Management company and fees

marbar

a month ago i found out that management company has a big hole in the accounts. they had been carrying debt forward for the last 3 years and as of the end of the month, will be 140k in the red overall

needless to say i wasn't aware of this when i bought 6 months ago. the shortfall is because the builder refuses to pay for the appartments taht have yet to be sold. the builders are also directors of the mgmt company, and so obviously won't try to sue themselves

the company is trading insolvent and as of the end of the month. i think the residents (the only contracted shareholders) options are:
fork out for teh shortfall between us
wind up the company and try to start a new one (loads of hassle. costly)
sue the builder (not been done yet. risky)

has anyone found themselves in this position?
best course of action?

antoinolachtnai

Usually the developer doesn't have to pay on empty units. It is not required.

If the thing is trading insolvent, the directors have done a bad thing.

Who is funding the debt? Do they owe that money to creditors? Or to the bank? Or to the developer?

marbar

there is no doubt the directors have done a bad thing, the problem is that the builders are teh directors of teh management company

the only people that are contracted to pay money towards teh management company are teh shareholders. that's us, the residents


the people who are owed money are the contractors. gardeners. esb. refuge. lift maintenence etc.
right now we don't know if a liquidator would chase the residents or the directors for teh money that's owed. even if we did wind up the company and start afresh, we probably woulnd't get contracts with suppliers until we pay the money that's owed

it's a serious head wreck

Paulw

You really need to talk to a solicitor, who can go through all the documentation and work out what the best course of action is.

Maybe a group of shareholders can get together and get a solicitor to investigate.

marbar

a group of the shareholders are solicitors. basically there's nothing that we can point to saying that the builder should pay. there's lots of grounds that we can say he should be, but nothing concrete. so basically even the solicitors arent sure what way it will pan out

Paulw

Well, if they aren't sure, then I doubt you'll get any better advice here.

Sounds like a big mess of a situation.

Mind you, it also sounds like your solicitor messed up when you were buying your property.

antoinolachtnai

First, in most situations, you are 'members' rather than 'shareholders'.

Are all the management fees paid up to date? If they were all paid up to date, what would the deficit be then?

What is the amount owed to creditors divided by the number of apartments?

What is ( the amount owed to creditors minus the amount owed to the company ) divided by the number of apartments?

If the directors have recklessly traded, then a complaint should be made about that. There is also grounds for suing the directors, and the directors could be liable for the outstanding debts. But does the developer actually have any money?

I can't see that much mileage in the liquidator side. You are probably going to end up paying the liquidator yourselves. And at the end of the day, what good will it do you?

marbar

Paulw wrote: »

Mind you, it also sounds like your solicitor messed up when you were buying your property.

agreed. problem is that it's my sister in law that did it for free. i remember her telling me that the builder would cover it, but i dunno where she got that from

Paulw wrote: »

I doubt you'll get any better advice here.

hoping someone else has been through this

marbar

antoinolachtnai wrote: »

First, in most situations, you are 'members' rather than 'shareholders'.

Are all the management fees paid up to date? If they were all paid up to date, what would the deficit be then?

What is the amount owed to creditors divided by the number of apartments?

What is ( the amount owed to creditors minus the amount owed to the company ) divided by the number of apartments?

If the directors have recklessly traded, then a complaint should be made about that. There is also grounds for suing the directors, and the directors could be liable for the outstanding debts. But does the developer actually have any money?

I can't see that much mileage in the liquidator side. You are probably going to end up paying the liquidator yourselves. And at the end of the day, what good will it do you?

all fees are up to date. year ends on June 30th. on that date the deficit will be 140k
if you divide what is owed by all properties, it's around 500 quid each
but that also includes the empty properties, which the builder wont pay for. so divided by the occupied properties it's 8-900

the next issue is that it's a debt that had started to build before i bought. am i liable for that?
even if we clear the lot, we can't get the balance low enough for it to break even next year, because the builder wont pay. so debt will build anyway

the builders are saying that they dont have money, which may be true of the company at the min, but the owners certainly do. the amount owed is pittence compared to what this whole place is worth to them

we would have to pay a liquidator. the advantage would be setting up our own mgmt company and excluding the unnocupied properties. the hassle that would then cause the builder might move him to just clear the debt

another issue for me is, i bought 6 months ago and had to pay for a full year, so i'm actually paid up to dec. if we fold the company then i'm out of pocket by 6 months

it's a nightmare tbh

athtrasna

You would be out of pocket by a whole load more than six months fees if the company folds. Your solicitor has really really messed up in letting you buy into this disaster. Freebie or not, you have walked into a nightmare situation. First things first, is the insurance for the development paid up? This is vital.

