With apartments in Dublin now valued at more than 60 per cent less than in 2007, and less again outside Dublin, it’s little wonder owners are keen to cut costs. Many seeking to mitigate their pain have annual property management charges firmly in their sights.
From landscaping fees to refuse collection, insurance to the maintenance of lifts and gates, the costs of owning a property in a multi-unit development can mount up. But examining your property management fees and service charges with a fine toothcomb can pay big dividends.
Apartment owners should be familiar with the 2011 Multi-Unit Development (MUD) Act. Under the act, owners of units in such developments now hold one equal share in an owners’ management company (OMC). Owners elect directors from amongst themselves to manage the development with a managing agent typically hired to do the day-to-day work. For an annual fee per apartment, the managing agent will look after the running of the development, the collection of service charges and keeping accounts. But how do you know you’re getting good value?
One Dublin-based property management company, Core Estate Management, is prepared to lift the lid on how owners can squeeze companies like them for better deals. Managing 40 developments across the city, Core says the first thing owners should watch for is managing agents providing their own cleaning, gardening or maintenance services.
“A managing agent should try to get the best possible price for their client. It seems a bit coincidental if the best possible price you can get for these services is your own price,” says Alan Drennan, a director of Core Estate Management. “Only by putting everything out to the market can you get the best rates.”
Where third-party providers are used, Drennan says managing agents can’t be allowed to become complacent and should regularly shake up service contracts to get the best deal.
“We manage a development called Rathmines Town Centre,” says Drennan. “We’ve reduced the cost of refuse collection there by 45 per cent over the three years we’ve been there, which has generated a saving in excess of €50,000. The savings have mostly funded an entire refurbishment of the development.”
The money has shored up owners’ property values. “It’s a very competitive rental market and the refurbishment has made it one of the most attractive rental properties in the area.”
Best rate
Other savings can be as simple as changing a light bulb. Drennan says in one development, lighting in the common areas was on 24/7, even in areas already flooded with natural light.
“In conjunction with the board of directors, we had a look at the energy usage and with a capital spend of €21,000 last year, we replaced all the lights with a mixture of LED lights and motion sensors. Now, it’s not only more environmentally friendly, but energy usage is reduced by 25 per cent.” The new bulbs will pay for themselves in just three years.
Like anyone managing their own domestic budget, owners in multi-unit developments also need to put the screws on energy providers. “In the last four years, Rathmines Town Centre has been with the ESB, Bord Gáis, Airtricity and Energia,” says Drennan. “So essentially we are where the best rate is. There is no barrier to moving but you really have to be proactive about it.
“Sometimes it can come down to a saving of €1,500 out of a €30,000 bill but that will go a long way to painting front doors or maintaining gates. It’s certainly money that is better spent elsewhere.”
With some high-end apartments once boasting on-site night security guards, the cost can now prove a drain.
“We’d advise using a night porter instead who will also do soft cleaning,” says Drennan. “That way, you are getting the benefit of having someone on site, but you are also getting work done in the evening. Security guards come under a different joint-labour agreement so you can get a better rate for night porters. And you are reducing your cleaning costs during the day.”
Insurance is one of the biggest components of management costs. Drennan says quite often, the rebuild estimate is based on boom-time construction costs and bears no relation to current reinstatement values. A professional rebuild valuation costs between €500 and €700, he says, which can save between €5,000 and €6,000 a year on the premium. Using two insurance brokers to scout the market rather than one is also advised.
When it comes to the managing agent’s fee, this is likely to be based on the hours required to manage the development, says Drennan. A crucial tip for owners seeking to save is to put the contract out to competitive tender, says solicitor at ApartmentLaw.ie, Sonia McEntee.
“Bring together a pool of about six agents to tender for the business,” says McEntee. OMC’s should ensure companies are registered with the Property Services Regulatory Authority (PRSA). All agents must use the PSRA’s standard property services agreement form. Available on PSR.ie, the form provides a long list of the potential services an agent can provide.
“Owners can go through it and say ‘yes we do need that. Or no we don’t need that’. They can then get agents pitching for the business on a like-for-like basis,” says McEntee.
Savvy owners need to get forensic about figures, she says. “The budget needs to be gone through on a line-by-line basis. Be mindful of hidden charges. Directors need to be able to explain how every penny was spent.”
Property management: keeping costs down
1 Make sure the managing agent is registered with the Property Services Regulatory Authority. Find out on psr.ie
2 Put the contract out to tender to compare services and costs. Ask for references from existing clients
3 Avoid agents that insist on using their own gardening, cleaning or maintenance staff rather than going to market for the best quote
4 Ask them to demonstrate how they will reduce costs in your development
5 Ensure they have sound debt collection capability to tackle owners refusing to pay charges
