FAQ’s
What is a Management Company?
If you are living in a Multi Unit Development i.e. an apartment complex or an estate, it will have several common areas accessible to all the residents. These areas typically include the lobbies, stairwells, lifts and main corridors. There may also be other areas that owners share collectively such as common roofs, common car parking or external landscaped or green areas.
Many new housing schemes and apartment blocks have a management company which is responsible for the maintenance of these shared spaces and services.
Management companies are generally formed to manage multi-unit developments because:
- They resolve the leasehold vs freehold issue.
- The rules of company law (which they must adhere to) also offer an effective structure in terms of administration and ownership.
- They offer an efficient means of managing Multi Unit Develops in the best interest of all owners.
Owners of units within multi unit developments usually sign management agreements on the purchase of their unit. Once you sign up to a management company agreement (Management Company Lease) you are legally bound to the terms of that contract. It stipulates your rights in terms of what the company will do for you, but it also places an obligation on you to pay for the services it provides. It should be noted that the Management Company’s ability to provide services and maintain the development to the appropriate standard is very much dependent on the owners paying service charge contributions in a timely manner.
What is my lease for? Is it important?
Your lease is very important document and you should read it carefully and consult your solicitor prior to signing. Conflict often occurs between owners and management companies out of a lack of understanding of the owner’s responsibilities arising under their lease. Purchasing a property for most people is the single largest investment they will make in their life time, the lease terms they sign up to will fundamentally affect the way in their property is managed and maintained in the future. An understanding of the charges that arise out of the lease terms can help you to maintain and enhance the value of your property in the coming years.
The lease will set out both your obligations and indeed the obligations of the Management Company.
This document tells you exactly what you are paying for and when to pay it. Additionally, it will outline rules about what you can and cannot do when on the premises. If you are unclear about the obligations, we strongly advise you to ask your solicitor to run through the lease with you.
What is a managing agent?
Management companies often employ professional firms known as managing agents to provide maintenance and other services in multi unit developments on their behalf.
The managing agent and the management company are two very different entities. The managing agent works under the instructions of the management company.
The management company has numerous responsibilities to its members and the employment of a professional third party agent to deliver on the terms of the management agreement is in most cases, essential.
What are Service charges?
Unit owners pay an annual fee known as a service charge to pay for the maintenance of the common areas and other shared services within their development. How owners fees are calculated is dictated by the provisions of the management company agreement. Service Charge contributions are based on the anticipated expenditure associated with running the multi unit development in the forthcoming year.
Service charges are not an optional payment if they are part of the terms and conditions of your contract to buy the unit. Once you conclude the contract, you have an ongoing legal obligation to pay these charges, usually in advance on an annual basis. So make sure your solicitor explains these obligations.
The following are typical items that a service charge may pay for, though the range of services will depend on your individual development:
- Managing Agents Fees
- Repair and maintenance of common areas, car park, footpaths, roads
- Cleaning common areas, windows, carpets/mats, gutters and drains
- Lift repairs and inspections
- Electricity and lighting for common areas
- Landscape and gardening, pest control
- Security - internal locks and doors, intercoms, external doors and gates
- Safety - smoke alarms, fire extinguishers, health and safety inspections
- Refuse collection and recycling
- Professional charges (e.g. block insurance, public liability insurance, the management company's legal/auditor fees)
- Sinking Fund Contributions
What happens if I do not pay my Service Charge?
If owners do not pay the charges, your management company will also run short of money and in time it may not be able to provide even basic services. This in turn may have a negative impact on the residents' quality of life and the value of property in the development.
Not paying could leave you open to legal action, and any outstanding debts can be tied to your property. Any monies owed may be deducted from the money you receive once the sale has gone through.
Why has the service charge gone up?
In setting the annual service charge budget, historic costs are reviewed, planned or programmed extraordinary works and future trends are all considered. We as an agent always aim to strike a balance between the level of costs and the standards of service to be provided at that cost.
Costs are often affected by external forces such as changes to legislation, cost pressures from suppliers and the requirements of the owners. In each case we will provide a detailed budget annually and this will be circulated with a full explanatory document so that you will know exactly what your service charge is used for.
Why is my service charge high when I have property elsewhere where my fees are less?
No two schemes are the same, service charge levels can vary significantly depending of a number of influencing factors, here are some common reasons as to why levels might vary.
You may have a more comprehensive set of services funded through your service charge. (e.g. security, site manager, lifts, car parking, entry systems etc)
One scheme may have a sinking fund provision, another may not. While this may lead to slightly higher annual charges it counters large fluctuations in annual costs.
The number of units in a scheme or a block can impact on costs, certain services must be provided to individual blocks, fire alarms & lifts are examples, as the costs associated with maintaining often do not vary significantly, the charges associated with spreading these costs across 50 apartments versus 20 will lead to significant variances.
Your service charge may be based on floor area versus unit type, this can often lead to variances in charges between neighbours not just schemes.
How your scheme is configured can impact on charges, a high number of blocks with a limited number of apartments can counteract economies of scale that might otherwise be achievable. Greater number of lifts, greater cleaning costs associated with higher numbers of cores etc.
I am selling my property do I have to continue to pay your demands for service charges?
You remain responsible for service charge up to completion of the sale. You should continue to pay in accordance with your lease terms. If you overpay as a result of early completion or completion half way through a financial period then your solicitor can arrange for a balancing apportionment to be made to you at completion.
If I am in financial difficulty and cannot pay my service charge, what can I do to ensure the matter does not escalate?
First and foremost, doing nothing will inevitably result in further costs that are normally recoverable from you, the owner, directly. We request that any owners facing difficulties contact us immediately, we will wherever possible work with owners to address the issues be it via payment plan or periodic payment options
If I wish to become a Management Company Director? What will be my responsibilities?
Your responsibilities as a Director of the Management Company are the same as for any Company Director. Consequently you have statutory and fiduciary duties that must not be taken on lightly. In simple terms however you will be responsible for ensuring that the development is managed properly and cost effectively. To this end you will need to work with your fellow Directors to agree a budget with the managing agent and to ensure that your members then contribute their service charges on time and in full. You will need to hold meetings in accordance with statute and ensure that you consult with your members/shareholders regularly. All decisions should be made giving due consideration that you as the management company directors must represent the owners as a whole and act in the common interest.