Secondly there have been cases where the developers have had to pay fees for unsold proprties, perhaps your SIL can help you find these rulings.

Next you need to look into calling an EGM and replacing the directors asap.

With the finances of the development in this state no owners will be able to sell any property in the development so the sooner this mess is tackled the better.

marbar

athtrasna wrote: »

You would be out of pocket by a whole load more than six months fees if the company folds. Your solicitor has really really messed up in letting you buy into this disaster. Freebie or not, you have walked into a nightmare situation. First things first, is the insurance for the development paid up? This is vital.

Secondly there have been cases where the developers have had to pay fees for unsold proprties, perhaps your SIL can help you find these rulings.

Next you need to look into calling an EGM and replacing the directors asap.

With the finances of the development in this state no owners will be able to sell any property in the development so the sooner this mess is tackled the better.

it would cost around 15k for a liquidator, that is providing that he then doesn't chase teh "shareholders" for the debt. that's a hell of a lot less than 140k
insurance is paid up
as of next week, esb have siad they're sutting us down without payment

any idea of these cases where there's been a ruling forcing the builders? the solicitors in the group didnt mention it

we had our agm last week, it had been adjurned 3 times to try to fix the mess in the mean time. we can't replace teh directors, but we can vote someone else onto the board. thing is, what mad man would want a place on a board that is potentially at fault and liable for that massive debt?

not only would we not be able to sell, but in order to get cash together the builders are going to rent out some of the unsold properties. that means anyone looking to lease the whole thing or just rent out a room, is now in competition with the builders

apparently last week a new sale was agreed, contracts were ready, and then the solicitor found out about the black hole and advised the client not to buy (wish i had of got that advice...)
the hope is that this news will force the builders to sort it out. they now won't be able to sell until it's fixed

Victor

Talk to a solicitor obout being an oppressed shareholder.

antoinolachtnai

You are going to have to find some leverage to convince the developer to give you more control of the complex and the board. If he has allowed the whole thing to run into insolvency, that might be your leverage. He is also in a weak position financially.

Ultimately, you may end up dealing with his bank rather than him.

A liquidator cannot chase shareholders for debt. This is what makes a limited company limited.

Are you certain all service charges are paid up to date? This is really surprising.

How much is your service charge? Is the service charge enough to cover next year's outgoings? I get the impression from what you have written that it is not. This is a ridiculous situation.

Under many agreements, the management company is not just responsible for management - it ultimately owns the common areas once the development is complete. This is why liquidating your management company might not be a good idea.

You cannot 'exclude the unsold apartments'. It just doesn't work this way. You have to insure and otherwise service the whole building, not just certain parts of it.

Your development is quite large, which is actually a good thing. There is a management agent who worked with one of the large developers on a site with problems and sorted out most things (though the problems were with services rather than the financial side). Let me know if you are interested in talking to them.

Oppression of a Minority Interest (OAMI)? Nice idea, you might even make Irish legal history and win, but I'd be surprised if you could afford it in practice.

You could get together as a group of residents, separate from the management company and offer to pay the ESB moving forward, on a cash-up-front basis (i.e., without paying off the existing balance). The problem here is collecting the money.

Really, your resident's group needs some decent legal and commercial advice here. Just because you have a few solicitors on your committee does not mean you have decent legal advice.

athtrasna

marbar wrote: »

it would cost around 15k for a liquidator, that is providing that he then doesn't chase teh "shareholders" for the debt. that's a hell of a lot less than 140k

That's just the cost of liquidating the company, not the cost of putting the accounts right or giving you ownership of your property! As an apartment "owner" you are on a lease from the management company, if that company no longer exists, you are in deep trouble!!

You really need very very decent legal advice, from proper specialists. It is worth the owners paying a couple of hundred euro per unit for decent legal advice before letting this deteriorate even further.

marbar

antoinolachtnai wrote: »

You are going to have to find some leverage to convince the developer to give you more control of the complex and the board. If he has allowed the whole thing to run into insolvency, that might be your leverage. He is also in a weak position financially.

