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An Apartment With an Inadequate Sinking Fund

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  • 18-07-2019 3:26pm
    #1
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭


    I have been renting last 2 years a top floor apartment in a small 3 story block

    Landlord offered to sell at mkt value to me. I had a surveyor in to inspect apartment, found no issues but...

    The roof is a low pitch timber carcass with rubber weathering sheet

    He said these roofs have life span of 15-30 years and at present looked 100% fine

    However, there is no money in the sink fund due to poor mismanagement

    A new mgt company has taken over and created a sink fund last month and seen a lot more proactive being residents too


    I am a lone parent, wrong side of 40 and mortgage expires next week. I have looked last 3 years and nothing in my budget

    This apartment has been a great home so far, would I be stupid to buy?


    Best case , sink fund healthy in 10 years and pays for roof

    Worst case..... myself and the other apartment on top floor pays



    My options are extremely limited

    Any advice?


Comments

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    #2
    Dav010
    Registered Users Posts: 14,003 ✭✭✭✭Dav010


    Why would you and one other person be the only ones to pay? Surely all units in the block contribute to upkeep of the exterior.

    On a practical point, your landlord will want vacant possession if he wants to sell, so if you like the place, you are getting it at market value and this is acceptable to you, and you have concerns over getting another mortgage approval, why not buy it?


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    #3
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Talk to your solicitor, I don't think your understanding of the worse case is correct.

    It would be more likely that a levy would be applied to all owners if the sinking fund were insufficient.


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    #4
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    Graham wrote: »
    Talk to your solicitor, I don't think your understanding of the worse case is correct.

    It would be more likely that a levy would be applied to all owners if the sinking fund were insufficient.

    Thanks , mgt company said if not enough for any reason, the expense would be factored into mgt fees


    Surveyor said in an ideal all 8 apartments would pay but often they won’t as don’t see it as their problem


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    #5
    Caranica
    Registered Users Posts: 10,001 ✭✭✭✭Caranica


    Fiftyfilthy wrote: »
    Thanks , mgt company said if not enough for any reason, the expense would be factored into mgt fees


    Surveyor said in an ideal all 8 apartments would pay but often they won’t as don’t see it as their problem

    It's their roof too so it's absolutely their problem. They'll also have signed legal documents committing them to pay. Something to check with your solicitor not your surveyor.


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    #6
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    The developer is long gone , would this make a difference?


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    #7
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    It shouldn't make any difference at all if there's an Owners Management Company (OMC) in place.


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    #8
    [Deleted User]
    Posts: 3,621 ✭✭✭ [Deleted User]


    Fiftyfilthy wrote: »
    Thanks , mgt company said if not enough for any reason, the expense would be factored into mgt fees


    Surveyor said in an ideal all 8 apartments would pay but often they won’t as don’t see it as their problem

    Short term thinking. In the long run it's their own pockets they are picking.


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    #9
    odyssey06
    Registered Users Posts: 27,873 ✭✭✭✭odyssey06


    If the new management company is working to create an adequate sinking fund, presumably there will have to be significant increase in annual charges to cover it - make sure you have an idea of what the charge will be going forwards e.g. could be €2000 a year.

    Aside from the sinking fund, the other thing I would be thinking of as a general point re: top floor apartment is whether there is a lift and in good order.

    Should you have any health episodes that limit mobility, that would be an issue.

    "To follow knowledge like a sinking star..." (Tennyson's Ulysses)



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    #10
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    ronoc wrote: »
    Short term thinking. In the long run it's their own pockets they are picking.


    Agreed as the draining goes through the middle of the roof right down the block so would be in everyone’s interests

    I don’t take risks and I don’t care to be a property owner other than to have a stable head over myself and daughter’s head

    I’ve thought about nothing else last 48 hrs , I’m thinking to proceed


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    #11
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    In your situation it would seem the right decision to proceed, IMHO.


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    #12
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    Most sinking funds are inadequate at the moment and are only starting to build a reserve. MUd act only brought in sinking funds in 2012. Minimum contribution from each apartment should be 200 per year. The owners should be paying this with their service charge. If an apartment is sold the owners management company ( you are a member of the management co. Once you are an owner) will receive any outstanding service charges and sinking fund charges from the sale proceeds. I’m sure the new management agent is on top of it. If surveyor says roof is fine we’ll then I don’t see why this would be an issue short term. Maybe in 15-20 years at which stage you will have built up an adequate sinking fund.


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    #13
    Sonny noggs
    Closed Accounts Posts: 1,523 ✭✭✭Sonny noggs


    Personally I’d be weary of buying an apartment in an 8 unit block regardless of the roof concerns. You aren’t getting decent economies of scale when paying for services and your ability to raise funds is limited to the 8 owners. Is there a lift?


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    #14
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    Agreed, however there is no lift, underground parking or electric gates

    So that is a blessing in disguise


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    #15
    Mrs OBumble
    Registered Users Posts: 25,669 ✭✭✭✭Mrs OBumble


    ronoc wrote: »
    Short term thinking. In the long run it's their own pockets they are picking.

