Apartments in cash crisis as large complexes can't pay bills
THOUSANDS of families living in apartments face a crisis as large complexes run out of cash and head towards insolvency.
The Irish Independent has learned that several management companies looking after about 12,000 homes are struggling to collect service charges.
This means the management boards are struggling not only to maintain their apartment blocks and housing developments, but also to pay bills to keep communal areas lit or even cover insurance costs.
Some residents are unwilling or unable to pay service charges because of personal financial difficulties, whereas in other cases the apartment blocks are not full to capacity. However, landlords who own multiple apartments are believed to be a huge contributor to the problem -- some dodging payments as part of a business strategy.
If nothing is done about the cash crisis, industry sources fear dozens of Priory Hall-style closures in order to maintain health and safety standards.
The cash crisis follows the transfer of blocks from developers to residents under the Multi Unit Dwelling Act (MUD) a year ago. This has seen resident-run management boards unable to collect outstanding service charges from many owners.
Many management boards employ professional management agencies to run their schemes, collect charges and pay bills.
With boards' outgoings consistently higher than incomings, some are struggling to pay day-to-day costs like electricity, waste collection and maintenance.
One apartment owner's group has reported that refusals to pay charges are as high as 50pc, with debts now going back several years. The result is that some developments have ended up with fee arrears of up to €750,000.
The Irish Independent has seen the accounts for the management board of one well- known Dublin apartment complex which show annual service charge income of more than €400,000 is due to be collected -- with annual expenditure listed as less than €350,000. In theory this should mean it has excess income over expenditure of more than €50,000.
However, a look at the balance sheet shows that it is due more than €800,000 in outstanding monies, most likely in outstanding service charges -- given that this is the only notable source of income for an apartment management company.
There is less than €15,000 cash in the bank, but creditors who are due within one year are owed a massive sum in excess of €700,000.
A manager of a large Dublin-based property agency said each of the big agencies had experience with at least four or five complexes which are consistently bringing in less cash than they are spending.
He added: "We're on the cusp of what could be a potentially explosive crisis here. If it's not sorted out in time there will be no money for insurance payments and lift maintenance.
"Ultimately it will lead to buildings being shut down and people being moved out because they fail health and safety requirements. I don't think residents or the Government realise how serious this is getting."
Another property agent added: "If you don't pay the lift maintenance people then there's no one to come and get someone out when they get stuck in there.
"Your insurance ends up being withdrawn thus rendering the apartments in the scheme unmortgageable and therefore unsaleable."
Enda McDonnell of RF Property Management says he is aware of one 200-unit scheme which is broke, and another where the management company has not paid the building insurance for six months.
Ross Carew of the Association of Landscape Contractors of Ireland said that around 20pc of members dealing with apartment management companies are now reporting arrears, some stretching back for several months.
"Our members are anxious to be loyal to their customers but are starting to wonder if they'll ever get paid," he said.