All fees are up to date, except for the ones in the empty complexes. The fees for these have never been paid and we are into the third year. The developer made it clear that he will not be paying out anything for these properties, and I don’t think there’s anything we can do about it.

The service charge currently stands at €1830, which is pretty pricey. The budget has been cut by something like 15% and I still don’t think there’s enough to cover next year. We have charges such as 75k for gardening. 75K!!!

The management company is just an agent. They answer to the directors, who are the developers until the last property has been sold. This essentially means that the agent is toothless and will do nothing. It is the directors that approve the accounts. The shareholders can voice their concerns, but can’t do anything. The directors have yet to show for one AGM, three years in.

As for excluding the unsold units, it is not a scattering of apartments. There are two blocks that have remained sealed. As far as I am aware it would be possible to exclude these. This may the only leverage that we have.

The problem with making any decision is that we have to have everyone in agreement and collect from everyone. A difficult task. We have created a committee of residents to speak to the builders without the lynch mob behind them, and they consist of accountants and solicitors.

One idea is to pay in to a separate fund so that we can be sure that our money is not used to pay the existing debt, but that will most likely leave us in breach of our contract/lease to pay the mgmt company.
Every option seems to be very costly

marbar

athtrasna wrote: »

That's just the cost of liquidating the company, not the cost of putting the accounts right or giving you ownership of your property! As an apartment "owner" you are on a lease from the management company, if that company no longer exists, you are in deep trouble!!

You really need very very decent legal advice, from proper specialists. It is worth the owners paying a couple of hundred euro per unit for decent legal advice before letting this deteriorate even further.

agreed we need proper legal advice, but i don't think we can organise that in the time we have left. in a week's time a letter is going to arrive asking for the next year's payments, and we are left in a horrible situation.

how could anyone be asked to pay into a company that is trading insolvent?

who's best interest is it to keep the mgmt company afloat, the residents or the builders?

athtrasna

I say again, you do not own your property, the management company does. You have a long lease, probably 1000 years on it. So it is in your interest to keep the management company afloat, somehow. It is in the interest of all owners (not residents as a resident has no say in the affairs of the management company).

To transfer ownership of selected units from one management company to another would require 100% approval of all the members of the original management company which in your case would require the consent of the builder so is unlikely to be forthcoming.

You really need to call an emergency meeting of all owners with a view to a commitment to fund a legal resolution. This situation needs to be dealt with as a matter of urgency, and properly.

antoinolachtnai

The developer might still be the landlord - the transfer to the Management Co. might only happen at the end. It depends on the structure of the thing.

The problem the OP has (in my opinion) is that he doesn't know what a legal resolution would look like - if they went to court, what would they be asking for, and on what grounds?

The immediate problem would seem to be that the ESB is threatening to cut them off. They really need to figure out some way to stop this happening.

bobbysands81

A few points...

If the Management Company goes bankrupt the ownership of YOUR apartment (and all others) reverts to the Minister for Finance. You would need to go through the High Court to re-establish the Management Company - I know an estate that this has happened in, I think the cost of doing this was around the 20k mark. However, the Developer would still retain rights as an owner in the new company.

As shareholders can you not sue the Directors of the Management Co for not running the company properly and allowing the management company to be in such a precarious state?

If the Developer manages to sell one of the units that money is owed on will he/she then pay the management company the money that is owed on the unit?

I'd be arguing vehemently with the developer that he/she has no choice but to cover costs in rlelation to lighting/heating insurance etc... as they are getting benefit from it. I would let them away with items such as Bin Charges but I would be threatening to sue them over this.

Have you checked the documents which set up the Management Company to ensure that the Director's do actually have majority voting rights? Also, surely there's legal jargon in that regarding the collection of service charges - the directors of Management Co have a legal obligation to ensure all charges are collected. Is it a grey area that the developer is saying because he hasn't sold these units he's not paying for the upkeep/insurance/common area lighting etc...?

antoinolachtnai

I think a liquidation is being confused with a strike-off. The liquidator sells the assets (if there are any) to pay the creditors.

It is, as said, important to read all the details.

marbar

Thanks for all the comments guys

I think the lease is something like 1000 years alright. When I say residents I am referring to the owners. The only say we appear to have is voting on things such as clamping etc (which we cannot afford to implement as there’s no money left).

