How to deal with apartment owners who refuse to pay management fees?

warrenm · 18-09-2011 04:49PM #1

Hi there. I am a director on the board of management of a Dublin city center apartment block. Our previous management agent mismanaged the building, with many fees uncollected, accounts "stolen" from their office and funds missing. They were fired in 2008 and a new company hired. Since then most of the unpaid fees have been clawed back but four of the forty apartment owners in the block are refusing to engage on any level, not only denying they owe historic fees (even though they have no evidence of any description of payment) but also refusing to fees since the appointment of the new company. Has anyone any experience dealing with this? The apartments are held under 999 year leases with the management company as freeholders. Refusal to pay fees directly contravenes the terms of the lease. Can the lease be terminated allowing the management company to take possession of them? If not can they be locked out of the development until fees are paid? Any other suggestions? We have sought legal advice on three occasions but no one seems to be give us a solution to the problem. It's a small block so the shortfall in fees year on year is really effecting out ability to run the development? I may add that all four apartments are rented out, two of the owners being "professional landlords" who know how to play the system. Every cent that is collected goes back into the block and a full breakdown of expenditure is sent to all owners every year

Paulw · 18-09-2011 04:58PM

In short, you need to take them to court - http://www.justice.ie/en/JELR/MUDSAct2011.pdf/Files/MUDSAct2011.pdf

Section 22.

bath handle · 18-09-2011 05:45PM

Paulw wrote: »

In short, you need to take them to court - http://www.justice.ie/en/JELR/MUDSAct2011.pdf/Files/MUDSAct2011.pdf

Section 22.

Is there a forfeiture clause in the lease?

warrenm · 18-09-2011 07:24PM

Thanks for getting back to me. Yes the lease does have a forfeiture clause. We were advised that a judge would not look favorably on any attempts to lock people out of their apartments in the present climate but non are owner occupiers

Paulw · 18-09-2011 07:31PM

You might have better luck seeking a judgement against the unit owners, which would give them a set amount of time to pay. Failure to pay can result in further action against them, such as contempt of court.

bath handle · 18-09-2011 07:56PM

warrenm wrote: »

Thanks for getting back to me. Yes the lease does have a forfeiture clause. We were advised that a judge would not look favorably on any attempts to lock people out of their apartments in the present climate but non are owner occupiers

Should be no problem ic you forfeited the units which are not owner occupied. you can change the lock on the door in co operation with the tenants. you give the tenants a reduction in rent, register with the prob and collect the rent.

Paulw · 18-09-2011 08:03PM

bath handle wrote: »

Should be no problem ic you forfeited the units which are not owner occupied. you can change the lock on the door in co operation with the tenants. you give the tenants a reduction in rent, register with the prob and collect the rent.

Yeah, and you just need a court order for that. :rolleyes:

The Orb · 18-09-2011 08:07PM

Take them off the block insurance then take them to court for fees and get a judgement. If they want to sell the apartment enforce the judgement by refusing to release the leasehold title until all monies are paid. It's not perfect but it's all you can do I think.

bath handle · 18-09-2011 08:35PM

Paulw wrote: »

bath handle wrote: »

Should be no problem ic you forfeited the units which are not owner occupied. you can change the lock on the door in co operation with the tenants. you give the tenants a reduction in rent, register with the prob and collect the rent.

Yeah, and you just need a court order for that. :rolleyes:

No you don't. provided it is done peaceably. F.G. Sweeney v Powerscourt Shopping Centre Ltd 1984. I.R. 501

Victor · 18-09-2011 11:06PM

bath handle wrote: »

No you don't. provided it is done peaceably. F.G. Sweeney v Powerscourt Shopping Centre Ltd 1984. I.R. 501

Are you certain? Different legislation and commercial -v- residential property.

bath handle · 19-09-2011 02:07PM

Victor wrote: »

bath handle wrote: »

No you don't. provided it is done peaceably. F.G. Sweeney v Powerscourt Shopping Centre Ltd 1984. I.R. 501

Are you certain? Different legislation and commercial -v- residential property.

