Service Charge Arrears, Who Is Liable Once a Property is Sold?

Discussion in 'Management companies, apartments, etc.' started by squa, Apr 6, 2018.

  1. squa

    squa Registered User

    Posts:
    8
    I'm a Director of an OMC for an estate & like many other posters on this forum have inherited the thankless task (along with my fellow Director) of collecting Service Charges. Thankfully the common areas were taken in charge by the local Council, so really we only need to collect a very modest annual fee to take care of grass cutting & general maintenance.

    We encountered a situation recently whereby a property was sold, but there were service charge arrears on it. Due diligence was not followed by the new vendor's solicitor & enquiries were not made to the OMC about outstanding charges. We've had subsequent (and previous) sales where the OMC was contacted prior to the completion of the sale & any arrears were paid in full.

    Our accountant advised that any debt remains with the property & as such we've included the arrears on the yearly invoices. The new owner is now questioning this & refusing to pay the arrears.

    Where does the OMC stand in relation to this & what grounds do we have in terms of collecting the debt, i.e. who is liable?

    I've reviewed the MUD Act & there isn't anything mentioned about this specific issue relating to service charges.

    Any advice would be grateful & please keep in mind that the arrears are very small (only a couple of hundred) plus we don't have huge resources (time/money) at our disposal to pursue this, so real-world suggestions would be best suited.

    Many Thanks,
    Squa
     
  2. mf1

    mf1 Frequent Poster

    Posts:
    4,075
    "Where does the OMC stand in relation to this & what grounds do we have in terms of collecting the debt, i.e. who is liable?"

    It should be in the body of the Lease and your accountant is right, the debt remains with the property in the absence of anything unusual.

    The OMC should have a copy of the Lease for the specific unit, check that and pass it on the new owner, showing their liability, with the suggestion that they take the matter up with their own solicitor.

    mf
     
    mathepac likes this.
  3. Palerider

    Palerider Frequent Poster

    Posts:
    1,071
    The OMC or managing agent could have alerted the estate agent and new buyer of the arrears, that way nothing is hidden and the arrears would have been cleared upon sale.

    This is a slip up, I'm also a reluctant director of an OMC, I would not recommend chasing the new owner, that is not equitable, you can't afford to chase the seller so it becomes a bad debt.
     
  4. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    3,097
    In cases that I’m aware of where this has happened, the Directors have always decided to write-off the debt.

    It’s ridiculous that it happens but it’s not fair to stitch up the new owner.
     
  5. squa

    squa Registered User

    Posts:
    8
    Thanks for all the replies.....some interesting views on the subject.

    Not sure I'd agree with this being classed as a stick up on the new owner......caveat emptor & all that. The vendor's solicitor should have made the relevant checks as part of the conveyancing.

    The reality is however, that it's probably not worth the time & effort to chase a couple of hundred in arrears & we'll inevitable end up writing it off!
     
    odyssey06 likes this.
  6. mathepac

    mathepac Frequent Poster

    Posts:
    6,521
    Purchaser's, who must surely have a tickle list for all conveyancing work. It's not rocket science to include one in all conveyancing files.
     
  7. Sunny

    Sunny Frequent Poster

    Posts:
    3,363
    Tell the new owned to contact their solicitor and ask them to confirm that this was clarified before closing. Are you sure that that the solicitor did check and wasn't mistakenly told that there were no arrears? Happened in my place before and we had to write off the debt. The debt is there on the property. The new owner is unfortunate but they need to sort it out. If the solicitor didn't check, then it becomes a matter between them.
     
    odyssey06 likes this.
  8. llgon

    llgon Frequent Poster

    Posts:
    300
    I think writing off the arrears creates a precedent for the future and encourages bin-payment of charges by others. This problem is not of the OMC's making so there is no reason to do this and while you are in an awkward situation I think it would be irresponsible as a director to sanction it.

    Why not continue as you have been doing and just include the arrears with the yearly invoice? No significant time and effort needed. It will continue to remain with the property and the owner will rightly have to deal with it him/herself at some stage.
     
    Sarenco likes this.
  9. Seagull

    Seagull Frequent Poster

    Posts:
    1,122
    Checking that there are no outstanding fees should fall under conveyancing 101. It's one of the basic items on the check list. If the purchaser's solicitor failed to check, then the purchaser should pass the bill onto the solicitor's liability insurance.
     
  10. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    3,097
    The amount in question is circa €200...sometimes a cost/benefit analysis is worthwhile...is it worth the time, effort, and hassle to go after someone for what is an inconsequential amount of money.
     
  11. llgon

    llgon Frequent Poster

    Posts:
    300
    What is the cost and effort of the approach they are taking so far?

    The amount outstanding is not a lot and the annual service charge is probably a lot less. However, the OMC do need to do their best to ensure it is paid by everyone.
     
  12. Gordon Gekko

    Gordon Gekko Frequent Poster

    Posts:
    3,097
    The cost of generating illwill with the new owner who has been the victim of incompetence. Levying him/her is shortsighted in my view.
     
  13. llgon

    llgon Frequent Poster

    Posts:
    300
    Not sure how that would fit into the cost benefit analysis given that any illwill could only be directed by the owner towards the solicitor. The OMC has no fault in this as far as we know so it should not become the victim in place of the owner. Amounts are small, let the owner and solicitor/their insurance sort it out between themselves.
     
  14. mathepac

    mathepac Frequent Poster

    Posts:
    6,521
    Not unless they want to end up in serious hot water for publishing private client/member information.
     
  15. Seagull

    Seagull Frequent Poster

    Posts:
    1,122
    Ask the purchaser to ask his solicitor why the management fees weren't checked. If the answer is "Oops" then the solicitor should be the one with a problem. It might be that the seller/seller's solicitor undertook to clear any management fees from the proceeds of the sale.
     
  16. Palerider

    Palerider Frequent Poster

    Posts:
    1,071
    Publishing, never said or suggested that.

    Informal conversations happen all the time, I know in my case I make a point of meeting the managing agent prior to progressing any interest in a unit, I have never failed to get a handle on the general well being of the building, any current issues, amount of tenants versus owner occupiers in the building and any significant arrears.

    in the building I'm referring to the managing agent makes a point of alerting estate agents by phone to any arrears on a unit listed for sale.
     
  17. Seagull

    Seagull Frequent Poster

    Posts:
    1,122
    If has has any sense, he'll stop the practise immediately. That is asking for a significant fine if word ever gets out. Every single call is a breach of data protection. The penalties significantly outweigh the benefits.