As far as I was aware we would be able to set up a new management company if we had 100% approval of the owners, not the members of the management company. This would then exclude builders.

The committee that we set up (4 people) are meeting with the management agents and the directors (the builders) this week. Stating that the esb needs to be paid and trying to come to an arrangement regarding the debt.

The developer is still the landlord. They are directors of the mgmt company and call all the shots. Decision only get passed to the owners when all units have been sold. That seems some way off.

As was stated by antoinolachtnai, if we go to court we simply don’t have any legal justification to sue the builders. We cannot say that they should pay the fees because XXX. All we can do is state that they are receiving benefit from it etc.

I was unaware of the ownership transferring to the minister for finance. If this were to happen and the builders still retained ownership then it would seem pointless, but would they still owe the creditors? Who would owe the creditors if the company folded?

As for sueing the directors because of the state of the company, we were thinking that reckless trading was a road we could take. But really, what we want is the bills paid.

If the builder sells a new unit, it is the new owner that will pay the fee for the forthcoming year. The builder is not accepting any responsibility for the previous debt of that unit, despite previously stating that they would.

The committee have gone through all of the of the papers and are adamant that we can’t move the directors and they have the voting rights. Regarding the legal jargon, it only clarifies that the owners are contracted to pay the management fee. As there is not piece of paper to state that the builders “own” the empty properties, they claim they are not liable. Yet they hold the keys. However, they did not sign the lease that the owners did.
That is the grey area.

If I am confusing liquidation with the company being stuck off, how does this affect the owners? What’s the difference in this situation?

Thanks again for your comments

athtrasna

marbar wrote: »

As far as I was aware we would be able to set up a new management company if we had 100% approval of the owners, not the members of the management company. This would then exclude builders.

No, you need all members of the management company to agree because the owners don't own the land, the management company does, or worse still the developer. You cannot assign what you do not own.

Not what you wanted to hear but I'm still in total shock that a qualified solicitor walked you in to this nightmare!

markpb

marbar wrote: »

The committee have gone through all of the of the papers and are adamant that we can’t move the directors and they have the voting rights. Regarding the legal jargon, it only clarifies that the owners are contracted to pay the management fee. As there is not piece of paper to state that the builders “own” the empty properties, they claim they are not liable. Yet they hold the keys. However, they did not sign the lease that the owners did.

They do own the empty units but because the lease agreement is only signed on a sale, they never signed one so they can claim they're not liable for the service charge. It's a huge black hole. The Law Reform Commission stated last year that they believe developers *are* liable for service charges in unsold units but I've yet to meet anyone who has proven this in court.

If I am confusing liquidation with the company being stuck off, how does this affect the owners? What’s the difference in this situation?

A company is struck off when it fails to file the accounts to the CRO after an acceptable timeframe. A bankruptcy is when it is unable to pay it's debt and the creditors make a petition to the courts to have it wound up. If that happens, the assets (i.e the land, building structure, etc) are normally transferred to the Minister for Finance but in your case, there is a good chance that the developer still owns all of those so in the event of a bankruptcy, there is nothing to transfer to the MoF. Any bills outstanding (to the cleaners, refuse company, ESB, etc) would be written off because they are unsecured. This does not solve your problem because it leaves you with no management company which means no-one to pay for the light, insure the building, etc which could invalidate your mortgage. It's a horrible, stupid situation to be put in :-(

There's no easy solution to this problem. Most companies end up cutting back on services to bring them back into the black. This often means no lifts or no refuse collection which isn't nice at all. After that, there's not a lot more you can do. You could file a complaint with the ODCE that the directors are trading recklessly and endangering the company. If the complaint was found valid, the developer could be disqualified from ever becoming a director again so they may inject cash into the company to avoid this situation. The downside of this is that they will try to get back the cash as soon as possible, endangering the company further down the line.

If it helps (and I guess it won't), there are countless estates facing the same problem as you. There is new legislation which should solve this problem in future, which will help you get rid of the developers but which won't get your debt cleared. Of course, it could be watered down so much as to be useless or it could be put on the long finger. Get everyone in your estate to lobby your local FF or Green TD to let them know how essential it is to you.

marbar

markpb wrote: »

They do own the empty units but because the lease agreement is only signed on a sale, they never signed one so they can claim they're not liable for the service charge. It's a huge black hole. The Law Reform Commission stated last year that they believe developers *are* liable for service charges in unsold units but I've yet to meet anyone who has proven this in court.



