Management company are demanding a lump sum of €2,500

MustangSally

My Management company are demanding a lump sum of €2,500 before the end of April because there has been no sinking fund set up in previous years during which the previous Management company ran up debts etc.

I was invited to an EGM in January during which it was outlined that my Management Company intended to carry out renovation works and that because no sinking fund had been put in place prior to 2006 they had already researched the market and sought quotes which required that we pay a lump sum of €2,500 as €250,000 need to be raised for the intended renovations. I queried the previous Management Company during this meeting and I asked if they had been pursued for their lack of management skills and for running up overdrafts and debts and for not managing in such a manner as to ensure that the necessary funds were set aside for sundry expenses such as are now seemingly required today. I was fobbed off and asked what I meant by pursued (!)

I paid a service charge of €1,200 in 2007 and this year this was raised to €1,350. I received an invoice with no indication of how this figure broke itself down and no prior written notification of the increase. Only after raising this at the EGM and upon sending in TWO registered letters did I receive a breakdown of my service charge.

The majority of attendees at the meeting voted for these renovation to go ahead and they didn’t seem to have any issues in raising these funds. However, these people were mainly renting out these apartments and had already been doing so for some time. Whereas, I only bought my apartment in 2006 and I was so naïve at the time I didn’t seek to know whether or not there was a sinking fund. I have paid my service charge in full for this year and I am reluctant to pay this money as I don’t see why I should have to dip into my personal savings due to the lack of management skills of a previous Management company (from which I have no doubt once it was dissolved some of the same characters formed this latest Management company). I also felt that the EGM was somewhat corrupt and that there was much handshaking going on and I have overall BAD vibe from the whole thing.

I received a letter in February requesting prompt payment of the €2,500 (!) as late payments would incur a surcharge of 8% (!)

Would anybody have any advice on this? Are they going beyond my rights requesting this? And what if I didn’t have these funds available to me?? This is outrageous I feel!

The_Conductor

Sally- outrageous it may very well be, but they are entirely within their rights in demanding the money. It has been a big problem with management companies- in the early years the fees are set at an unusually low level, which then shoots up as work needs to be done.

They do need to hold an AGM, which must be properly constituted, notice of 7 weeks given, along with a copy of the accounts for the previous year. This is a legal obligation on the part of the Management Company. That aside- an EGM may be called for special items that arise- such as your emergency EGM for remedial works etc.

In most cases people don't care about these periodic demands for money- as most of the units are buy-to-let properties and the landlords can simply write off the demand as a legitimate expense against their rental income, before determination of their taxable rental income. It is an anamoly that is particularly harsh on owner occuppiers- I am personally aware of one lady in Smithfield who had to borrow almost 3 months salary to cover one of these demands.

By rights owner occuppiers should be able to write off their management charges against their income (PAYE income or otherwise), as it could be argued that it is a form of double taxation as in most cases the charge covers services which are provided free of charge to residents of estates that the different councils have taken in charge.

Yes, it was naïve to purchase a unit without appreciating fully that you have annual obligations to the Managment Company which can vary wildly on a year to year basis. However this is something that isn't really highlighted at the outset- as obviously it would scare away potential purchasers.

One way of looking at the situation positively, is that the Management Company is spending the money on remedial work which will benefit the members of the company as a whole- yourself included, and add inherent value to the complex/estate.

A number of us have approached Shane Ross and some other members of the Oireachtas with a view to trying to have some sort of tax credit initiated for owner occuppiers, in recognition of the difficulties that these charges put on a lot of people.

Gillo

smccarrick wrote: »

They do need to hold an AGM, which must be properly constituted, notice of 7 weeks given, along with a copy of the accounts for the previous year. This is a legal obligation on the part of the Management Company. That aside- an EGM may be called for special items that arise- such as your emergency EGM for remedial works etc.

In most cases people don't care about these periodic demands for money- as most of the units are buy-to-let properties and the landlords can simply write off the demand as a legitimate expense against their rental income, before determination of their taxable rental income. It is an anamoly that is particularly harsh on owner occuppiers- I am personally aware of one lady in Smithfield who had to borrow almost 3 months salary to cover one of these demands.

Just throwing an idea out there from the tax point of view, but what would be the implications of an individual setting up a company and transferring their property over to said company. Then renting the property from that company. EG, I set up Gillo Ltd and tranfer ownership of my house over to it , I then rent my house back from Gillo Ltd.

Could it be used a a work around from the tax point of view?

The_Conductor

Gillo wrote: »

Just throwing an idea out there from the tax point of view, but what would be the implications of an individual setting up a company and transferring their property over to said company. Then renting the property from that company. EG, I set up Gillo Ltd and tranfer ownership of my house over to it , I then rent my house back from Gillo Ltd.

Could it be used a a work around from the tax point of view?

Its known as a non-compliant aggressive tax avoidance measure and is covered under Section 811 of the Taxes Consolidated Acts (TCA), post the 2006 Finance Act (section 126 of which coincidentally introduced the PN1 notifications, which have been successfully used to minimise the penalties associated with situations such as you are suggesting).

Gillo

So in a word, it can't be done [legally] considering it only took thirty seconds to think up I'm not surprised that it's already been flagged by the Revenue Commissioners.

The_Conductor

Gillo wrote: »

So in a word, it can't be done [legally] considering it only took thirty seconds to think up I'm not surprised that it's already been flagged by the Revenue Commissioners.

Correct. It didn't stop people from trying their arm at it though, but they were caught.

Paulw

smccarrick wrote: »

They do need to hold an AGM, which must be properly constituted, notice of 7 weeks given, along with a copy of the accounts for the previous year. This is a legal obligation on the part of the Management Company. That aside- an EGM may be called for special items that arise- such as your emergency EGM for remedial works etc.

Don't you mean 21 days notice of an AGM/EGM? I've never heard of 7 weeks notice.

Yes, unfortunately, the management company can alter the fees due, and this can be voted on at an EGM.

Are the residents the directors of the management company or is it still run by the developer? I would advise forming a resident's association, and also doing what you can to elect residents as directors of the management company.

It is very hard to hold previous management agents liable for poor management or work. This is very unfortunate as well as annoying.

Bottom line, you do have to pay these new fees.

antoinolachtnai

There is a building in Dublin 6 where there is a renovation bill of 50k/apartment and counting. The place has been turned into a building site. One or two people are refusing to pay, the whole thing is headed for the High Court.

There is another building in Dublin 4 in a somewhat similar situation although the leadership is stronger and they will probably be able to do everything consensually.

In these two situations, some of the bill is being defrayed by building extra units at the same time. However, this makes some of the existing tenants unhappy and uncomfortable.

You are quite lucky really, that the amount of money is relatively small, and that it now seems that you have some responsible adults running the thing.

A lot of people don't appreciate the atmosphere at these EGMs. They feel that they are on the outside, and to some extent that's true. They definitely don't appreciate that an EGM is not a social event. You shouldn't expect it to have a friendly outcome. You just go and get your business done. This is not like going to a shop or on a training course. It is a very serious situation.

If you didn't have the money, the management company could put a lien on your apartment, they might even be able to force you to sell it.

The main thing really is to try to ensure that the costs don't go any higher.