Management fees

Anna0740

Hi,
I am currently in the process of buying of apartment. I have just found out that around 50 % of owners of apartments in the area do not pay management fees- they owe management circa 120000. There is 88 units and development was build in 2005. It Management fees are not the highest-500 euros pa, but it does not cover bins and car park. I am very concerned about this. Not so sure if it would be a norm. What would be further consequences of this situation for owners who paid? I assume it means that there is a risk that at some point there wont be money to pay for some maintanance work and it will be responsibility of affected units .

cubatahavana

Anna0740 wrote: »

Hi,
I am currently in the process of buying of apartment. I have just found out that around 50 % of owners of apartments in the area do not pay management fees- they owe management circa 120000. There is 88 units and development was build in 2005. It Management fees are not the highest-500 euros pa, but it does not cover bins and car park. I am very concerned about this. Not so sure if it would be a norm. What would be further consequences of this situation for owners who paid? I assume it means that there is a risk that at some point there wont be money to pay for some maintanance work and it will be responsibility of affected units .

Run
Don’t look back

Extremely difficult to recover the arrears. If services as essential as bins are affected, there’ll be lots of trouble soon

Caranica

Buy if you want to and become a director of the management company asap. Fire the management agent if they're not collecting fees. There are ways, I was due to represent our directors in court next week after we rejected a 40% settlement from a long term debtor. Got word this week that they paid in full. Our agent and solicitor are amazing at collecting fees.

Dav010

cubatahavana wrote: »

Run
Don’t look back

Extremely difficult to recover the arrears. If services as essential as bins are affected, there’ll be lots of trouble soon

Ignore this op.


While 50 % is quite high, If you are searching for a development where all management fees are paid, they are few and far between.

Op, ask your solicitor to request info about the sinking fund held by the MC. This is a requirement under the MUD Act, and is there for unexpected expenses.

If the sub is €500, that is pretty good, some developments where most units pay can cost a couple of thousand per year.

In relation to collecting the fees, the owners will need confirmation from the MC that all is in order before selling the property, and/or the MC can apply in court for a lien on the property for the amount owed. In my experience of being a Board Director, the MC always got the money, it can just take time.

Anna0740

Thanks for your reply.
I have asked for sinking fund and it looks like there is only 5 000 in it. It doesnt look correct as in financial statement they claim they should collect 10000 each Year from 88 units ( Estate has 15 years). At this point i have requested for financial statements from previous years, as I hope it will give me more information. Managment fees dont cover bins and car park, so it wouldnt be an issue for me. However I am worried if with this managment they will be able to cover insurance, some maintanance work or service of common area.

Dav010 wrote: »

Ignore this op.


While 50 % is quite high, If you are searching for a development where all management fees are paid, they are few and far between.

Op, ask your solicitor to request info about the sinking fund held by the MC. This is a requirement under the MUD Act, and is there for unexpected expenses.

If the sub is €500, that is pretty good, some developments where most units pay can cost a couple of thousand per year.

In relation to collecting the fees, the owners will need confirmation from the MC that all is in order before selling the property, and/or the MC can apply in court for a lien on the property for the amount owed. In my experience of being a Board Director, the MC always got the money, it can just take time.

Juwwi

The problem you could have is the fee will rise the less people who pay it ,

Are there lifts in the building they are expensive to maintain .

Be no harm to also try and talk to an owner living there and find out why only half are paying it , they are not happy about something ( management company maybe ) .

dotsman

I, too, would run.

50% delinquency is nowhere near the norm. And a sign of there being a lot of problems. Why aren't they paying? Are they that broke? If so, what does that say about the neighbours? Or are they refusing, and if so, what infighting is causing that?

Either way, it sounds like it is completely fubar, and will only get worse.


I would also question the €500 per month. That seems ridiculously low. The place must be really run on a shoestring for that much. Also, if 50% can't afford to pay (or are refusing to pay) that much, there will definitely be trouble when the fees rise drastically, which they will have to.

Finally, you don't have a sinking fund. To put the above €500 p.a. into perspective; in my apartment complex, we are putting that much alone into the sinking fund every year (and have done so since the beginning), and even then it is only just enough. The sinking fund is not just for unexcepted items as already mentioned, but also about annualising capital expenditure. At 15 years of age, this apartment complex is likely to start entering a phase where there is going to have to be considerable capital expenditure on items that only need to be done circa every 20 years (replacing lifts & electronic gates, upgrading fire prevention measures, replacing/enhancing intercoms, paintworks, repairing/replacing roof tiling, repairing structural issues/water leaks etc, the list goes on...)

My apartment complex is just over 20 years old and has done all the above (and more) in the past few years with the total cost running well into the 7 figures. Thankfully, when I bought, it was a well run management company with fees closer to 2 grand, <5% delinquency, and a sinking fund of well over a million prior to starting all the big works.

killbillvol2

At that rate of delinquency and with nothing in the sinking fund you'll be living in a derelict building within a few years.

dotsman

One more point to add. Even if you are willing to take the risk, you need to consider how many other potential buyers would be to do so.