A company is struck off when it fails to file the accounts to the CRO after an acceptable timeframe. A bankruptcy is when it is unable to pay it's debt and the creditors make a petition to the courts to have it wound up. If that happens, the assets (i.e the land, building structure, etc) are normally transferred to the Minister for Finance but in your case, there is a good chance that the developer still owns all of those so in the event of a bankruptcy, there is nothing to transfer to the MoF. Any bills outstanding (to the cleaners, refuse company, ESB, etc) would be written off because they are unsecured. This does not solve your problem because it leaves you with no management company which means no-one to pay for the light, insure the building, etc which could invalidate your mortgage. It's a horrible, stupid situation to be put in :-(

There's no easy solution to this problem. Most companies end up cutting back on services to bring them back into the black. This often means no lifts or no refuse collection which isn't nice at all. After that, there's not a lot more you can do. You could file a complaint with the ODCE that the directors are trading recklessly and endangering the company. If the complaint was found valid, the developer could be disqualified from ever becoming a director again so they may inject cash into the company to avoid this situation. The downside of this is that they will try to get back the cash as soon as possible, endangering the company further down the line.

If it helps (and I guess it won't), there are countless estates facing the same problem as you. There is new legislation which should solve this problem in future, which will help you get rid of the developers but which won't get your debt cleared. Of course, it could be watered down so much as to be useless or it could be put on the long finger. Get everyone in your estate to lobby your local FF or Green TD to let them know how essential it is to you.

we were advised that this was a "recommendation" and based on this recommendation the mgmt agent has asked the directors/developers to pay the outstanding debt. but they won't "i don't think i'll be doing that" was the last quote i heard

as for being struck off, we have filed audited accounts. no shareholder approved them, but apparently this doesn't matter as the directors have the final say

as for bankruptcy, the creditors will not apply for this as they most likely have contracts in other areas with the mgmt company/developers. the mgmt agent stated that this is the only property that the builder is involved with where this is an issue

i think our greatest hope is to create awareness of this debt as the developer will not sell any more property while it is public knowledge (except for uninformed eejits like me). but then, it is in our best interests to have all units sold as quickly as possible as well

nightmare

markpb

marbar wrote: »

i think our greatest hope is to create awareness of this debt as the developer will not sell any more property while it is public knowledge (except for uninformed eejits like me). but then, it is in our best interests to have all units sold as quickly as possible as well

If you want to put pressure on the developer, get everyone in the estate to talk to the local councillors and TDs. Make sure they know exactly what to do - you want the politicians to call the developer and ask why he's letting the mgt co go bankrupt. Politicans love to talk so if you let them take the lead, they'll talk about supporting you, about upcoming legislation, etc but won't have a clue what to do.

The second thing you could do is print large notices and and put them all over the estate so anyone viewing will find out the problems you have. This will annoy the developer/estate agent who will try to take them as often as possible but you have the advantage by living there. The other source of opposition will be people living there trying to sell up - they won't want you getting in the way.

Jo King

http://www.herald.ie/national-news/courts/judges-ruling-gives-residents-of-apartments-new-legal-rights-1708975.html

In theory the PRTB should deal with the situation.

Paulw

Jo King wrote: »

In theory the PRTB should deal with the situation.

In theory, yeah. In practice, it might be a very different issue.

Of course, the new Multi-Unit Developments Bill 2009 is due soon, which will give you more powers in these situations.

The main thing you need to do is hassle the developer. Send the listed directors registered letters and demand their response. Do contact the policitians. While they love to talk, they can put pressure on. Contact as many lobby groups as possible too.

antoinolachtnai

markpb wrote: »

A company is struck off when it fails to file the accounts to the CRO after an acceptable timeframe. A bankruptcy is when it is unable to pay it's debt and the creditors make a petition to the courts to have it wound up. If that happens, the assets (i.e the land, building structure, etc) are normally transferred to the Minister for Finance but in your case, there is a good chance that the developer still owns all of those so in the event of a bankruptcy, there is nothing to transfer to the MoF. Any bills outstanding (to the cleaners, refuse company, ESB, etc) would be written off because they are unsecured.

It's not particularly material, but this is not what happens in business insolvency.

