Paying Directors

Tim Robbins

HI,
How much does it cost to pay directors to run your management company?
For example, suppose none of your residents wish to become Directors, and so the only alternative is to pay people to do it.
Does anybody have any experience of the above and how did they get on?

Victor

You might be better off stating a thread in the Biz category.

Probably here: http://www.boards.ie/vbulletin/forumdisplay.php?f=106

Paulw

You better check the articles of association of your management company. It may be a requirement that a director is a home owner in the development.

As for how much to pay - how much do you earn a year? A director can ask for a salary.

The_Conductor

In most cases it is the Chairperson and the Secretary of a management company who decide on day-to-day issues pertinent to the running of the complex. Only for issues of fiscal significance and/or legal implications are the directors decision called for. The Chairperson and/or secretary may or may not be directors of the Management Company (this will be specified in the articles of association of the Managment Company). They will normally be shareholders in the Management Company (as will the directors)- that is they will own at least one unit in the complex/block that the company is managing.

Typically it is those who are most involved in the day-to-day running of the complex who may receive a token recompense for their services- so the secretary of the Company may receive a rebate of his/her Management Charges- or another token gesture.

Directors are normally a legal requirement and have a lot of obligations vested in them under law. As such they are the legal face of the Management Company- and should anything untowarth happen, they ultimately are the ones held responsible. As such they should be up-to-date on happenings in the company, irrespective of their level of involvement, and if they disagree with anything should be in a position to make their oposition known and take relevant action as necessary.

Any fees paid to directors tend to be very nominal in nature- other than attending meetings and making decisions they tend to have very little to do with the day-to-day running of the Management Company (though of course this will vary on a case-to-case basis).

At the end of the day- no-one is involved in the running of the Management Company for reasons of personal financial recompense. People become involved out of a sense of duty and a willingness to try to better their living environments. In cases where residents/owners have taken back control of Management Companies and do a lot of the duties themselves- the reason is normally because a Management Agent has been running the scene as a cash-cow, and their primary concern is not how well they run the complex, but how much cash they can extract from the owners for doing as little as possible that will keep most people relatively happy.

Running a Management Company is a thankless duty- and only the most civic minded of people who are willing to look beyond the petty distractions of their own betterment for the good of all, should be considered for the task.

S.

antoinolachtnai

The guy asked a very specific question.

There is no going rate, because this isn't the way it's usually done.

I would say that 5000 euros/year would be the absolute minimum. 10000 euros per year might be more realistic. You would need two of those.

If your development has 100 apartments this would add 200 euros/year to the service charge for every apartment (which is probably the reason it isn't often done like this).

gibo_ie

i have never seen directors of a managment company being paid! I would seriously worry if they were to be honest as they do not do much in most cases, it is the managing agents that do the work and get paid (or should be doing the work).
Every owner has the right to be a director on the management company by the way!!

antoinolachtnai

It's not a question of how much the director does; it's a question of how much responsibility he or she is taking on.

I would say that a NED in this situation would be looking at at least 20 or 30 hours work in the year to discharge his/her responsibility as a company director properly.

The OP's problem is obviously that the residents don't want to take on the responsibilities or work of being directors.

It is not the case that every owner has a right to be a director of the company. There is a legal and practical limit on the number of directors you can have. Usually this means that there will be a vote if there are more candidates than vacancies (which is unlikely to be a problem for the OP).

The_Conductor

As Antoin said- there is most probably a legal minimum number of directors.
Of necessity these will be part of the Management Committee of the Management Company (terms and designations will depend on the articles of association of the Management Company). Actual pay at the end of the day depends entirely on the level of work a person puts in- for example where I am at the moment the listed directors are nominal figures, not involved in the day-to-day running of the Management Company, without any duty barr that of signing off on the Annual Accounts and okay'ing any expenditure over a particular level. In our case its the Company Secretary (who is not a director) and the Company Chairperson (who is not obliged to be a director), who discharge the day-to-day running of the Management Company (with the assistance of the Owner Occupiers in the complex (which is a big bone of contention- as the buy-to-let landlords in the place- over half the owners, couldn't be rat-arsed what happens, all they want is low Management Fees).

We do not pay any directors, the only committee member who receives any remuneration being our Company Secretary whose annual management charge for her unit is discharged in recognition of her services. Our insurance policy covers any decisions the Management Committee and its Directors may make in the running of the Management Company and any third party liabilities that may accrue. Thereafter their sole duty is the signing of annual accounts- some of directors don't even bother turning up for the AGM (which is chaired by the non-executive secretary and chairperson).

If you are talking about paying a defacto salary to directors- you have to ask yourself why you are doing away with Management Agents in the first place?

At the end of the day get a copy of the articles of association of your Management Company- and a sample lease for the complex and sit down and see exactly how the Management Company is structured and what owners rights and obligations towards the Management Company are.

S.

antoinolachtnai

The issue the OP has is that no resident is willing to take on the duties you mention.

It's all very well taking on duties for your own development where you live. To become involved with someone else's is another story and you should expect to pay.

How your directors conduct themselves is your concern, not mine. However, if I was a director in your company and I had to sign off on accounts, I wouldn't just sign off without checking them. I would have to satisfy myself that they are actually reasonably representative. It is not reasonable to simply accept the auditors' word on this. I also need to peruse the auditor's report in depth, and query and follow up on any issues that arise. I think this is 10 hours work at the very minimum.