Not if the lease is longer than 35 years.

paddylonglegs · 19-09-2011 08:24PM

notify all tenants that bin collection and maintenance will cease in the next 7 days in the development because 4 tenants have not made any attempt to pay. When bags of stinking waste start to pile up and the 4 know its because of them, this may force them to comply.

Sorry to come across a bit mafioso, but it worked at my sisters development. They went as far as to name and shame them, think that could get dangerous though

Victor · 20-09-2011 05:33AM

paddylonglegs wrote: »

notify all tenants that bin collection and maintenance will cease in the next 7 days in the development because 4 tenants have not made any attempt to pay. When bags of stinking waste start to pile up and the 4 know its because of them, this may force them to comply.

May bring the council down on your head for having a health hazard.

Sorry to come across a bit mafioso, but it worked at my sisters development. They went as far as to name and shame them, think that could get dangerous though

Potential for data protection / defamation issues.

AstonMartin · 20-09-2011 09:39AM

Are you telling me that if someone buys an apartment and cant afford to pay management fees then a board of directors can apply to the courts to take ownership of the apartment? What happens to the mortgage? Who sets the management fee?

Paulw · 20-09-2011 10:51AM

AstonMartin wrote: »

Are you telling me that if someone buys an apartment and cant afford to pay management fees then a board of directors can apply to the courts to take ownership of the apartment? What happens to the mortgage? Who sets the management fee?

Failure to pay management fees can be considered a default on your mortgage, and the banks take that very seriously. If the management company get a judgement against you, you would be given a set period of time to clear the debt. Failure to do so can result in a court order to sell the property (I believe this has been done a number of times), where the management company fees are then paid, and the rest of the money goes to the bank, and the owner is left with any outstanding debt (such as negative equity).

Management fees are set by the Lease Contract you signed when you bought the property. The fee is generally the cost per annum for running the development divided by the unit share of floor space. The running costs are generally agreed at the company AGM.

mikemac · 20-09-2011 10:59AM

my mistake, need to read it better

happy to be corrected

Paulw · 20-09-2011 12:21PM

No offence Mike, but you don't seem to understand a number of concepts.

The management company never changes. It is the same company from the day the development is built until 999 years later. All fees should be paid to the management company.

A management agent tends to be employed by the management company to run the development on a day to day basis. They should be paid by the management company, and not by unit owners directly.

Each unit owner is a member of the management company and has an equal holding in it.

If the place is not being well run, then each unit owner has power to get involved (become a director) and change how things are done. Not paying your fees is never a solution and will only ever make matters worse, for everyone.

Lantus · 21-09-2011 10:45AM

Paulw wrote: »

A management agent tends to be employed by the management company to run the development on a day to day basis. They should be paid by the management company, and not by unit owners directly.

Managment agents can take on the collection and debt collection of monies and also the running of all accounts for the management company on behalf of the directors, who then would only need to check in every so often to see it is all been done. They can also prepare and submit annual reports and run AGM's in lieu of directors if given the power to do so by the directors.

So yes, you can pay an agent direct and they can operate as de facto directors.

Paulw · 21-09-2011 10:57AM

Lantus wrote: »

Managment agents can take on the collection and debt collection of monies and also the running of all accounts for the management company on behalf of the directors, who then would only need to check in every so often to see it is all been done. They can also prepare and submit annual reports and run AGM's in lieu of directors if given the power to do so by the directors.

So yes, you can pay an agent direct and they can operate as de facto directors.

Yes, the management agent can do that operation. Debt collection and invoice payment can be done by the agent.

However, the bank account should belong to the management company, so all cheques and payments should be made out to pay the management company.

EG - Development X Management Company Ltd is the management company.
Development Management Company Y is the management agent.

All cheques and payments should be made to Development X Management Company Ltd ONLY.

While the directors of the management company directors can grant admin access to employees of the management agent (and often do), the management company is still the one in control and the one being paid.

Any management company that allows payments by members be made to the management agent bank are foolish and only asking for trouble. All payments should go via the management company bank account.

padz · 28-09-2011 12:48PM

management fees.. isint this something that went out with the good times?

athtrasna · 28-09-2011 01:05PM

padz wrote: »

management fees.. isint this something that went out with the good times?