The creditors, through the liquidator, get access to the assets. The Minister for Finance has very little to do with it. There are a number of ways that a liquidator can be appointed. It does not necessarily have to be done through the courts.

See http://www.grantthornton.ie/Ourservices/SpecialistAdvisoryServices/RecoveryandReorganisation/CourtLiquidation

Anyway, this does not help the OP.

There is very little point in lobbying TD's or anybody else until you figure out what you actually want them to do.

Really, you have to figure out some way to make a settlement with the builder. The builder is just trying to put you off, because he simply doesn't have any money with which to solve your problems. If he could, he would, simply to make his other apartments available to let.

Realistically, one way or the other, you and the other owners are going to have to put up a chunk of money here. The builder just doesn't have the money. You might get him to give the management company a couple of units in the development as a settlement, but what good are they going to do you?

You are also going to have to get everything lined up with the other owners. It's going to be a fairly complicated and expensive restructuring. You have no choice though - the further this thing goes, the worse it's going to be.

marbar

antoinolachtnai wrote: »

There is very little point in lobbying TD's or anybody else until you figure out what you actually want them to do.

Really, you have to figure out some way to make a settlement with the builder. The builder is just trying to put you off, because he simply doesn't have any money with which to solve your problems. If he could, he would, simply to make his other apartments available to let.

Realistically, one way or the other, you and the other owners are going to have to put up a chunk of money here. The builder just doesn't have the money. You might get him to give the management company a couple of units in the development as a settlement, but what good are they going to do you?

You are also going to have to get everything lined up with the other owners. It's going to be a fairly complicated and expensive restructuring. You have no choice though - the further this thing goes, the worse it's going to be.

I think that this is the crooks of it. He has apparently paid out for every other complex (very well known builder/company) but has so far refused to pay for ours. He had originally promised the mgmt agent that the money would be paid, but has recently changed his stance.

I finally got my solicitor and asked if I had just imagined that I was told the builder would cover the unoccupied units. She said:

I have taken a look at your Title Deeds. Your Lease with the Builder and the Management Company provides that the service charge is based on a percentage basis. Your Lease specifically states that you are liable to pay 0.3077% towards the estate service charge and 0.3670% towards the unit service charge.

In developments such as yours, the Builder enters into an Agreement with the Management Company to hand over the estate once same is completed. As the estate is not yet complete and the builder still has unoccupied units, the Builder is therefore the registered owner of the unsold units and remains so until the sale of them. Therefore he is liable for the running of the complex and any service charge due and owing from those unsold units.

Now, obviously if this is correct then I have nothing to worry about. But if it’s correct, how come my solicitor is the only one that has seen this? Is she misreading this statement?
Not one other owner, solicitors among them, thinks that this is the case. Nor does the mgmt company. If my solicitor can’t get it right, what hope do I have?

markpb

marbar wrote: »

Now, obviously if this is correct then I have nothing to worry about. But if it’s correct, how come my solicitor is the only one that has seen this? Is she misreading this statement? Not one other owner, solicitors among them, thinks that this is the case. Nor does the mgmt company. If my solicitor can’t get it right, what hope do I have?

As far as I know, it's a case of interpretation. If all the owners only owe (try saying that fast!) 80%, it stands to reason that the remaining liability falls to the developer as de-facto owner of the remaining units. The problem is, it's never been proven in court because most owners don't have the money to bring them to court or don't realise the problems they face.

antoinolachtnai

If the lease really says that, then the builder has screwed up and your management company gets to join his list of creditors!

You actually have to read the lease to find out the story. It reads to me like your solicitor has actually taken the time and trouble to read the lease.

Has anybody else read it? Have you? It's amazing how few people actually bother to read leases. Everyone assumes the lease is the same as the last lease they came across. But leases do vary.

None of this really changes the fundamental fact that your builder probably doesn't have any money.

Paulw

antoinolachtnai wrote: »

Has anybody else read it? Have you? It's amazing how few people actually bother to read leases. Everyone assumes the lease is the same as the last lease they came across. But leases do vary.

That's a common fault - not reading the documents. I know I've read my lease inside out many times, as well as the articles for the management company. I ended up knowing these documents better than the developer, and used that to our benefit in the end.

I would guess that other people and their solicitors have not actually sat down and read these documents fully.

But, as others have said, if the developer has no money, then he has no money.

marbar

I didn’t go through the lease in detail, I trusted the solicitor to do that. I also trusted the solicitors among the owners who said that we have no legal leg to stand on.

