undoubtedly a very convenient location due to its proximity to the city centre but you could debate that it is actually too central within the north city centre and its various social issues that others have alluded to. Don't be surprised if that block is physically impossible to keep meticulously maintained due to where it is situated, if you are in any way concerned about the current condition of the block I would suspect it's better to walk away because the chances of it becoming meticulously maintained after all these years since it was built are slim.

While it may not make 'sense' to pay as much (or more) money for a home a little further away from O'Connell Street, take a look at apartments in areas like Phibsborough, Stoneybatter, Drumcondra, Glasnevin. You may find they are better maintained and set off less 'red flags' in your mind compared to this place.

Finally, just on your assumption that shareholders giving their address as being in the building means that they are owner occupiers, I agree with the logic but in reality I don't think it's likely. When given the option, many would just put their address as the property they own in the building for privacy's sake.

Best of luck with the search.

paul71

I am not going to quote the entire last post and I do agree with the majority of it. However the directors of a Company are required to put their residential address on the annual returns to CRO, to do otherwise is an offence under the Companies Acts.

buyersagent

paul71 wrote: »

I am not going to quote the entire last post and I do agree with the majority of it. However the directors of a Company are required to put their residential address on the annual returns to CRO, to do otherwise is an offence under the Companies Acts.

The previous poster is talking about shareholders, though, not directors. A shareholder can give whatever address they want. This management company has 2 directors who give addresses in the development and they presumably do live there so there's no issue.