signing contract but worried about man co. accounts

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ggirl

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I went to sign my contract for a place that is due to close on 28th March today but my solicitor is concerned about the estate's management company accounts. The last available are for 2006, which is fair enough since it is only March now, but at end of 2006 they have a net closing deficit of almost 18K. In addition they have only 3k in the sinking fund. The estate was first developed in 2005 I believe and the 3K was put into the fund then but nothing additional in 2006. I am no expert here but this seems insufficient.
In addition, the auditors report states they were given sufficient information to carry out the audit and that books have been kept in accordance with the rules Companies Act etc. but nowhere does it say that they are satisfied with the company's financial situation. I am limited in experience with these things but know that audits I have read in my job have stated that they auditors feel the company is in a stable financial situation etc.
I really love the apartment and am under pressure to close asap (for personal reasons) but am worried what the consequences would be if the company went belly up. Any advice would be really welcome here please!
 
I would run a mile!! As an owner you would be partially responsible for any management company debts, repair bills if there is not enough in the company accounts. Firstly it does not seem good enough that the last audited accounts in are 2 years old. Our year runs from May-April but the last set were filed last September. Our sinking fund has in excess of 30k in it and the development is only 4 years old.

Be glad your solicitor flagged this, there are plenty of apartments out there at the moment - go somewhere that your investment is protected.
 
If there are signs that there are problems with the management company then I'd agree with shesells and I'd run a mile as well.

If you ever wanted to sell the apartment in the future the management company has to running successfully. Otherwise you'll find it hard to sell.

Probably the key thing you need to find out is are the existing residents paying their annual fees. If they're not then the management company won't have enough funds to do their work and existing funds would be wasted on legal fees chasing up residents in arrears.

Is the apartment second hand or brand new? If its second hand did the previous owner pay his/her fees?

You should maybe knock on some doors in the apartment block, saying you're thinking of buying one and do they like living there etc etc. You'll find out soon enough if there is a problem with the management company or agent
 
As a matter of interest, how many apartments are in the development ? With this figure you should be able to determine as to whether it would take a massive amount of money to build up the sinking fund. e.g. the fewer the amount of units, the more it would cost each apartment owner
 
I am about to sign a contract and in an effort to discover the annual cost of the management fee, I have learned that the previous occupants (the first owners of the property) have never paid the management fees since they both the house in 2005. the amount outstanding is €650.

I am a first time buyer so all this is new to me, this definitely does not sound right. Will I get caught for this €650 or can i get the sellers to pay the fees they have avoided???
 
The seller must discharge all liabilities to the management company before the sale can be completed ie they must pay before the unit can be signed over to you.

BTW - management fees can fluctuate widely year on year so don't have a set amount in your head that it's going to be the same all the time.
 
shesells said:
The seller must discharge all liabilities to the management company before the sale can be completed ie they must pay before the unit can be signed over to you.
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But who is responsible for ensuring the seller is paid up? The company or the agent? We've a number of properties for sale in the estate.

We asked the agent for a budget for this year and list of paid houses - but a week later and we still haven't received it.

If this continues we will have to change agent.
 
ggirl said:
I really love the apartment and am under pressure to close asap (for personal reasons) but am worried what the consequences would be if the company went belly up. Any advice would be really welcome here please!
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If for example there was a problem with the building and homebound, warranty (for lift) or insurance wouldn't cover the repairs I imagine then the sinking fund will be required. If there wasn't enough money in the sinking fund every resident would be required to fund the repairs.

If there is a problem with the management co. or agent there could be a huge fee hike due to resolve it.

Don't believe what the agent tells you - its the management company or res. assoc you need to talk to. See http://www.askaboutmoney.com/showthread.php?t=71622
 
AKA said:
But who is responsible for ensuring the seller is paid up? The company or the agent? We've a number of properties for sale in the estate.
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The management company are responsible for ensuring the seller is paid up, the agent will do this as part of their job. It's done as part of the legal requirements. In short, if a seller hasn't paid all fees due the agent will not "sign off" on the relevant paperwork which is required to complete the sale.
 
The purchasers solicitor will insist on an undertaking from the vendors solicitor to pay out of the proceeds of sale any arrears up to the closing day and to provide a receipt in due course or alternatively to provide a receipt on closing.
 
The agent will do what they can to get unpaid fees but if selling a property the sellers solicitors request a requisition 37 which is a pack containing all info on the managment company including a statment for the unit being purchased. It is up to the buyers and sellers solicitors to ensure that the buyer has paid their service charge when the sale completes as it is up to them to ensure there are no charges against the mortgage. Its part of the checks they carry out. Also if property is sold mid year the buyers solicitor will have to make sure the sellers pay service charge up to the date sale closes.
 
That's good to hear. One thing we don't have to look after and we can use this information to make members pay up.

Thanks
 
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