OMC without sinking fund, common areas not transferred, service charges not paid

R

RMGC11

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Hi all!

I am looking at buying an apartment built in the last two decades, which is in a small development (20-30 units?) without internal common areas or lifts (all apartments have their own entrance).

My solicitor has flagged the following items with regards to the OMC, but has not made a specific recommendation one way or the other:
  • Common areas have not been transferred to the OMC
  • No sinking fund has been setup
  • Around half the service charges could not be collected in the last year (and there seems to be over 100k of service charges not collected in total over the past years, half of which was impaired already). On top of that, from what I can tell from the audited financial reports, not all of the directors from the OMC are paying their service charges for their units (again, about half the expected funds from the directors were collected).
The OMC also has significantly less than 10k in cash/its bank accounts (which represents about 1/3 of their yearly operating expenses).

To me, all of the above look like pretty serious red flags - but I'm not sure if I'm interpreting it correctly. Any thoughts and experience with the above?
 
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OK my 2 cents as the Director of a Management Company of 16 units. The situation you have described sounds very bleak. I would advise you to walk away. 100K in arrears and no sinking fund implies a Management Company that has completely lost control. No funds means no refurbishments, no grass cutting, no anything. Unless they dramatically turn things around, the development will look worse and worse over the years and you will regret buying into it. Walk away.
 
Thank you very much gebbel, much appreciated!
One of my main concerns would be my ability to sell it on at some point in order to move to a different home, however, if I understand correctly, the OMC going under is a possibility that could significantly affect a sale (on top of all of the previous items mentioned).
 
I'm also a Director in a MUD, walk away, sorry, run away, nobody needs the kind of hassle you will experience, there are owners that have no interest in paying on time ( 30 days usually from invoice ) despite renting their units, these people are pond life....spongers.

Interest can be charged to late owners, ask your solicitor if there is a clause in the lease that allows for interest charging, there should be, if there is ask the managing agent why this is not being charged, hold your breath for the response...."I didn't know that !"

The thing is the values remain poor unless all owners pull their weight fairly and this is Ireland so good luck with that, I wish I never bought my unit, trust me run away and buy a house.
 
Walk away. There are plenty properly run apartment complexes. This is not one of them
 
Truth be told, it has dissuaded me a bit from pursuing the purchase of an apartment.
 
I rang an auctioneers today, a national brand, about an apartment advertised, I enquired about service charges and was surprised when I was told they were half what I pay in the same location, sounds good says I.

When I investigated there was block insurance with some limited maintenance, that was it, no cleaning, no refuse service, no agent, no sinking fund.

There were significant arrears and no functioning management company at least none licensed.

I had to establish this myself, I asked the agent would they not have that information available to prospective purchasers, they said no not usually, the message here is be very careful with all apartment purchases.

I am biased against apartments, I just do not think the market is mature enough up to deal with all the issues arising, I can understand the OP going cool on the idea.
 
Palerider said:
the message here is be very careful with all apartment purchases.
Click to expand...

People need to be aware too that there are housing developments, even some of larger semi-d's or detached houses where this model applies too, not just apartments. Prospective purchasers really need to do their homework.
 
RETIRED2017 said:
I hope it will not stop you from buying in a properly run apartment complexes
Click to expand...

Would also second this - I live in an apartment block with no unpaid management fees, very well maintained services (refuse costs work out at approx €80 per year per apartment for example), and pretty much unchanged fees for the past 6+ years. In well-maintained complexes fees can actually be quite reasonable when you think of the services you get - you just need to have your eyes open and for every well run development there will probably be a poorly run one.
 
The management company is the managing agent, requiring licensing.

The management agent / company works for the OMC... owners management company...in law but not in practice from my experience.
 
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