Apartment owners have rights too

THIS WEEK saw the publication of the residential property price register, which will allow members of the public for the first time to find out the exact price paid for properties since 2010.

While the development has been greeted as a welcome move to introduce greater transparency into the industry, a separate property-related issue continues to cause problems for some people. The sharp increase in the number of apartment blocks built during the boom has brought with it concerns about the management and regulation of those buildings.

With apartment owners facing a sharp decline in property values, many are now finding themselves caught in the middle of a legal quagmire over regulation and management. As the problems being faced by clients of Assured Property Management (see page 2) show, these can also have significant financial implications for residents who are ultimately left to handle problems, as well as suppliers such as waste collectors and utility companies who are faced with unpaid bills.

One issue facing apartment owners is the question of where the ownership and legal control of the apartment block and communal areas ultimately resides.

Legislation has been introduced in this regard in a bid to regulate ownership.

The Multi-Unit Developments Act was signed into law in January 2011. The act required developers to hand over ownership of all common areas of apartment blocks to the relevant owners’ management company no later than September 30th, 2011.

The legislation addressed what had been a major issue for the sector – developers tended to retain control of an apartment block until all units were sold, while some were legally permitted to retain ownership for up to 21 years after the final apartment was sold.

Under the new legislation, control of the estate must pass to an Owners’ Management Company (OMC), which is controlled by the residents/shareholders who are generally entitled to one vote per unit.

Although the legislation has been in place for more than a year, in many cases the transfer process has been delayed due to complications regarding the separation of title of common areas and unsold units, legal difficulties regarding tenure of land or receiverships and liquidations.

But while the ownership of common areas is one issue facing apartment owners, another problem for some owners is their relationship with property management agents.

Historically, developers who built apartment blocks appointed management agents to manage and arrange the running of the property, which included everything from refuse collection, gardening, public lighting and general upkeep.

With the transfer of the control of OMCs from developers to residents, apartment owners are now effectively the employers of property agents.

While in theory OMCs are free to appoint who they wish as management agents, in practice, exiting from a contract can be difficult.

One contract seen by The Irish Times, which was originally drawn up between a developer and a management agent, shows the specific terms under which an OMC can terminate a contract. If the OMC does not serve notice of termination of a contract three months prior to the anniversary of the initial contract period, it must wait for another 12 months before it can end the contract.

There have also been accusations, particularly from smaller players, that the market is dominated by a number of large players.

Further, because historically the accounts of management companies were not in the control of residents but were effectively managed by property agents, some apartment owners have reported difficulties in securing copies of their bank accounts from agents.

“We’ve been pushing for more information about how exactly our management agent procures services, and whether it’s at the most competitive price,” said one apartment owner.

The situation has not been helped by the fact that, as was the case with companies who used Assured Property Management, monies were often paid directly to the property agents, rather than through the OMC itself, though again this was in part due to the blurring of boundaries historically between the property management agent and the OMC, which was often controlled by the developer.

Some suspect larger players of using some contractors that are linked to the agency itself, rather than shopping around for the best prices and services for residents.

There is also a frustration from some apartment owners about excessive fees being charged by property agents, with many charging more than €2,000 per year.

The lack of transparency appears to have led to questionable practices. One invoice seen by The Irish Times shows that one well-known property agent added a 25 per cent charge on to a bill for a product it purchased from a cleaning services firm, which was then charged to the management company. This was in addition to “management fees” charged by the agency to the apartment owners.

However, some residents interviewed for this piece say they are happy to pay the extra costs, if the service is provided. “Yes, our management agent is probably more expensive than the average, but at least the services are provided, and at a high level,” said one apartment owner.

Despite frustrations from some apartment owners about regulation and oversight of the industry, moves have been made to introduce greater regulation and transparency in the area of property management.

Since last July, all property service providers in the country, including auctioneers, letting agents and property management agents, have to be registered with and licensed by the Property Services Regulatory Authority (PSRA).

The agency has been criticised by some in the property agency business for excessive bureaucracy, leading to delays with the process. Following the closing date on July 6th, between 60 and 70 per cent of applications were returned to applicants due to insufficient information and were given three weeks to return the forms.

Chief executive of the authority, Tom Lynch, has rejected claims of excessive bureaucracy. “The PSRA wrote to all individuals working in the field in April informing them of the forthcoming requirements, which includes information on qualifications and tax clearance certificates. We have been as fair and as clear as possible, with an informative and accessible website,” he said.

The PSRA has significant powers. Under the new legislation, any operator found to be operating without a licence could face a jail term of up to five years.

Paul Mooney, the chairman of the residents’ committee of the Irish Property and Facility Management Association (IPFMA), says there have been major changes in the industry over the last few years.

“The IPFMA has been working closely with the Department of Justice for more than six years on the new Property Services Regulatory Act. Regulation has really gained momentum in the last few years,” he said.

The new developments will also include significant protection for clients, he says. “Compulsory professional indemnity insurance is now mandatory for all property management agents, which will protect OMCs, while a compensation fund of €2 million is also been established as part of the licensing process.”

Core Estate Management, which was set up in 2006, has also welcomed the changes to legislation. “Ultimately, apartment owners need to make sure they are in full control of how their complex is being managed,” says David Ward, a director. “This includes making sure there are no difficult exit clauses in contracts, and insisting that all services are tendered out. Apartment owners should also insist on seeing bank statements and financial accounts on a monthly basis. It is their right after all.”

Apartment owners should insist on seeing bank statements and financial accounts on a monthly basis.

It is their right after all.