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No sinking fund

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    #32
    PhoenixParker
    Registered Users Posts: 2,671 ✭✭✭PhoenixParker


    A few comments, questions and observations:

    1) what's the delinquency rate on fees? Is everyone paying up or is there a serious problem collecting the money? If there's already a big problem collecting fees it's going to be quadruply difficult if there needs to be an additional levy to pay something specific.

    2) 218 is actually a pretty decent number of apartments. A 20 unit management company with a few non-payers is in a tough position but typically a bigger management company will have deeper pockets to pursue fees. Costs are typically recouped when the fees are paid, but you gotta pay to chase up front. There are also usually some economies of scale when it comes to the bigger jobs which a bigger development can take advantage of.

    3) I'd expect a steep discount due to the lack of sinking fund. The owner has effectively saved themselves at least €250 per year since 2002, probably more like €500. On top of that you're taking on the risk of an apartment in such poor financial shape. That comes off the price ++ as far as I'm concerned.

    4) are you willing to get involved in the management company and sort this yourself?

    5) see what the detailed surveyor/fire report says.

    If overall if it looks salvageable, I'd proceed cautiously with a steep discount. Do not panic yourself into proceeding due to mortgage approval. If this goes wrong it'll be very very expensive.


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    #33
    listermint
    Registered Users Posts: 33,613 ✭✭✭✭listermint


    antoinolachtnai wrote: »
    If there is significant wear and tear on the roof of the building or there is a lot of work to do on fire or mech elec systems, the existence of a sinking fund won’t necessarily save you. By way of example, a thirty unit purpose built flat roofed development built in late 60s without lift which has 250 euros per year per unit committed to the sinking fund since the Act will only have 45000 euros in the fund. Doing the roof and upgrading the fire doors and fitting a fire alarm will cost at least twice that.

    You need to look at the overall picture.

    He's already said it matches nothing like your description


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    #34
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    listermint wrote: »
    Who in their right mind would buy any apartment with no sink fund in place.

    With the level of issues with builds in this country over the last two decades. From roofs peeling off in storms, to owners having to patrol halls at night in rotation for fire watch protection. Then there's basements and all that lovely water related issues.

    You'd want to be off your rocker to do it. Biggest single transaction in your life and you'd listen to someone on the internet giving you odds of how alright it can turn out ...

    I’m not listening to anyone in particular.


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    #35
    listermint
    Registered Users Posts: 33,613 ✭✭✭✭listermint


    Fiftyfilthy wrote: »
    I’m not listening to anyone in particular.

    Not implying you are.

    I'm just saying you'd be mad on paper to do it. Huge money and it's easy for anyone in here to spend your money for you.


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    #36
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    PhoenixParker wrote: »
    A few comments, questions and observations:

    1) what's the delinquency rate on fees? Is everyone paying up or is there a serious problem collecting the money? If there's already a big problem collecting fees it's going to be quadruply difficult if there needs to be an additional levy to pay something specific.


    There does appear to be an issue regarding fees. I think the developer Owns a substantial amount of properties but has left the country years ago

    2) 218 is actually a pretty decent number of apartments. A 20 unit management company with a few non-payers is in a tough position but typically a bigger management company will have deeper pockets to pursue fees. Costs are typically recouped when the fees are paid, but you gotta pay to chase up front. There are also usually some economies of scale when it comes to the bigger jobs which a bigger development can take advantage of.

    3) I'd expect a steep discount due to the lack of sinking fund. The owner has effectively saved themselves at least €250 per year since 2002, probably more like €500. On top of that you're taking on the risk of an apartment in such poor financial shape. That comes off the price ++ as far as I'm concerned.

    The vendor was paying his mgt fees every year without fail around 1600 pa ( no lifts or underground parking) the money apportioned to the sinking fund never made it as the mgt company had to use the money just to keep up with general maintenance

    This in itself is alarm bells that something was/is very wrong

    4) are you willing to get involved in the management company and sort this yourself?