With a lot of buyers put off by those figures, the future sale price of the apartment is very likely to suffer. This, in turn, could trigger a catch-22 situation where the prices fall, which results in even worse investors/owners resulting in even worsening management company financials resulting in broken lifts, flaking paint in common areas, garden/courtyard unkept resulting in even less potential buyers resulting in further plummeting prices and this keeps going around in circles until you end up in severe negative equity in an unliveable apartment. Or, as killbill put it, a derelict building.

Please, for your sake (both financial and mental health) - avoid!

As a matter of interest, can you link to the apartment on daft/myhome? Someone here might actually know what is going on there and be able to give you specifics.

cubatahavana

Dav010 wrote: »

Ignore this op.


While 50 % is quite high, If you are searching for a development where all management fees are paid, they are few and far between.

Op, ask your solicitor to request info about the sinking fund held by the MC. This is a requirement under the MUD Act, and is there for unexpected expenses.

If the sub is €500, that is pretty good, some developments where most units pay can cost a couple of thousand per year.

In relation to collecting the fees, the owners will need confirmation from the MC that all is in order before selling the property, and/or the MC can apply in court for a lien on the property for the amount owed. In my experience of being a Board Director, the MC always got the money, it can just take time.

50% of units not paying is not something to ignore. Neither is the debt. How are the financials? Is there a massive debt to be sorted?

Dav010

cubatahavana wrote: »

50% of units not paying is not something to ignore. Neither is the debt. How are the financials? Is there a massive debt to be sorted?

Ignore your advice, to runaway, don’t look back.

Members debt is never ignored, but it is eventually collected if the owner sells. The financials are discussed at the AGM, the op can request a copy of the minutes from the seller. It is highly unlikely that the membership fee would be set at €500 if running costs were not being covered by the subscriptions collected.

The op can take a walk around the development to see its condition/upkeep. I was on the BoD’s for a development for a few years, some units didn’t pay subs for a number of reasons, some beyond their control, but all are eventually collected either by negotiating a payment plan/making settlement of fees a requirement before a letter of good standing is forwarded prior to sale or a lien on the property for outstanding amount.

Dotsman’s suggestion is a good one, if the op posts the name of the development , someone here may either own or rent a unit there and be able to give an insight into its condition.

In general, what is the typical arrangement with refuse in large apartment blocks? Is it usually included in MC fees?

Anna0740

Hi, 120000 of outstanding charges from previous years. Does not include 2020. 44 units out of 88 in estate. Estate is 15 years old.

cubatahavana wrote: »

50% of units not paying is not something to ignore. Neither is the debt. How are the financials? Is there a massive debt to be sorted?

Samuel T. Cogley

What's the sinking fund like?

ELM327

Dav010 wrote: »

Ignore your advice, to runaway, don’t look back.

Members debt is never ignored, but it is eventually collected if the owner sells. The financials are discussed at the AGM, the op can request a copy of the minutes from the seller. It is highly unlikely that the membership fee would be set at €500 if running costs were not being covered by the subscriptions collected.

The op can take a walk around the development to see its condition/upkeep. I was on the BoD’s for a development for a few years, some units didn’t pay subs for a number of reasons, some beyond their control, but all are eventually collected either by negotiating a payment plan/making settlement of fees a requirement before a letter of good standing is forwarded prior to sale or a lien on the property for outstanding amount.

Dotsman’s suggestion is a good one, if the op posts the name of the development , someone here may either own or rent a unit there and be able to give an insight into its condition.

In general, what is the typical arrangement with refuse in large apartment blocks? Is it usually included in MC fees?

In my complex we pay ~1000pa management fee and an additional sum (around 200 I think) for bins.

hmmm

50% non payment is extremely high, I would walk away. It would suggest to me that the owners not paying are either very foolish or there is a very severe problem with the management company. It's not something I would personally want to get myself into.

A very low management fee would also set off alarm bells. Apartment complexes require upkeep and a sinking fund for anything unexpected, and scrimping on that is often a false saving.

Anna0740

150 Euro out of 500 Euros ( 10000 per year) goes ( or should go) into sinking fund. There is 88 units in developments. According to documentation provided by solicitor there is 5000 Euros in sinking fund.obviously if apartments owners don’t not pay, definety less than 10000 is put into sinking fund yearly. I am trying to find out why there is only 5000 in sinking fund after 15 years— is it to any improvements completed recently or due tu payments not being collected from people.

Samuel T. Cogley wrote: »

What's the sinking fund like?

Samuel T. Cogley

There's a total sinking fund of €5000? I think I'm with the runners on this one.

antoinolachtnai

Samuel T. Cogley wrote: »

There's a total sinking fund of €5000? I think I'm with the runners on this one.

If there is 120 grand outstanding and there is a reasonable chance of recovery then the financial situation is not necessarily bad.

