Property

We’re paying €1,000 annually in management fees, where is this money going?

Property Clinic: Your questions answered

There are a range of standard elements of a service charge budget which will vary by development

Thu Feb 8 2018 - 06:00

We’ve just bought a small house in a development built about 15 years ago. It’s a very ordinary scheme with no electric gates or communal gardens, but still there is a property management charge of nearly €1,000 a year. Where is this money going and how can we get that figure down?

From the information you provide, it is hard to say if the charge is appropriate or excessive. However, you have the right to get more information on the budget and, if you then feel the charge is excessive, you will have the opportunity to put forward your views on how to reduce charges for future years.

The fact that there are no electric gates or grounds should reduce the charge. However, there are a range of other standard elements of a service charge budget which will vary by development. The legal documents you received when you purchased the property will set out the precise services the owners’ management company (OMC) has to provide.

Examples of common services are block insurance (including public liability); cleaning of common areas; maintenance/management of the car park; repair of roofs and gutters; electricity; painting /decorating and vermin control. Some or all of these may apply.

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The OMC may also be paying a managing agent to manage its day-to-day affairs. And there are expenses linked to the good administration of OMC business, eg having its accounts audited and being up-to-date on its company secretarial obligations.

In addition, the annual charge should include a contribution towards a long-term sinking fund. If it is following best practice, your OMC will have asked a chartered surveyor to prepare a building investment fund report and will have used it as a basis for this contribution. It is possible that your OMC under-provided in this regard in earlier years and is now having to compensate for that.

You have the right to get a copy of the current year’s budget from the OMC or its agent. You also have the right to get a copy of the last set of audited accounts, which should help to identify how the OMC is spending the money it gathers from owners. If you have thoughts on efficiencies after that, it may be useful to set them out in writing to the OMC or its agent. Information on any service charge arrears that have built up may also help you to fully understand how the company finances operate.

In relation to charges for the next financial year, these will be based on a budget which has to be agreed at a general meeting of members. As a property owner, you will have the opportunity to attend this meeting, to ask questions, to propose amendments and to vote on the draft budget. If you wish to get more involved in managing costs between AGMs, you could also consider putting yourself forward to be a director of your OMC.

Finbar McDonnell is a Chartered Property Manager and member of the SCSI

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