City LivingWhat do management companies do with your service charge, asks Edel Morgan
In a recent column about inflated service charges and shady management agents, I gave the email address for a new representative body for management companies being set up by independent management consultant, Michael Noonan. Noonan says he is still wading through the 679 emails he received which he believes "reflects the level of disquiet out there".
The body will be called the Institute of Residential Management Companies (IRMC) and Noonan says he can still be contacted at IRMC@operamail.com. He asks that people are patient with him, as it is taking some time to reply to all of the emails.
Meanwhile, a resident of a new north Dublin apartment complex contacted City Living to report a theft. Apparently around €1,000 of her money is unaccounted for. This sum was paid as a service charge for her apartment but, 10 months on, she says mystery surrounds how it has been spent.
The "magnificent" landscaped grounds promised in the brochure for the development are "a disaster area", with rubbish strewn everywhere and builders' rubble clogging the water feature. At night the common areas are in virtual darkness with several light bulbs broken and an outdoor security light constantly on the blink.
With a final phase of apartments yet to be sold, the development hasn't been handed over to the residents. The management agent appointed by the developer refuses to divulge the company's annual accounts and has told residents to contact the developer. Four months ago, the developer agreed to send a representative to meet with residents but this meeting has been cancelled several times.
The role of management agents is currently unregulated in this country but a working group has been set up by the Law Reform Commission to look into the matter. It is hoped that a code of conduct for agents will be established but there is no indication how long this will take.
Another reader who invested in Section 50 student accommodation close to the Institute of Technology in Limerick told City Living her service charge was €2,250. Although she regarded this as "excessive", she says she didn't complain as she believed the rental yield would compensate. The rent achieved, however, was "extremely poor" - €2,829 for the entire year.
She calculates that, with 190 apartments in the development, the management agent has a massive €427,500 annual budget to play with and attempted to ascertain how it was being spent. Following "countless" phone calls, emails and letters, she "failed utterly to extract any information on the subject. There has never been an AGM.
"I asked the agent to provide me with a copy of the annual accounts for the company for the past year, and have asked what the service charge is likely to be for the coming year."
"In desperation" she then asked her solicitor to contact the agent. The agent eventually replied that all queries should be dealt with by the developer "as he neither has the information nor the authority to respond to my request. I attempted to contact the vendor but he is not taking my calls.
"My hands are tied. Without information or contact details of the other investors, it is not possible to attempt to convene a company meeting or make the management agent accountable."
One way of discovering the identities of other investors in a development, according to solicitor Gavan Carty, of Kent Carty solicitors, is to call on the secretary of the management company to furnish a list of members. Assuming the buyers are admitted to membership when they purchase the property, he says, the register of members should be made available free of charge for two hours every day. "If members encounter difficulty they can refer the matter to the Director of Corporate Enforcement.
"An AGM should be held within 18 months and after that every year, or at least every 15 months. If no AGM is held it is possible to call upon the Minister for Enterprise, Trade and Employment to demand an AGM."
He says owners should examine the Memorandum and Articles of Association of the company to ensure they've been admitted to membership on purchase.
"The difficulty is these members are trying to elicit this information on a voluntary basis and are expected to negotiate the rigours of company law legislation. Many will end up getting legal advice. Their only recourse at present is the Companies Registration Office for this type of grievance, which is unfair. It begs the questions whether there should be a body to resolve these issues and impose time limits on the handover of a development to the residents. In some cases the developer will keep a few apartments for himself in a development and it could take 10 years before completion."
While Michael Noonan welcomes the Law Reform Commission's intervention, he fears it will result in the imposition of "onerous duties" on residents who are directors of management companies "who are not getting paid".
He says management agents are legally obliged to show members the annual accounts. If the development hasn't been handed over to the residents, one solution could be to request the information through the company's auditor - the details of the auditor can be found through the Companies Registration Office.
