Tens of millions of euro a year are paid to apartment block owner management companies which operate in “the wild west of governance and financial regulation”, TDs and Senators have been told.
At a briefing in Dublin on Tuesday politicians heard calls for a regulator for the sector to be appointed as a matter of urgency, particularly before additional billions of euro are spent on redress schemes for homes which have been found to have construction or fire safety issues.
Brian O’Gorman, chief executive of housing agency Clúid, said there were “owners’ management companies where voluntary directors were paying themselves large amounts of money”. He said many of them were facing significant financial and governance challenges. “We need a regulator to instil good practice,” he said.
“Too many owners’ management companies were on the brink of insolvency” he added.
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Bryan Maher, chairman of the Apartment Owners’ Network, told the meeting the financial position of owner management companies as a sector was largely unknown. He said their remit to collect management charges for ongoing maintenance also included maintaining “a sinking fund” to make provision for tackling big items such as structural defects and roof replacement.
However, he estimated that about 25 per cent of owners were in arrears with their management charges, and 10 per cent of owners were in significant long-term arrears, perhaps going back decades.
Mr Maher said items such as insurance, energy and waste costs were often paid out of the sinking funds. He said coming up to 25 years after the Celtic Tiger building boom the question was “When the pumps and the roof and the lifts need to be replaced, would the money be there?”
The 2011 Multi Unit Developments Act suggest an annual fee of €200 per apartment be directed towards the sinking fund but research suggested that this should have been about €1,000, he said. With many owner management companies adopting the €200 per year figure, “a deficit of €800 per apartment per year was being built up”.
A number of speakers from the floor, many of whom were individual apartment owners, spoke of a lack of transparency in management company finances.
Meeting co-ordinator Pat Montague said there was an urgent need for reform of the Multi Unit Developments Act but while this was promised in the programme for government, the latest information from the Department of Justice was that reform would have to await the Government’s redress scheme for defective housing.
But he said reform “needs to precede the legislation for the defects remediation scheme so that owners’ management companies are fit for purpose from a governance perspective in applying for public funds through that scheme”.
“The legislation for the proposed defects remediation scheme will have no bearing at all on the issues of service charges and sinking funds so there is no reason to delay,” he said.
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