I just asked my solicitor now if I took the builder to court was there something that I could point at that says he must pay for the empty properties, and she has now changed her mind. She is still sure that he is liable for empty properties and is pouring over the lease as we speak.

Amazingly she also just told me that she didn’t check the mgmt company accounts. She just checked to see if the company was trading solvent.
If the debt had started in year one, and continued for another year before I bought, how could the company have appeared to be trading solvent? Is there a certain level of debt/certain time to be reached before it’s stated that the company is trading insolvent?

Paulw

marbar wrote: »

I didn’t go through the lease in detail, I trusted the solicitor to do that. I also trusted the solicitors among the owners who said that we have no legal leg to stand on.

Amazingly she also just told me that she didn’t check the mgmt company accounts. She just checked to see if the company was trading solvent.
If the debt had started in year one, and continued for another year before I bought, how could the company have appeared to be trading solvent? Is there a certain level of debt/certain time to be reached before it’s stated that the company is trading insolvent?

It sounds like you and your solicitor have learned a valuable lesson - to read all the documents, and check the facts. A bit late for you though.

It can happen that management companies trade at a loss, especially in the early years, as units are sold. But, I'm very surprised at the level of debt your company has been able to carry over.

I'm not sure if there is a specific level of debt that can be carried over, but it can happen if expenditure is high and recovery of management fees is low. But, this would seldom last more than 2-3 years, unless someone isn't doing their job properly.

Sounds more and more like you are in a right mess, and no solicitor wants to put their neck on the line about the developer and the due management fees.

marbar

Oh I am certainly in a right mess. There is no doubt about that. But so are the other 220 people who own properties in this complex.

The solicitor ran through the lease briefly with me before everything was signed. I was certainly under the impression that it was standard and, as I’ve no experience in this anyway, I probably wouldn’t have known the difference if I’d poured over the whole thing.

I distinctly remember, however, being told that the developer would be paying for the empty properties, as this is something that my dad had asked me to check up on due to horror stories. The solicitor told me today that the developer has shares in the company (90. Amounting to the unsold units) but, again, when I asked her if he could be brought to court and asked to pay for those units, she thinks not.

I have been well and truly shafted I’m afraid

Paulw

You, personally, may have a case to bring against your solicitor, to the Law Society, for failure to disclose all necessary details and for failing to do a proper check of the management company.

It won't solve your problem, but, it may help you.

While I did trust my solicitor when I bought (personal friend actually), I also made sure to get a copy of all documents, which I read from cover to cover. A lot of reading, but it paid off in the end. While these contracts are "standard", they are all different, and have different clauses and options. These little differences can make a very major difference to the management company and to you.

antoinolachtnai

Just concentrate on actually moving forward and getting a resolution to this whole thing. Looking back isn't going to help you that much.

This really isn't the biggest problem ever. It can be solved. It will take some creativity, team-work and hard slog.

Paulw

antoinolachtnai wrote: »

It can be solved. It will take some creativity, team-work and hard slog.

And a lot of money. :rolleyes:

antoinolachtnai

Well, there are things that can be done. You might need to take units off him in lieu of payment. Messy, but if that's all you can get, that's all you can get. You would still need to put up some cash, but if you do it right, you might well be able to recover all your money over the longer term.

I am guessing, again dangerously from leases I have read before, but I would suspect that the lease actually says that the builder is supposed to run the estate and charge a proportion of the cost to the owners who are in place. So this would make him liable for paying his share.

But you have to read it and think about it.

marbar

thanks paul for filling me with...confidence over the situation...

so would do people think the best option is?
1. strike/wind up/bankrupt/liquidate the company
2. pay the debt between owners and continue (letting the builder away with it). this would also mean the debt will continue to grow while units are unsold
3. chase them in court over payment
4. sue the directors for reckless trading?

antoinolachtnai

None of those. You need to open up all of those options, but only to give you leverage with the builder. All of them will be expensive, and if the builder doesn't have the money, he still won't have the money when you are done suing him.

This is all about protecting the value of your investment.

Most importantly, you have to figure out a way to ensure continuity of services.

Next, you have to stabilize the control of the management company, in some form or other.

Paulw

The very unfortunate situation means that you are all (unit owners) in a right mess. You already know that though.

