My husband and I are newish apartment owners. Our concern is a derelict apartment in our building. It has been empty for decades and the owners insist that they will not pay management fees until the apartment is sold. We suspect that the property may be tied to the Fair Deal scheme because its owner is now in a nursing home, but we don’t know this for sure.
The property manager has advised us that the owners cannot sell the unit until we agree, but we won’t allow the sale until the management fees are paid in full. However, we also understand that there is a limit in terms of how far we can go back with regard to collecting arrears. Then there is the question of how to apply interest to the money owed. Please advise on the best course of action.
When it comes to pursuing outstanding service charges in an owners’ management company (OMC), the only legal remedy available is the normal debt collection process through the courts.
This is effective in some cases and ineffective in others. The first thing that an OMC should do is to ensure that they have a company policy in place for the collection of service charges. This policy will set out what penalties apply to non- or slow service charge payers. It should be clearly set out in the policy what the interest rate will be for overdue and outstanding service charges.
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A critical element to the successful collection of service charges is to diligently follow a set of procedures. This company policy will set out what the steps in the process are for collecting the service charges. For example, when the invoice is sent out there will be a time limit set down for when owners can pay, taking into consideration stage payments and payment plans. Timeframes and deadlines will be a key feature of the company policy for the collection of service charges.
Within this, there will be a point when the debt is handed over to the company solicitors to be pursued legally. Thereafter the solicitors will follow the normal debt collection process through the courts. You say the owner insists that they will not pay management fees until the apartment is sold and on the other hand that the owner is in a nursing home. Irrespective of whether the owner is in a nursing home or not, the service charges are due and owing and can be legally recovered if the correct procedures are followed. The OMC should engage solicitors to pursue the debt legally. If this property has been vacant for decades, it raises a number of questions. Are the service charges outstanding for decades also? If so, have the service charges ever been pursued legally?
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In terms of how far back you can go with outstanding service charges, the general limitation period under the statute of limitations is six years for proceedings for breach of contract. However, the payment of the annual service charge is legislated for in the Multi-Unit Developments (MUD) Act 2011 which states that if you are an owner in a multi-unit development you must pay the annual service charges. The legislation does not confine that to a set period, so there is no limit.
The issue of derelict apartments is somewhat separate from the issue of outstanding service charges. Dereliction of an apartment in a development can have a negative impact on the surrounding apartments and there are many issues that can arise such as damp, security, and health and safety concerns. It is a provision in the lease agreement that owners have a responsibility to maintain their apartments to ensure that they do not have a negative impact on their neighbours.
When a unit in a multi-unit development is being sold, the solicitors for the purchaser and the solicitors for the vendor must ensure that all MUD Act inquiries have been completed. The outstanding service charges issue will arise at this point and the solicitors will have to make arrangements for these charges to be paid. The MUD Act inquiries will be completed by the OMC, and so the OMC will have highlighted the fact that the service charges are outstanding at this point. Normally, the sale will not conclude until all of the outstanding service charges are paid in full.
Aisling Keenan is a property managing agent and consultant and an associate member of the Society of Chartered Surveyors Ireland
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