After 15 years or so properties tend to turn over. The unpaid charges usually get paid at that point.

Are unpaid charges being collected over time? This is really the big question. Just looking at the sinking fund in isolation won’t tell you everything you need to know.

pinkypinky

I'd be concerned that the agent is not doing their job properly and not being overseen by the directors properly. There may well be judgements against debtors, and as others have said, I've seen worse. The sinking fund may be temporarily depleted because work was done on a capital project. It's also really difficult to judge one building against another in terms of the service charge, but it does sound low. Are there lifts in the building?

It's not an unrecoverable situation, but unless you really love the property, I'd reconsider.

cubatahavana

Anna0740 wrote: »

150 Euro out of 500 Euros ( 10000 per year) goes ( or should go) into sinking fund. There is 88 units in developments. According to documentation provided by solicitor there is 5000 Euros in sinking fund.obviously if apartments owners don’t not pay, definety less than 10000 is put into sinking fund yearly. I am trying to find out why there is only 5000 in sinking fund after 15 years— is it to any improvements completed recently or due tu payments not being collected from people.

My two cents is that even though there are funds allocated to sinking fund every year in the budget, as half the property owners are not paying, money is scarce and debtors need to be paid. Only after paying all bills money will go into the sinking fund. That’s why there’s such a low amount

Anna0740

Hi,
I sent list of questions to Vendor. As you said looking on sinking fund in isolation doesn’t give all information. I asked if any works were done recently that could explain so small amount in sinking fund; I also asked if legal steps were taken to get money from debtors. To be honest I am disappointed, buying a new house should be exciting and in this situation it is very stressful with many unanswered questions.

antoinolachtnai wrote: »

If there is 120 grand outstanding and there is a reasonable chance of recovery then the financial situation is not necessarily bad.

After 15 years or so properties tend to turn over. The unpaid charges usually get paid at that point.

Are unpaid charges being collected over time? This is really the big question. Just looking at the sinking fund in isolation won’t tell you everything you need to know.

dubrov

I don't know why you are wasting your time unless you know exactly what you are doing.

It's true that the money may eventually come in but only when the units that are in debt are sold (the unit you are looking at may be one of them). Given the debt, most will not sell until death so you could be looking at 30+ years before the money comes in.

In the meantime, you may have bigger problems in relation to provision of services and insurance for the block. What happens if there is a issues that are expensive to fix (e.g. broken lifts, roof leaks). With no sinking fund, you could be sitting there watching rain drip into your apartment with nothing that you can do.

Also consider that 50% non-payment reflects very badly on the other owners. It suggests they can't be bothered to contribute to the upkeep of their own properties.

Just walk away now and save yourself a lot of hassle.

Anna0740

No, there is no lifts nor gates. Apartments have own entrances what explains low management fee. My concerns are more about sinking fund and basic maintanance of outside of the building. As I said estate is 15 years old, most likely roofs and outer walls will require some renovations to keep them in good conditions. I am just really afraid that due to lack of funds it won’t be done and repaid will be completed only when covered by insurance. Management fee covers also service of common areas.

pinkypinky wrote: »

I'd be concerned that the agent is not doing their job properly and not being overseen by the directors properly. There may well be judgements against debtors, and as others have said, I've seen worse. The sinking fund may be temporarily depleted because work was done on a capital project. It's also really difficult to judge one building against another in terms of the service charge, but it does sound low. Are there lifts in the building?

It's not an unrecoverable situation, but unless you really love the property, I'd reconsider.

TheW1zard

When i was buying my house i retracted an offer on a house because the drainpipe of the neighbours extension was coming into the back garden.
It amazes me what people will consider getting themselves into!
I would run OP!

Chris_5339762

+1 for RUN. Many issues can crop up there, and none of them are good. Just get out and find a better place. Low sinking funds and high levels of delinquency are very hard (and expensive) issues to fix.

Run.

Arklow10

Obviously very poorly run. All good advice above. €500/month service fees - ridiculously low!
We have put a lien on every apartment that so that a sale cannot be completed unless mgt fees are paid in full. Overdue service fees are charged at 8%/annum. Always paid. Still some issues with a very small number of service payments but is been managed.
I would also pass on this property. There will be a day of reckoning ahead for this complex.
There is always another apartment coming along.

Dav010

Arklow10 wrote: »

Obviously very poorly run. All good advice above. €500/month service fees - ridiculously low!
We have put a lien on every apartment that so that a sale cannot be completed unless mgt fees are paid in full. Overdue service fees are charged at 8%/annum. Always paid. Still some issues with a very small number of service payments but is been managed.
I would also pass on this property. There will be a day of reckoning ahead for this complex.
There is always another apartment coming along.

Out of interest, what is your opinion about the condition/upkeep of the development the op is considering buying in? I ask because different developments charge differing subs depending on costs incurred.

In relation to the 8%, we considered that, the legal advice we received was that it is unenforceable.