There doesn’t seem to be any issue that frustrates apartment owners more than the annual service. This may be because it’s hard to trust others with your money, or maybe it’s because you simply don’t believe that it takes as much as it does to pay for the services in your development. Either way, what we’ve found is that the major problem here is lack of communication.
The Managing Agent is appointed by the Board of Directors on behalf of the Owners Management Company. The appointment of the Managing Agent is generally discussed at the AGM each year when members are given a chance to air their views. Many of the common complaints arise around failures to deal with queries, failure to get jobs done and the cost of their services.
When it comes to comparing the costs of living in an apartment with the costs of living in a house, you might be surprised at how little difference there is. You really have to make sure you are comparing like for like. It’s easy to see, for example, that insurance is paid every year, and there’s no doubt that cost is higher overall for apartment owners than house owners, but think about when a house-owner wants to replant a part of his garden, paint the outside of his house or even replace a broken door or window.
The annual service charges are for the running of the development on a day-to-day basis. It includes costs like the insurance, repairs and maintenance and electricity for lighting in common areas, maintaining security systems and perhaps electronic gates, or lifts. All-in-all it adds up.
On top of that, there is the Managing Agent’s fee. So what are they doing for that money? Well, generally speaking, the managing agent is taking care of the day to day operation and administration of the development. This can range from contacting servicemen, to chasing down apartment owners who haven’t paid their charges. The Managing Agent makes sure waste is removed, gardens are tended and damage is repaired. As a house-owner, you would have to do all of that yourself, so you are also paying for the convenience of having someone else do this for you.
Under the terms of your lease, you must pay the service charges on the terms outlined. Where there are issues like the non-provision of services, or even non-payment by other owners, these should be dealt with by consultation and communication. Often the break-down happens as the Managing Agent deals directly (and perhaps solely) with the Board on the provision of services, and given that there is only one AGM each year, members (apartment owners) feel that they have no voice. Under the Multi-Unit Development Act 2011, the annual service charge budget for the year must be presented to the members for approval. For this reason, if no other, you should have a full and clear understanding of how the development is run, what the daily requirements are and where responsibility lies for various issues.
Another major issue however is non-attendance at the AGM. For many people this is a matter of time or commitment, and the AGMs come and go. In many developments, the number of apartment owners who go to these meetings can be 10% or less of all owners. In other developments, AGMs are not being held at all. These are all serious problems. For apartment owners to voice their concerns, they must go to the AGMs.
This problem runs right through in relation to sinking funds. It’s a fact that most apartment developments are grossly underfunded. This might be for a variety of reasons:-
- The development is relatively new, so no problems are anticipated
- Service charges are already high and there is resistance to increasing them further
- The apartment development is ‘ageing well’ and problems haven’t yet become visible
Each one of these scenarios will ultimately cause problems. The MUD Act set out to compel apartment owners to contribute minimum sums to sinking funds each year. This has been significantly watered down and the decision can now be made in each development. We have to ask; if the majority of developments are already underfunded, will apartment owners, in a time of great economic stress, agree to further increase their service charges? The answer to this problem lies in better budgeting, more rigid financial control and accountability for funds spent on an annual basis. Members of apartment developments have to be prepared to get more involved in how their funds are managed and start insisting on answers. To do this, they must also be prepared to become Directors of the Owners Management Company.
Our services in this area range from induction workshops for directors of Owners Management Companies to contract negotiation, meeting residents associations, attending AGMs. Remember that if you can’t attend your AGM you should at least use your proxy so that your vote counts. We are also prepared to act as proxy holders for groups of residents for AGM purposes. To find out more about these services, or to discuss your individual needs with us, please contact us by telephone, email or using the enquiry form.