Take control of property maintenance charges
There are a number of ways in which owners can seek to reduce the cost of the annual service charge
Apartment living is a relatively recent phenomenon in Ireland and in many respects we have not yet become fully accustomed to the concept of communal living and of property management fees.
Fortunately, two pieces of legislation have been introduced to provide further consumer protection and transparency in this sector.
The Multi Unit Development Act (MUD) provides a range of provisions in relation to the management of apartment and housing complexes. One of the most important parts relates to transparency around annual service charges.
The act requires a clear breakdown of all of the costs that comprise the annual service charge including insurance, maintenance, cleaning, landscaping and administration expenses. It also requires an annual report provided by the directors detailing all income and expenditure at the AGM.
Secondly, the Property Services (Regulation) Act, introduced last year, requires all property managing agents to be licensed and provides a statutory redress and complaints handling procedure and compensation fund. This is a welcome development to improve standards in the industry and enhance consumer protection.
One of the biggest issues in the management of developments is the lack of engagement by the unit owners in the managing of the development. The MUD Act requires the transfer of the common areas of the development to the owners' management company (OMC). This means that the owners assume full control and responsibility for the running of the development.
Owners who become directors of the owners' management company should ensure that they are fully aware of their responsibilities under company law and also under the MUD Act. Equally, they should also ensure that they are fully satisfied with the common areas before taking it in charge from the developer. A detailed survey is usually an important prerequisite.
There are a number of ways in which OMCs can seek to reduce the cost of the annual service charge.
The first is insurance. The insurance premium is calculated on the basis of the rebuilding cost of the block in the event of a catastrophe such as a fire. Over the past number of years, the rebuilding costs have come down significantly and the OMC should ensure that this is reflected in the insurance premium.
Secondly, electricity costs should be reviewed. For example, is the correct tariff being used at night and are energy saving bulbs being used in the common areas? There is significant competition in the electricity market and quotations should be sought from a number of different providers to get the best one.
Waste management is another area for possible cost savings. Typically, recycling can reduce waste costs by up to 50pc and there are also a number of providers in this sector which could result in a better quote.
Landscaping costs should also be reviewed on a seasonal basis.
There are of course certain areas in which frequency and quality of service must not be compromised. Fire safety is a key area and the appropriate service contracts and regular inspections must be carried out for the safety of all.
Lift maintenance is also an area which should not be compromised. Regular maintenance of lifts will actually enhance the overall working life and potentially reduce costs in the longer term.
Appointing the right property managing agent is also a key aspect to the smooth running and management of the development. There are a number of things to consider. Ensuring value for money is important. However, you should not necessarily base your decision on the cheapest quote. Consideration should be given for experience in managing similar scale developments, response times, personnel and professional competence. It is also important to consider the experience and expertise of the managing agent in protecting and maintaining the longer term interests and consequently, the value of the development.
Finally, it is very important to ensure that the managing agent is licensed and regulated by the Property Regulator – who will ensure your interests are protected on a statutory level.
Siobhan O'Dwyer is Chair of the Property Management Professional Group of the Society of Chartered Surveyors Ireland. The Society of Chartered Surveyors Ireland has published a Guide to Management Companies in Multi Unit Developments available from www.scsi.ie