Most management companies are plc's and this potentially adds a significant amount of bureaucracy and rules which I need to understand and possibly implement.

There are also issues about providing responses to queries on title. These seem like formalities, but they are very important, especially if there is some issue in the development.

If you are paying your secretary in-kind, you will need to be careful to pay the appropriate PAYE and PRSI on the payment you make to her.

I am not trying to discourage anybody, just stating that it is a very serious matter and if someone has to come in to do it from the outside, you shouldn't expect them to just sign papers and go home.

Plissken1

My management company have just raised the fee for my 1 bed apt from 1200a year to 1500. And we have nothing mechanical like lifts to maintain, and we are not in Dublin. They have also dug up most of the trees and hedges, to cut down on gardening costs obviously. The apartments are in Leixlip, it doesnt make sense to be paying this much.

The_Conductor

Plissken1 wrote:

My management company have just raised the fee for my 1 bed apt from 1200a year to 1500. And we have nothing mechanical like lifts to maintain, and we are not in Dublin. They have also dug up most of the trees and hedges, to cut down on gardening costs obviously. The apartments are in Leixlip, it doesnt make sense to be paying this much.

Contact the management company and get a copy of their accounts from last year. This will tell you where the money is going. To be honest- 1500 per annum is not bad going- do you have electric gates that need maintaining/ windows that need washing / ongoing repairs / painting etc- you'd be surprised how quickly all these things add up.

1500 a year is 45,000 over 30 years. Its not to be laughed ! Management companies became widespread in Ireland only relatively recently. The estates built in the 70s and 80s had no management fees

The_Conductor

Deleted User wrote:

1500 a year is 45,000 over 30 years. Its not to be laughed ! Management companies became widespread in Ireland only relatively recently. The estates built in the 70s and 80s had no management fees

They were tended for by local authorities / county councils for the most part, the more progressive of them often organised lawn mowing etc. amongst themselves. Following completion of estates- the county council would "take in charge" the estate. They're not willing to do so these days (for any of a long list of reasons......), when granting permission for the construction of modern apartment complexes/estates- one of the terms of permission is normally that a Management Company takes over the communal running of the complex- in a manner that the council may have once done.

You could argue that our taxes paid for them then- why should we pay these charges when people living elsewhere get these services gratis from the council. You could also argue that its an unfair expense particularly on owneroccuppiers who can't even write this off against tax, unlike the landlords who own a sizeable proportion of them. Hell yes, its unfair. Was it made an election issue by anyone- no, not that I know of. Should have been- hell, yes.

Mailman

For our management company the articles of association or memorandum states that the directors can only be compensated for their expenses. No salary.

Consult your company's documents and you should get the answer there.

Plissken1

smccarrick wrote:

Contact the management company and get a copy of their accounts from last year. This will tell you where the money is going. To be honest- 1500 per annum is not bad going- do you have electric gates that need maintaining/ windows that need washing / ongoing repairs / painting etc- you'd be surprised how quickly all these things add up.

I am still waiting for the figures, although I spoke to a neighbour who is also not paying, and has been there for ten years, He says don't get too excited about seeing the books as they are all cooked anyway. I spoke with a director of a management company in Dublin, he said those prices are crazy for small apartments in Kildare. Those rates are what you would expect for a 1bed in Dublin. Ok, so Leixlip is considered Dublin these days, but its still 10 miles out from the city.

There are electric gates, the windows you have to paint and wash yourself, the walls no one can touch, as it is a listed building (so they cant charge for paint anyway). as for the gardens, they have pulled up and cut down just about anything that was living (in order to cut down on bills I would geuss). I am surprised they didnt put weed killer on the grass actually.

I mean if they are going to increase it by 20% in one year, god knows what they will try and do in 12 months time !!!. I am sure the increase is just down to them wanting to keep up their lavish lifestyle, and buy that new Merc, I said this to the manager of the Dublin company, and he said "yes your probably right", " I mean it is Ireland after all, people here will rob you blind if you give them an inch".

antoinolachtnai

It could be that they are increasing the contribution to the sinking fund. Many sinking funds are insufficient at present.

Really though, the only way to find out is to get involved. It is worth looking at the budget for this year compared to the budget and accounts for last year. (Budgets are different from accounts.)

markpb

This should probably be moved to a separate topic but anyway. Plissken sounds extremely bitter and, in my experience, it's usually misplaced. Management companies have a bad reputation and not always because the developers retain control of the company but because of bad communication or no place to ask questions.

Plissken1 wrote:

I am still waiting for the figures, although I spoke to a neighbour who is also not paying, and has been there for ten years, He says don't get too excited about seeing the books as they are all cooked anyway.

Whatever your objections to the company, non-payment of fees is never an option. They'll just accrue, you'll probably be charged interest and even if the company decides not to send your file to a debt collection agency, you'll automatically lose all that money when you sell you house.

The books are normally prepared by an outside accountancy firm and audited by an independent auditor before being passed to the CRO. Given that, it would be difficult to hide valid figures from you, the best they can do is refuse to provide simple explanations for figures which is bad enough.

There are electric gates, the windows you have to paint and wash yourself, the walls no one can touch, as it is a listed building (so they cant charge for paint anyway).

I'm guessing that the fact that it's a listed house may explain the high costs. Also electric gates, from experience, are expensive to install, run and maintain. Without seeing the accounts, you have no way of knowing whether they are unreasonable or not. Perhaps you can apply to the CRO for a copy of the filed accounts?