    New management company in place, I Have been in constant contact with queries and they have been great in providing answers with back up




    5) see what the detailed surveyor/fire report says.

    Exactly this. My solicitor is looking to find this out ASAP, when it takes place etc

    I’m also getting a surveyor to take a look at the building and roof too

    If overall it looks salvageable, I'd proceed cautiously with a steep discount. Do not panic yourself into proceeding due to mortgage approval. If this goes wrong it'll be very very expensive.


    As you can see by this thread I’m literally in 2 minds. Nothing will be decided hastily and the probability is I will not buy

    However, it is reasonable to explore all possible outcomes


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    #37
    Glass fused light
    Registered Users Posts: 1,576 ✭✭✭Glass fused light


    Fiftyfilthy wrote: »
    New mgt company in place this summer

    They have already reduced insurance and bins charges going forward and started a sink fund from June 2019

    There are 218 properties in the estate

    Estate was built 2002 so would be expecting wear and tear

    Still thinking it over
    the change should be to the mgt agent who look after the property on a day to day basis.

    The mgt company should not have changed since the start of the estate.

    A reduction in the insurance premium may indicate a change to the policy.
    So when will the policy kick in and what costs will each owner have to find before insurance applies?

    Fiftyfilthy wrote: »
    As you can see by this thread I’m literally in 2 minds. Nothing will be decided hastily and the probability is I will not buy

    However, it is reasonable to explore all possible outcomes
    You are buying 2 things. A lease to occupy the space and a share in the company that owns the physical infrastructure.
    In an ideal situation the market valuation for the share is you pay just paying the prior owner for their portion of the sinking fund.

    Management fees - annual current year costs = sinking fund for next year onwards.
    Or
    Cash lodged - expected costs as included in the fee calculation - unexpected costs = prepaid cash 'gain' as you don't have to fund in the future ( cash in your right pocket moving to your left pocket)

    So for the sinking fund also spend the money for the professional advice of an accountant who can read and interpret the management company's accounts. And who can work with the surveyor to total the estimated associated costs for each element that the survey brings up. And fit these into a reasonable timeframe and see if the calculation matches what the current agent is proposing.


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    #38
    voluntary
    Registered Users Posts: 871 ✭✭✭voluntary


    Marcusm wrote: »
    That’s precisely the issue; a significant remediation or upgrade is required but no funds are available and/or only a limited number provide their portion. Work can’t get done, if the issue is serious enough either the costs ramp up (see Longboat Quay where they had to have people physically present to watch out for a fire which never happened or Priory Hall where the entire complex was decanted). In either case it is a ****show. Absence if a sinking fund means no attention is paid to planned preventative maintenance.

    Many of the post 2000 apartment complexes have been already assessed for fire safety complience. The management company will have this information at hand wheter this particular one has or has not been assessed and if it was then they have an obligation to pass this info over to your solicitor.

    In case the building has already been assessed for fire safety complience then a big portion of the risk goes away.


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    #39
    JJJackal
    Registered Users Posts: 1,016 ✭✭✭JJJackal


    Fiftyfilthy wrote: »
    As you can see by this thread I’m literally in 2 minds. Nothing will be decided hastily and the probability is I will not buy

    However, it is reasonable to explore all possible outcomes

    You can money in escrow - ie a third party would hold say 50k for some time and if no issues with no sinking fund the vendor would then get the money. If the house fell down you would get the 50K but no more


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    #40
    Horusire
    Registered Users Posts: 158 ✭✭Horusire


    JJJackal wrote: »
    You can money in escrow - ie a third party would hold say 50k for some time and if no issues with no sinking fund the vendor would then get the money. If the house fell down you would get the 50K but no more

    I've read your post 5 times and still cannot make sense of it? From what I gather..

    You propose that the buyer puts the money in an escrow account and the seller will gain access to that money in say 5 years time providing nothing goes wrong?

    Are you insane?


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    #41
    partyguinness
    Registered Users Posts: 8,207 ✭✭✭partyguinness


    Horusire wrote: »
    I've read your post 5 times and still cannot make sense of it? From what I gather..