So insurance, maintenance, gardens, common area lighting, fire safety, audits, refuse and company administration all come free in a recession :rolleyes: Fees are a necessary evil. Anyone buying in a managed development signs up to pay them.

padz · 28-09-2011 01:15PM

athtrasna wrote: »

So insurance, maintenance, gardens, common area lighting, fire safety, audits, refuse and company administration all come free in a recession :rolleyes: Fees are a necessary evil. Anyone buying in a managed development signs up to pay them.

insurance for? arnt all indivdual rented or owned properties required to be insured by law

maintenance is a relative term, sumthing which i mite think is fine u might think is under maintained

gardens = potted plant balcony

common area = i need a way to access my apartment, cant be expected to pay for that?

fire safety = required by law renting/owning covers this

refuse collection = panda bin tag

im being facetious here but im not sayin managment fees dont have their place they just seamed to have been rather excessive at times in the boom, at the mo i have what u would call managemet type perks in my aparment block but there included in the rent

Milk & Honey · 28-09-2011 01:30PM

padz wrote: »

insurance for? arnt all indivdual rented or owned properties required to be insured by law

No.

padz wrote: »

maintenance is a relative term, sumthing which i mite think is fine u might think is under maintained

gardens = potted plant balcony

padz wrote: »

common area = i need a way to access my apartment, cant be expected to pay for that?

Yes. You will also require public liability insurance

padz wrote: »

fire safety = required by law renting/owning covers this

All owners have to comply together

padz wrote: »

refuse collection = panda bin tag

im being facetious here but im not sayin managment fees dont have their place they just seamed to have been rather excessive at times in the boom, at the mo i have what u would call managemet type perks in my aparment block but there included in the rent

Then the landlord is paying management fees to the management company.

padz · 28-09-2011 01:39PM

Milk & Honey wrote: »

No.

padz wrote: »

maintenance is a relative term, sumthing which i mite think is fine u might think is under maintained

gardens = potted plant balcony

Yes. You will also require public liability insurance

All owners have to comply together

Then the landlord is paying management fees to the management company.

yes the agency who im paying are the 'managment' people but i do know of people who have rented payin an agency AND had to pay managment fees on top to another company

Paulw · 28-09-2011 01:43PM

padz wrote: »

yes the agency who im paying are the 'managment' people but i do know of people who have rented payin an agency AND had to pay managment fees on top to another company

Well, if tenants are paying rent and management fees then their landlord is having a great time. By law, only the unit owner must pay management fees.

Now, if the landlord wants to wrap up fees within the rent, then that's between the landlord and tenant. But, there is no obligation on any tenant to pay management fees.

In some developments, the management agent also provides services for letting of properties. This is not part of their job as a development management agent, but is a separate private contract with the unit owners who wish to rent out their units.

padz · 28-09-2011 01:50PM

Paulw wrote: »

Well, if tenants are paying rent and management fees then their landlord is having a great time. By law, only the unit owner must pay management fees.

Now, if the landlord wants to wrap up fees within the rent, then that's between the landlord and tenant. But, there is no obligation on any tenant to pay management fees.

In some developments, the management agent also provides services for letting of properties. This is not part of their job as a development management agent, but is a separate private contract with the unit owners who wish to rent out their units.

yeah think they had an annuall fee to pay, dont get me wrong it was well looked after.... just pissed us off how the clampers got in the gates the day after paddys day to clamp our friends car,... would a managment company honestly do that?

athtrasna · 28-09-2011 02:01PM

padz wrote: »

yeah think they had an annuall fee to pay, dont get me wrong it was well looked after.... just pissed us off how the clampers got in the gates the day after paddys day to clamp our friends car,... would a managment company honestly do that?

If the car was parked in a manner or location that was in breach of the lease agreement (basically the deeds the owner signed at purchase, not to be confused with your lease between you and your landlord) then the vehicle should have been clamped.

As a tenant you wouldn't have seen MC company accounts or attended AGMs so it's understandable that you don't fully appreciate the situation regarding fees. "Owners" don't actually own their apartments, they have a long term lease (often about 1,000 years) from the Management Company. The MC owns all the buildings, common areas, car parks etc, hence the huge costs associated with insurance, maintenance etc.

How to deal with apartment owners who refuse to pay management fees?

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