My question is in regard to an owners’ management company (OMC). We live in a housing estate solely made up of under 100 houses, without any apartments.
The whole estate has been taken in charge by the local county council with the exclusion of some flower beds and grass areas which the OMC employs a landscaping company to maintain to a high standard.
However, the OMC also has a security patrol van operating in the estate at night following a spate of car thefts and house burglaries. These occurred before the advent of cheap security cameras and doorbell cameras.
The retention of this security patrol has become contentious as the contract now costs €70,000 annually and has made the OMC annual service charge very expensive. From a review of the Multi-Unit Developments (MUD) Act section 18, it would appear that the OMC is solely in charge of “common areas” and should not be employing an expensive security patrol on what are public roads. Am I correct in my interpretation of the legislation?
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The issue at hand lies at the heart of the budget-approval process at the annual general meeting (AGM), where the key to the solution can be found. The OMC operates on the principle of collective responsibility – meaning that all owners have a say in how the company is managed and, in turn, the services it provides or decides not to provide.
When an owner is dissatisfied with how things are run, they can actively participate in the democratic decision-making process through voting at the AGM. For change to happen, however, it must be initiated by those who recognise the need for it.
One of the strengths of the OMC structure is that it includes built-in mechanisms allowing owners to voice their concerns and take part in governance. In cases where there is disagreement over a particular item of expenditure, those who oppose it should organise themselves and take formal action. Before the AGM, they may submit a nomination form to the OMC, either nominating themselves as directors or being nominated to be a director by another member or another director.
At the AGM, there should always be an agenda item for the resignation or appointment of directors. All owners are entitled to put themselves forward for election as directors. Once elected, directors have the authority to make decisions within the framework of the MUD Act.
The directors are responsible for preparing the annual service charge budget, which is then presented for approval by the members at the AGM. The requirement for budget approval as per the MUD Act is just 25 per cent plus one more of the members present and voting.
In this case, the practical solution is for the directors to determine whether a particular service should continue. If they decide to discontinue it, they can remove it from the annual service charge budget. If more than 25 per cent of the members present agree with this decision at the AGM, the motion passes.
The relatively low threshold for approving the annual service charge budget exists for a good reason. In a collective decision-making structure like an OMC, the directors bear the primary responsibility for ensuring that the company and its estate or building are properly managed. They are accountable for the outcomes of their decisions.
A low approval threshold gives the directors the flexibility and authority to make necessary choices for the good of the company. There is always a risk that members may vote only for the lowest possible service charge, leading to a funding shortfall that hampers proper management. While it is essential that owners have a voice, there must also be a balance to ensure sound governance and adequate control.
Aisling Keenan is a property managing agent and consultant, and an associate member of the Society of Chartered Surveyors Ireland
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