    You propose that the buyer puts the money in an escrow account and the seller will gain access to that money in say 5 years time providing nothing goes wrong?

    Are you insane?


    Yeah that is a bit nuts- asking a seller to future proof a buyer against possible expenditure.

    Factor it into the asking price to try a negotiate a reduction but otherwise you take the property warts and all.


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  • Options
    #42
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    OP your solicitor is saying don’t go for it so that would put me off. However if I was in two minds, like others say, see how bad the financial reports are. And also see if your solicitor can enquire with seller as to whether a sinking fund will be put in place. And also find out exactly why there is none at the moment. Also I would guess if your getting a mortgage, bank’s approval will need to be received since there is an issue with legal title.


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    #43
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    Dolbhad wrote: »
    OP your solicitor is saying don’t go for it so that would put me off. However if I was in two minds, like others say, see how bad the financial reports are. And also see if your solicitor can enquire with seller as to whether a sinking fund will be put in place. And also find out exactly why there is none at the moment. Also I would guess if your getting a mortgage, bank’s approval will need to be received since there is an issue with legal title.


    Sinking fund in place next month (will take a few years for fund to have sufficient cash in it) 220 dwellings

    No issues with the titles and deeds

    Is a new management company and also a new agent too due to both being ran so poorly

    There’s no lifts or underground parking . Need to find out the imminent fire inspection first, a surveyor to check the building too

    I’m with rebuilding Ireland home loan , so to reapply and get to the stage I am now took me months and months

    Each time I look at an apartment I’m not going to know this issue until I go save agreed which will be both timely and costly as most estates don’t have sufficient sink funds


  • Options
    #44
    Glass fused light
    Registered Users Posts: 1,576 ✭✭✭Glass fused light


    If there is an actual new management company as in there the buildings were "sold"/transferred from company A to company B, I would suggest that you don't invest unless you want to be a director.

    You need to understand exactly what happened to create the mess and who were the key drivers in getting it sorted. It would suggest the majority of the 220 owners sat back and let their asset devalue to zero. They are not going to change and if the active people sell up it will revert back to a mess.


  • Options
    #45
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    2 of the residents from an agm stepped to to be directors

    The developer was the mgt company prior as far as I’m aware and left the country x amount of years ago

    This isn’t ideal


  • Options
    #46
    partyguinness
    Registered Users Posts: 8,207 ✭✭✭partyguinness


    Fiftyfilthy wrote: »
    2 of the residents from an agm stepped to to be directors

    The developer was the mgt company prior as far as I’m aware and left the country x amount of years ago

    This isn’t ideal


    That is normal.

    The developer manages the block until the last unit is sold. The common areas are then transferred to the new management company that was set up and the developer is out of the equation. The developer will usually put Agents in place to run the day to day management of it which helps the leaseholders to get their feet under the table.

    The leaseholders as shareholders will appoint directors to run the company (existing leaseholders as you have mentioned), hold AGMs, appoint Agents if necessary but not mandatory, produce budgets and service charge accounts etc etc.


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    #47
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    One last question, if my solicitor is advising not too and the consensus on here is the same

    Who are the people buying these apartments in that estate? There are so many for sale and sold the last few weeks/months

    Cuckoo funds? Foreign investors or ftb just not caring about future possible consequences?


  • Options
    #48
    alwald
    Registered Users Posts: 1,283 ✭✭✭alwald


    Fiftyfilthy wrote:
    Who are the people buying these apartments in that estate? There are so many for sale and sold the last few weeks/months

    You will get a more accurate answers if you provide further details about the name and/or location of the estate.


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    #49
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    The apartments to the right of the shopping centre in Charlestown


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    #50
    Floppybits
    Registered Users Posts: 7,529 ✭✭✭Floppybits


    Here is my take on this. I have lived in an apartment for 10 years or more. My advice would be to check the grounds and the common area of the apartments, are they well maintained? If they are not then don't go near the place, if they are maintained then it shows that the management company are looking after the place. Also how old is the apartment building? If it is older than 10 years then any structural problems are going to have appeared unless something happens during a storm or freak event.

