Being a Director – Aggressive Defaulters

[Pondering]

Hi there,

Our management company governs a very large number of units. Prior to MUD we were not members of the company as per our leases. It has led to untold hassle over the years as owners were limited in what they could do to control the management of the estate. The current directors (developers) have presided over the accumulation of a significant debt. There are many hard-line defaulters who will not pay fees and some are quite aggressive.

I am working with some residents hoping to organize new directors of the company as per the rights afforded to us via MUD… most importantly for us, membership of the company. Myself and my fellow owners in this residents group, being immersed in all of this (we know about MUD, how owner’s management companies work, attend Apartment Owner’s Network meetings etc.) feel obliged to put ourselves forward as directors at an upcoming EGM or AGM where the current developer directors will be deposed.

We are aware of numerous extremely aggressive unit owners who have taken a very hard line stance on fees. I won’t get into the details of why people don’t pay (the original developers admittedly left a sour taste but many just used this as an excuse to default) but in once case an owner emailed our group in a worryingly aggressive and threatening manner. We were almost tempted to forward the email to the Gardai.

Have any company directors here ever experienced threats or intimidation from other unit owners who refuse to pay fees and blame you for pursuing the debt? I want to put myself forward as a director to move this company forward but I don’t want some nut case at my door threatening me or my family.

Thanks for the advice.

 

[shesells]

My advice would be to put as many layers between you and the defaulters as possible - get the agents to issue a notice to all owners giving a deadline for payment of outstanding fees. Then get them to follow up as vigorously as they can - letters, calls then legal/outsource to debt recovery firm. Don't make it personal as in dictate what units to follow up on. A general policy will keep your hands cleaner. Directors liability insurance is an essential also.

In our development the agent acts on our behalf, and complainants are never identified. Similarly any communication about rule breaches etc goes out without saying that the directors are the instigators.

Remember as a director you would be charged with acting in the best interests of the Company. Any owner not paying fees is breaching their legal requirement to do so, they are also jeopardising the future of the company.

 

[zenga]

Pondering,

As youre aware the MUD act states that the common areas have to be handed over by the developer before the 30th September 2011 (6 mnths)

I think the first steps you need to take are this.

1. Find out as much background info regarding the management company that was established by the directors, get your hands on a copy of the last audited accounts and see how good / bad the financial position is.

2. Engage a managing agent, they will have went through this before and can negotiate with the developer on your behalf. They as the other poster stated also put a clear barrier between the directors and the unsavoury characters in your developement.

3. From what you say above I would imagine that all owners were members of the management company but did not have equal voting rights?? This happened quite a bit where the developer wanted to retain power and thankfully under the MUD bill this has been rectified, but be carefull about putting yourself up as director, it can be a lonely place. However if no one steps forward the developement goes south very quickly.

4. Be prepared for more problems. Generally if a developement is badly ran and has serial non payers there may be a number of things that can come out of the woodwork

- Unpaid bills
- Possible legal claims
- Special arrangements between the developer and some debors to name but a few.
- It will take time and it could be 3 - 4 years before the developement is really back to where it should be

5. As another poster stated. Whatever you do take D & O Insurance before you even consider becoming a director. It is unfortunate that in this day and age it is the conscientous few that step forward and try to better their developement that are taking on the most risk.

Finally best of luck with it. If you have any more questions im more than happy to answer them here.

 

[Pondering]

Thanks for the advice guys. Zenga… in reply to a few of your pointers… just for context/clarity!

1. Find out as much background info regarding the management company that was established by the directors, get your hands on a copy of the last audited accounts and see how good / bad the financial position is.

Oh we have… the last audited accounts submitted at the CRO were 2008. But we know where the finances are right now via the current agent. Would you be shocked if I told you the company is in the red 7 figures… I sh*t you not.

2. Engage a managing agent, they will have went through this before and can negotiate with the developer on your behalf. They as the other poster stated also put a clear barrier between the directors and the unsavoury characters in your developement.

Our residents group are liaising with the current agent and plan to use them for the medium term while the company transitions to the owners and new directors are bedding in.

3. From what you say above I would imagine that all owners were members of the management company but did not have equal voting rights?? This happened quite a bit where the developer wanted to retain power and thankfully under the MUD bill this has been rectified, but be carefull about putting yourself up as director, it can be a lonely place. However if no one steps forward the developement goes south very quickly.

No… I know what you are talking about re. weighted voting rights…. and you are not the only one to have said this when we tell people we were not members. I can categorically tell you (our residents group even have our own legal advice on this) our leases ensured we were not members of the company and would not have been until the developer decided otherwise. Apparently these types of leases were rare but not unheard of. For the last 5 years as we were not members no AGM was required and we had no rights whatsoever. We tried everything including going to the ODCE and were told… nothing could be done as we weren’t even company members. We then got a solicitor and looked into taking the developer to the High Court to force him to make us members. But by that stage MUD was in sight so we waited. And now, finally we have the holy grail of membership that is a given for so many of the rest of you!!!!

4. Be prepared for more problems. Generally if a developement is badly ran and has serial non payers there may be a number of things that can come out of the woodwork

- Unpaid bills
- Possible legal claims
- Special arrangements between the developer and some debors to name but a few.
- It will take time and it could be 3 - 4 years before the developement is really back to where it should be

Believe me dude…. Nothing would surprise us… NOTHING!!! And we know this is going to take time and sweat.

5. As another poster stated. Whatever you do take D & O Insurance before you even consider becoming a director. It is unfortunate that in this day and age it is the conscientous few that step forward and try to better their developement that are taking on the most risk.

Without a doubt… top of the list.

 

[zenga]

Thanks for the advice guys. Zenga… in reply to a few of your pointers… just for context/clarity!

Oh we have… the last audited accounts submitted at the CRO were 2008. But we know where the finances are right now via the current agent. Would you be shocked if I told you the company is in the red 7 figures… I sh*t you not.

Our residents group are liaising with the current agent and plan to use them for the medium term while the company transitions to the owners and new directors are bedding in.

No… I know what you are talking about re. weighted voting rights…. and you are not the only one to have said this when we tell people we were not members. I can categorically tell you (our residents group even have our own legal advice on this) our leases ensured we were not members of the company and would not have been until the developer decided otherwise. Apparently these types of leases were rare but not unheard of. For the last 5 years as we were not members no AGM was required and we had no rights whatsoever. We tried everything including going to the ODCE and were told… nothing could be done as we weren’t even company members. We then got a solicitor and looked into taking the developer to the High Court to force him to make us members. But by that stage MUD was in sight so we waited. And now, finally we have the holy grail of membership that is a given for so many of the rest of you!!!!

Believe me dude…. Nothing would surprise us… NOTHING!!! And we know this is going to take time and sweat.

Without a doubt… top of the list.

1. I most certainly wouldnt be suprised, We took over a developement a few years ago in a similar situation, It can be extremely difficult to turn it around. Were the accounts audited?? If not it could be even worse than you think!!

2. I think sticking with the current managing agent may be a good idea, however I wouldnt just go with it. The common areas must be handed over within the next few months, and I would fear that the managing agent and the developer might have too close a relationship to be able to negotiate effectively on your behalf. I would also advise you to at least speak with other managing agents to get a broader range of views and advice on your situation, This may also help you drive down the price!!

3. Thats really amazing, I wasnt aware that this was legally possible, if you were not members of the management company, have you sought legal advise on whether it is possible to set up your own management company and reject the current management company that is hundreds of thousands in the red?? If youre not a member of the management company can you still be made legally liable for the management company?? Might be an idea to check this out before taking over the debt!!!