Your suggested options -
1) A big mess, and could be a lot more hassle in the end, and may still not help your situation.
2) Painful, a short term fix, but will result in problems next year and the year after, etc.
3) Depends on the legal advice you can get from solicitors, and what they say your chances of winning are.
4) That is unlikely to recover all the costs needed, and still may not fix the problems.

Me, I've no advice to give you. Really you should be getting as much legal advice as possible from your solicitor, and you should be working with all other unit owners and their solicitors too. Enough people together should be able to find some form of way to work this out, without having to cost you too much more.

marbar

antoinolachtnai wrote: »

None of those. You need to open up all of those options, but only to give you leverage with the builder. All of them will be expensive, and if the builder doesn't have the money, he still won't have the money when you are done suing him.

This is all about protecting the value of your investment.

Most importantly, you have to figure out a way to ensure continuity of services.

Next, you have to stabilize the control of the management company, in some form or other.

thanks for all the advice antoinolachtnai

the investment is the most important thing. and while he may not have any money, he still owns 90 properties in the complex. could some of these be tunred over if a ruling was in our favour?

the esb, insurance and refuse are the most important things to keep running. anything after that is a bonus. but again, the directors make these decisions. we have no say. the control will stay with the directors

marbar

Paulw wrote: »

Really you should be getting as much legal advice as possible from your solicitor, and you should be working with all other unit owners and their solicitors too. Enough people together should be able to find some form of way to work this out, without having to cost you too much more.

yeah this is what we're all at right now. i know we're not the only complex to be in this mess, but it would be so much simpler if the decisions were black and white.

as i'm not on the committee and have no legal experience, my say in what will happen ultimately will most likely be very small, if even taken on board. really all i'm looking to do is limit the damage to be by taking the cheapest/best course of action
if legal professionals are having difficulty deciding this, then i really am screwed

D3PO

BTW Marbar dont forget aswell as the running deficit by the management company it sounds like you have no sinking fund. so the gap is larger than you think as you have 3 years worth of a sinking fund to make up aswell !!

antoinolachtnai

marbar wrote: »

thanks for all the advice antoinolachtnai

the investment is the most important thing. and while he may not have any money, he still owns 90 properties in the complex. could some of these be tunred over if a ruling was in our favour?

the esb, insurance and refuse are the most important things to keep running. anything after that is a bonus. but again, the directors make these decisions. we have no say. the control will stay with the directors

Well, you could just all club together and pay the esb to keep the lights on. You could structure this in various ways. You could all lend money to the management company, for example.

If the directors are going to do something that's going to lead to the lights being turned off and the insurance not being paid, I'd say you'll be gearing up for a trip to the High Court.

How exactly this would be done would depend on your lease and paperwork, but if it's at that point, the court might be convinced to intervene pretty quickly. This won't solve the problem though, it will just forestall it.

It is very unlikely that apartments would be turned over to you. They would really have to go on the market. Remember, his bank has some sort of lien or mortgage on these properties.

However, maybe there is a possibility to structure something that would get him out of there and maybe some apartments would be part of the deal. It would require you putting up some money though. You have to be creative.

Carawaystick

I don't see how the OP has much to loose by trying to get the ODCE to bar the directors, or at least threatening it. They sound like gangsters and should not be directors. If there were elections to replace them then there may be more favourable people elected/appointed.

Keith C

any chance of a pm where this apts are? ive a few friends eyeing up a few places & would like to make sure they're not looking at these.

athtrasna

Keith all your friend needs is a good solicitor who reads the documents before purchase rather than afterwards. I'm not particularly shocked at the state of the OP's management company but still can't get over the dreadful legal assistance that facilitated the OP buying into a disaster!

marbar

the solicitor told me that she just checked it the mgmt company was solvent, as opposed to checking the accounts. i still don't get how it could have appeared solvent if the debt had been building for two years

met one of hte solicitors last night briefly and she reckons that there's no way that i'm liable for the debt. i didn't get into details though because i'm waiting to hear legal certainty at this stage

keith, pm sent

antoinolachtnai

She checked to see if the company was in liquidation. It wasn't. She checked was it trading, it was. Just because something has debts doesn't make it insolvent.

Re your advice - no, you aren't liable for the debt. It's a limited company. No one is liable for the debt, not you, not the people who have lived there for longer. The problem is that the suppliers still have to be paid.