    Like a I said the things to look out for are how well the common areas are maintained, if there are lifts are they working, if they break how soon are they fixed?

    How much of a sinking fund are you looking for the Management company to have? €500 or €500,000?


  • Options
    #51
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    No lifts
    No underground parking
    No electric gates

    Grounds are well maintained , I think volunteers also help with flowers and shrubs


    Apartments build early 2000s so is time for wear and tear potential but to the untrained eye, look well maintained

    If around 200 odd properties, I would expect there to be some money in it next 5 years


    My thinking at the moment is

    Surveyor in to check the building and see what this fire inspection comes back with



    I think anytime I go to see an apartment I’ll only find out about mgt accounts and sink funds when I’m in the final stages of closing a potential purchase


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    #52
    SozBbz
    Registered Users Posts: 1,889 ✭✭✭SozBbz


    Fiftyfilthy wrote: »

    I think anytime I go to see an apartment I’ll only find out about mgt accounts and sink funds when I’m in the final stages of closing a potential purchase

    This is true. Most appartment buyers (bar investors) are first time buyers looking to get on the ladder, I know I didnt ask about sinking funds when I was viewing places. I think one EA may have mentioned it to me, but at the time I probably didnt understand the significance.

    That said, sinking funds are important. Its positive that theres a new board in palce and an agent to manage the day to day. I'm on the board where I live and while its often tedious, I do like knowing whats going on with the biggest single thing I own.

    We had a fire stopping issue a few months after I bought and we got off very lightly. Ultimately we part funded the fix by placing a levy on the apartment owners, but we offset some of the cost by using about €30k from the sinking fund, so people only had bills of about €600 extra to cover the works (as I say in the grand scheme of fire stopping, it was minor.)

    That said, there was a fraught few months trying to work out what to do. Getting quotes and then needing to find people to certify any work done.
    Ultimately no one wanted to be left with an uninsurable/unsalable asset and payed up, but it can take time for people to have that "come to Jesus" moment. The original estimate came in at a few grand per unit, but thankfully we had an investor (who owned multiple units) who is also a developer and he sorted work for us at a better rate.

    Owning in a MUD is complex. Its great in a lot of ways, 99% of the time the place runs like clockwork and lifestyle wise it suits us, but a well run MC is critical. I'd advise being a director if possible if you really want to safe guard your money.

    We have roughly 90 units (40 houses and 50 apartments)
    No lifts, no underground parking and no electic gates. Our main area of concern would be roofs over the longer term. We're typically proactive in our maintenance approach.
    Sinking fund of almost €100,000 (we've built it back up in the last few years by slowing increasing the charge.)
    We also have low levels of delinquency when it comes to getting our fees in. Most pay by quarterly DD, but we've a few who seem to enjoy getting reminder letters (annoying). We always have all the money in by the end of the year.

    There are well run MUD's out there OP!


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    #53
    antoinolachtnai
    Registered Users Posts: 9,773 ✭✭✭antoinolachtnai


    I was an AGM of a management company last night. On paper everything is awful. The sinking fund is empty. But in reality sinking fund capital works are being done every year to deal with problems that have been building up over the decade. There is a year’s Turnover of outstanding service charges which the management company expects to collect in full. This will replenish the sinking fund. Even though the situation looks bad, in reality the management company is in ok shape and moving in the right direction to under a capable board of directors.


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    #54
    Fiftyfilthy
    Registered Users Posts: 554 ✭✭✭Fiftyfilthy


    Update

    Solicitor never heard back from mgt company with regards to the fire inspection

    So they wrote to my mortgage provider to inform them no sink fund and a fire inspection that they have no date


    I am currently living in the property the last 3 years and liked the place and only place in my budget in Dublin as landlord was selling at mkt price


    Going to see if my mortgage can be extended but I’m the wrong side of 40 so it’s not looking great

    End up now panicking trying to find somewhere to rent now. Ffs


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