Apartment stumbling block

Apartment owners are up in arms over spiralling service charges and management company ineptitude, but being fully informed and proactive is the best way to tackle these problems, writes Caroline Madden.

Online discussions boards, consumer bodies, corporate watchdogs and local politicians are being bombarded with complaints from irate apartment owners. "My annual service charge has jumped from €900 to €1,500"; "the bins haven't been collected in six weeks and there are rats running around the gardens"; "the roof is leaking and flooding the lift shaft but nothing is being done about it" - these are just a few of the problems causing frustration to apartment owners.

But the biggest problem of all is confusion. Disgruntled owner-residents rail against the ineptitude of their property management company, which owns the common areas of the complex, without realising that they themselves are a member of that company. "If you buy a unit in a multi-unit development, as part of the purchase transaction you [ automatically] become a member of the management company yourself," explains Maria Hurley of the National Consumer Agency (NCA). "Not a lot of people know that, and that can cause difficulties."

As a member of the management company, owners have an opportunity to get involved and influence how the development is managed by participating in the annual general meeting or even becoming a director of the company. But very often they are uninformed about their rights and responsibilities.

Hurley says that another big problem for owners is trying to decipher the distinction between the property management company and the property management agent. In an ideal world, the management company hires a reputable commercial business - the management agent - to carry out the day-to-day maintenance and administration of the development for a reasonable, transparent price, which is passed on to residents in the form of a service charge (which increases in line with inflation). In reality, things don't always run quite so smoothly.

One reason for this is that very often, ownership of the common areas of the complex is not transferred over to the management company by the developer until the last unit is sold. This becomes a problem where the developer retains a number of units indefinitely (often with the intention of developing a green area on the site) as the transfer can end up being delayed for years.

"Practically speaking, until the developer transfers control of the common areas to the property management company, the company isn't really actively able to manage anything," says Hurley. During this limbo period, owners are nevertheless required to pay for the upkeep and maintenance of common areas over which they have no control, and often run into trouble getting the management agent to carry out the necessary work.

Then there is the thorny issue of the level of service charges levied. "Where we would get a lot of complaints would be where people buy into a brand new development this year and the management fees are €800 or €900, and next year they're €1,200 or €1,500," says Hurley.

Costs often genuinely rise after the first year or two because warranties covering fixtures in the complex start to run out, but developers have been known to understate service charges in the first year in order to entice buyers. Either way, purchasers often get a nasty shock a couple of years down the line when the service charge they factored into their budget soars. "It can really place people under strain," says Hurley.

"There's absolutely no price control and there is no value-for-money check on what people pay," says Joan Burton, Labour TD for Dublin West, who says that unsatisfactory property management is a huge issue in her constituency. The problem is particularly acute in newer developments of houses and apartments such as Ongar, Tyrrelstown and College Gate.

Service charges for apartments in Dublin West run from about €1,800 to €2,500 on average, Burton says. Many people who are out working all day are happy to pay a reasonable fee in return for insurance, refuse collection and the complex being kept neat and clean, she says, but they can end up feeling "ripped off" if they discover that they weren't fully informed of the charges in advance and if the level of service is poor.

Apartment owners often find it difficult to ascertain who the management agent is, and how to deal with getting problems resolved. This situation is exacerbated by the fact that the management agent arena is unregulated. "There is no common standard in relation to the property agent," Burton says.

The NCA is hopeful that the establishment of the National Property Services Regulatory Authority (NPSRA) will be a "big consumer win", as it will eventually regulate management agents. "It's going to greatly assist improving the quality of service that is offered by management agents, and therefore improve the experience of people living in multi-unit developments whose management companies have contracts with recognised and registered management agents," says Hurley.

But although this body has been established for some time, it has yet to be given any regulatory teeth. "The Government have been making noises about regulating it," Burton says, but she feels that the issue is being "long-fingered".

In order to give regulatory powers to the new body, the Property Services Regulatory Authority Bill must first be published, and this has encountered several delays. "Our current understanding is that it's in the final stages of the parliamentary draft at present," a spokesman for the NPSRA said. "We would hope that it would be published after Easter."

Apartment owners also have to contend with company law issues relating to the management company. Residents who decide to get actively involved in the running of their complex and become a director of the management company often take the position too lightly and fail to realise the serious responsibilities that come with the territory.

If the company fails to meet its company law obligations, for example if it doesn't file annual accounts or hold an annual general meeting, then it may be struck off the Register of Companies, which can lead to major problems down the line for owners.

The problems in this area appear to be escalating. The number of complaints to the Office of the Director of Corporate Enforcement in respect of management companies in apartment blocks rose by almost 150 per cent last year.

Although uninformed residents are sometimes at fault, in most cases non-compliant directors turn out to be developers who retained control of common areas and therefore effectively control the management company.

"The developer then finishes the developments, melts away into the background and the residents can find that they're in the situation of having had their management company struck off," says Hurley. "In theory, you could literally find yourself unable to sell your unit because your company's been struck off. The ramifications are potentially very, very serious."

So what can frustrated apartment owners do other than simply vent their anger on sites such as www.neighbours.ie? In the absence of regulation in the area of management agents, the only way of protecting your investment is to be informed about your rights and responsibilities (useful information leaflets can be found on www.consumerconnect.ie), and to get actively involved with the management company and attend agms to air any grievances.

Successful apartment living requires a proactive, collaborative approach, and ultimately apartment owners must face up to the reality that their development won't run itself.