Apartment Owners – Control Of The Apartment Complex

02 Jul Apartment Owners – Control Of The Apartment Complex

If you own an apartment whether as an owner occupier or as a landlord, the coming into effect of the Multi-Unit Developments Act will be of interest to you.
The Act came into force on 1st April 2011. Prior to this, Management Companies were run on a somewhat ad hoc basis with substantial differences between one Management Company and another which in turn impacted in the overall standard of different developments and therefore the marketability of your apartment.

Running of the Management Company: The Act requires that control of the Management Company is transferred to the Apartment owners once a certain percentage of the units have been sold. This provision is designed to take control of the Development out of the hands of the Developers, many of whom
continued to maintain control for many years after most of the units were sold. The Developer must now transfer the ownership of the common areas to the owner’ Management Company (which the Developer must set up at its own cost) once the threshold of sold units has been reached.

Service Charge Budget:

This has been a bone of contention for apartment owners over the years. As many will be aware, service charges vary substantially between one development and another. Sometimes a high service charge is easily explained where, for instance, the buildings are supplied with lifts or security/concierge services. However, sometimes the justification for a high service charge is not so readily understood.

Approval of Service Charge Budget now required:

From now on the Service Charge Budget for the coming year must be approved by the apartment owners (ie the members of the Management Company), at their AGM. This gives the individual apartment owners an opportunity to scrutinise the various elements of the budget, e.g. insurance, maintenance of grounds, maintenance of buildings, waste management costs, sinking fund, etc. If the apartment owners believe too much is being paid for elements of the Service Charge they are now free to seek alternative quotes and/or appoint alternative service providers.

Sinking Fund:

The Sinking Fund is the “rainy day money” of an apartment development. Its purpose is to ensure there are funds available to meet large once-off costs such as structural repairs to the building or the drains within the development. Up to now the establishment of a Sinking Fund was at the discretion of each Management Company. However, since 1st April last, every Management Company is legally obliged to maintain a Sinking Fund and each apartment owner within the development must contribute to the same on an annual basis. Each apartment owner is required to contribute €200 p.a. unless a different figure is agreed by the Management Company.

Liability of Developer for Unsold Units:

Not infrequently, significant numbers of apartments remain unsold for long periods of time, particularly in larger developments. There was a doubt as to whether the Developer was liable for the share of the overall Service Charge Budget attributable to the unsold apartments. The Act has clarified that hence-forth the Developer must pay the proportion of the service charge attributable to the number of unsold apartments.

Defaulting Apartment Owners: The Management Company is entitled to sue individual apartment owners for failure to pay their annual service charge and to recover the sum due plus costs from the defaulting owner.

Bedsits: Bedsits are not covered as the Act only applies to developments which contain at least 5 individual residential units with their own self contained kitchens and bathrooms, but with shared amenities and common areas.

Protect Your Investment: The best way an apartment owner can protect the value of their investment is to participate in the running of the Management Company, attend the meetings of the Management Company and generally take an active interest in how the apartment development is managed.