Taking ownership of multi-unit living

Owning an apartment comes with a host of responsibilities around managing the property. When owners fail to engage, disaster can result – but there is growing awareness of the need to be hands-on, writes JOANNE HUNT

WE ALL remember them. Boom-time billboards with glamorous couples clinking champagne flutes in their perfectly appointed kitchens – they were selling us not just a property, but a lifestyle.

Hulking above the heaving dual carriageway on a wet November evening, their slogans promised if you lived here, the living would be easy.

Stand-offs over service charges, rogue managing agents and anarchy at the agm – the potential pitfalls of living in a multi-unit development were never mentioned. And with the responsibility for their upkeep now resting squarely with owners, it doesn’t always make for easy living.

“Things just started to get very ugly,” says Ciara of a debacle among the residents of the northside development where she bought an apartment in 2003. She doesn’t want to be identified, because the debacle in question is ongoing. Two years ago, tensions over landscaping led the resident-run management company to abdicate, leaving a void until a new committee was formed.

“There was such bad feeling, the person doing the accounts [a resident] wouldn’t even talk to the new committee. People still aren’t talking to each other.”

Such are the potential travails of living in multi-unit developments, where property owners are not just living side-by-side but also effectively run a company together. The 2011 Multi-Unit Development (MUD) Act was designed to make life for these people more harmonious.

Made law on April 1st last year, the Act means owners in multi-unit developments, whether they are a resident or an investor, now each hold one equal share in an owners’ management company (OMC) for each unit they own. As such, they are invited to an agm to elect a board of directors from among themselves, which is then legally responsible for managing the development.

The directors typically hire a managing agent to look after maintenance, the collection of service charges and the keeping of accounts. But with collaborative decisions to be made about everything from bin collection to hedge heights, colour palettes and vermin control, it’s easy to see how relations can fray.

In Ciara’s case, an elected committee of owners had for years successfully managed the development itself, without a managing agent. But when the committee took a decision to bulldoze mature trees and pave gardens to lower landscaping costs, not everyone was happy.

“The gardens, I think most people would say, were the selling point,” says Ciara. “The committee decided to bring in a guy with a digger and it was only discovered when people looked out their windows. People were standing in front of the digger and calling the guards and solicitors – it got very ugly.”

She says other owners felt the decision was too big for them not to be consulted. “Work was stopped half way through and we had to spend a large amount of money out of the sinking fund to repair the damage.” Relations since have been less easy to repair.

“Be very aware that your committee does have power,” says Ciara, who has since become a director in the new OMC. “They can make decisions about your development that could affect its value. It really pays to be involved.”

One of the most pressing issues dealt with in the Act was the retention of ownership by some developers of common areas. They could legally retain that ownership, and control of managing the estate, until the last apartment was sold – with no time limit for transfer of control to apartment owners.

This meant owners had no say in how their development was being run or in how service charges were levied. Some developers refused to pay service charges for their unsold units.

In a move welcomed by owners, the MUD Act mandated that developers must transfer ownership of the common areas to the OMC by September 30th last, and in future new development, before any sales occur.

The other issue for multi-unit development owners has been the variability of service among managing agents.

Mark Boyle is a representative of the Apartment Owners Network, a group formed after Dublin City Council organised a public meeting for apartment owners in 2007.

He cites examples of rogue managing agents who unilaterally assumed the identity and powers of the management company and others who have refused to disclose the names of OMC directors to residents.

Kevin lives in a two-bed apartment in a mixed development that includes houses and shops in Kildare. He says while he pays an annual service charge of €1,200, poor service from the previous managing agent meant other residents had stopped paying.

He became a director of his OMC to get more transparency. He doesn’t want to be identified, as the new agent he and his fellow directors have hired is pursuing his neighbours for unpaid service charges amounting to €60,000.

“At last year’s agm we were all fighting. This year it was a feeling things were normalising – that’s important for residents. I think if the majority of residents are paying the fees, then everyone will pay the fees.”

In a bid to weed out incompetent managing agents, since July 1st, all must now be licensed by the Property Services Regulatory Authority (PSRA), which can inspect their operations and revoke their licences or impose fines of up to €250,000 for improper conduct.

Siobhan Dwyer, chair of the property and facilities management professional group of the Society of Chartered Surveyors Ireland, welcomes the move but says owners have to get more involved too.

“The management company won’t operate itself, it needs the active involvement of a group of owners.” She says OMCs are facing a funding timebomb caused by owners who are dodging their legal obligation and making a mockery of their neighbours by refusing to pay service charge fees. She estimates between 15 and 20 per cent of owners aren’t paying.

She says while a good managing agent will work with those who can’t pay on a payment plan, those who won’t pay are a problem the MUD Act has failed to legislate for.

“The legal process for the recovery of service charges is very slow, burdened with procedural rules, and it’s very expensive,” she says. “This really infuriates compliant owners, to know their funds are not being used to manage the estate but to chase others for not paying.”

Managing director of Erin Property Management, TJ Farrelly says with just 10 per cent of owners showing up to management company agms, he’d love to see more residents getting involved.

“An awful lot of people bought properties without realising that they have to be involved. If you built a house, you’d have to keep it clean, have the boiler serviced, and do the gardens or the gutters. In a development, those services are shared.”

He says in many developments the number of owner-occupiers is small, with buy-to-let owners sometimes less interested in maintaining services so long as they get their rent.

He praises owners who volunteer to be on OMCs, for whom he says there is little immediate return – “except for maybe grief and heartache from their fellow residents”. “People should get more involved, maintain standards and help to make it a better place to live. If they don’t, it won’t hold its value and they won’t be able to rent it or sell it.”

COSTS ESCALATE SERVICES DETERIORATE

Deirdre Fox bought an apartment in Santry in 2003 and says, “I realised very quickly I knew nothing about management companies.

“The managing agent always seemed to be saying ‘You need to pay more’, costs were escalating, yet at the same time the quality of services was reducing.”

Attending her first management company agm that year, she found it had a debt of €500,000. “We were told that services would be cut because people weren’t paying their service charges,” she says.

Fox joined her owners’ management company (OMC) and started to investigate how it should operate. “We built up a new board of only owner-occupiers and started stripping out costs.”

The new OMC immediately saved €10,000 on its insurance bill, while retendering the cleaning contract cut cleaning costs in half.

Setting up the Apartment Owners’ Network in 2007, a group that now meets monthly at Dublin City Council offices, Fox was this year invited to join the board of the Property Services Regulatory Authority (PRSA). She has plenty of tips on how multi-unit development (MUD) dwellers can get the best from their managing agents.

She says monthly onsite meetings to check in on activities “make the agent familiar with the complex and if house rules are being broken, you can ask them to write a letter to apartment X about a bike on the balcony or whatever”. While she says all board members don’t need to attend these meetings, she recommends the board tries to meet up monthly.

When it comes to money she says: “I would ensure the directors are the only people who control the cheque book, not the managing agent.”

She recommends online banking, where the managing agent has visibility of the account, but doesn’t have the authority to issue cheques or make online payments.

“It’s very easy for people to spend money that’s not their money . . . Essentially it’s not their money, it’s our money – and the board should take responsibility for it.”

She says managing agents should be asked to provide three quotes for all third-party services and to declare any links to service providers.

She says under the MUD Act, owners should now be in no doubt how their annual service charge is split between services, the sinking fund and the agent’s fee.

She says while the MUD Act and the regulation of managing agents by the PRSA are improving things, owners need to get more involved.

“Go to the agm, ask questions and take ownership and responsibility. My motto is your managing agent is only as good as the board of directors.”

For more information, visit apartmentowners.ie