    Correct. But if they agree they are liable but simply refuse to pony up the cash, it puts property owners who are directly impacted in this position of having to fund the work themselves in order to get it done now instead of later.

    Personally, it's the sort of risk I would take if in the OPs shoes


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    #16
    hmmm
    Registered Users Posts: 11,205 ✭✭✭✭hmmm


    How many of the 8 residents are paying, and how many are owner occupiers? I wouldn't necessarily be worried myself that a sinking fund hasn't been built up if they have now got their act together, and would be trying to work out the likelihood of all 8 contributing if repairs are required.

    In many apartment complexes, the arrears are recovered when someone tries to sell - and ideally hefty interest rates are charged for unpaid amounts. That can be a nice earner from people who think they are pulling a fast one.


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    #17
    Caranica
    Registered Users Posts: 10,001 ✭✭✭✭Caranica


    Baby01032012 wrote: »
    Most sinking funds are inadequate at the moment and are only starting to build a reserve. MUd act only brought in sinking funds in 2012. Minimum contribution from each apartment should be 200 per year. The owners should be paying this with their service charge. If an apartment is sold the owners management company ( you are a member of the management co. Once you are an owner) will receive any outstanding service charges and sinking fund charges from the sale proceeds. I’m sure the new management agent is on top of it. If surveyor says roof is fine we’ll then I don’t see why this would be an issue short term. Maybe in 15-20 years at which stage you will have built up an adequate sinking fund.

    Not true. Any decent development had a sinking fund way before then. We bought in 2003 and development had a decent sinking fund back then and still does. We don't pay 200 a unit into the sinking fund, as we don't need to. That may change but for now our fund is certainly adequate.


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    #18
    mdebets
    Registered Users Posts: 1,747 ✭✭✭mdebets


    Graham wrote: »
    Talk to your solicitor, I don't think your understanding of the worse case is correct.

    It would be more likely that a levy would be applied to all owners if the sinking fund were insufficient.
    It could be even worse for the OP, in that she could pay all, or she could even be living in an apartment with a leaking roof.
    If the roof needs to be repaired, it would indeed be either taken out of the sinking fund or every apartment owner has to pay an extra levy for the repair if the sinking fund has too little money (as it seems to be the case here).
    The building has already a history of not enough people paying the proper management charges and you don't know if they can't pay or just won't pay. Now imagine the roof develops a leak over your bedroom. If the management company now charges an extra levy for the repair, how likely will it be, that this money is raised quickly enough to not drag out the repair? In this case, you probably need to raise the money yourself (and get it paid back later from the management company when they got the money from the other owners). Are you able to do that?


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    #19
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    Caranica wrote: »
    Not true. Any decent development had a sinking fund way before then. We bought in 2003 and development had a decent sinking fund back then and still does. We don't pay 200 a unit into the sinking fund, as we don't need to. That may change but for now our fund is certainly adequate.

    I’m glad that in your single instance you were lucky enough to have a sinking fund but my wider knowledge shows that would not have been the norm.

    I don’t understand what you mean that you don’t contribute 200 per unit per year. This is the legal minimum under the MUD act.


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    #20
    happyfriday74
    Registered Users Posts: 194 ✭✭happyfriday74


    Baby01032012 wrote: »
    Most sinking funds are inadequate at the moment and are only starting to build a reserve. MUd act only brought in sinking funds in 2012. Minimum contribution from each apartment should be 200 per year. The owners should be paying this with their service charge. If an apartment is sold the owners management company ( you are a member of the management co. Once you are an owner) will receive any outstanding service charges and sinking fund charges from the sale proceeds. I’m sure the new management agent is on top of it. If surveyor says roof is fine we’ll then I don’t see why this would be an issue short term. Maybe in 15-20 years at which stage you will have built up an adequate sinking fund.


    Your right that 200 per year per unit is the figure in the MUD Act.

    However no to developments are the same. i.e an estate of semi D's in a privately managed estates such a figure might be more than enough, but for a block with loads of lifts etc it may not be.

    OMcs should always get a building lifestyle report that breaks the sinking fund items cost out over a long period of time and base the contributions on that- I believe this is required under the new planning permissions


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    #21
    Caranica
    Registered Users Posts: 10,001 ✭✭✭✭Caranica


    Baby01032012 wrote: »
    I’m glad that in your single instance you were lucky enough to have a sinking fund but my wider knowledge shows that would not have been the norm.

    I don’t understand what you mean that you don’t contribute 200 per unit per year. This is the legal minimum under the MUD act.

    It's not the legal minimum, it's the suggested minimum.


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    #22
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Baby01032012 wrote: »
    I’m glad that in your single instance you were lucky enough to have a sinking fund but my wider knowledge shows that would not have been the norm.

    Sinking funds have been commonplace going back much further than the MUD act.


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