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Potential Time-Bomb for Apartment Owners

Apartment complexes are an ever-more frequent feature of Irish skylines, and a recent report on behalf of the National Consumer Agency indicated that a record number of about half a million people in Ireland now live in apartment blocks. In the rush to embrace a more European style of property ownership however, the law has not kept apace with rapid change.

Normally, when a person purchases a leasehold interest in an apartment in a complex, it will be a condition of the lease that they become a member of the management company. The National Consumer Agency Report estimates that there are 4,600 management companies in this country. The management company is charged with maintaining the common areas (such as gardens, car parks, entrances, corridors and stairways) and arranging the provision of services for the complex (such as insurance, waste disposal, security, building maintenance, etc,). In most cases, a property management agent is engaged to carry out this work.

Apartment-owners are increasingly faced with management company difficulties, which are not eased by ambiguities in the law. The more serious problems include failure by management companies to adhere to stringent company law requirements, lack of a sinking fund to provide for unforeseen expenses, inflated service charge rates which are not properly accounted for, failure to maintain the common areas of apartment complexes and to provide common services to the complex and failure to properly transfer ownership of the common areas to the management company.

Mr. Paul Appelby, the Director of Corporate Enforcement stated in December 2006 that apartment-owners could suffer a reduction in the value of the property if the common areas of apartment complexes are not correctly maintained. This means that apartment-sellers could lose money on the re-sale of their apartment due to common areas being in a dilapidated state.

Many apartment-buyers are purchasing their properties unaware of the responsibilities accompanying membership of management companies. Those seeking to sell on their apartments have encountered difficulties where the common areas have not been transferred properly from the developer to the management company. A further difficulty arises where the management company has been struck off in the Companies Office due to failures in company housekeeping. Where strike-off occurs, assets of the company revert to the ownership of the State and it can require an expensive trip to the High Court in order to get the Company re-instated. Potential vendors are then faced with an extraordinary delay in selling their property, coupled with the cost of applying to have the company re-instated.

Another situation is where the common areas are not properly transferred from the developer to the management company after the sale of the final apartment in a complex, and the developer company has subsequently been struck off the Companies Register, vesting the common areas in the State. This means that apartment-owners would never have had an interest in the common areas in the first place, and they will encounter a multitude of title problems when they attempt to sell the property.

The Law Reform Commission published a report in December 2006 recommending the establishment of a regulator to oversee the registration of all apartment blocks, to investigate complaints and to provide some support to management companies in charge of apartment complexes. It also recommends the regulation of service charges, which in some cases can be exorbitant.

Furthermore, the Office of the Director of Corporate Enforcement recently concluded a consultation process pursuant to draft guidelines on the Governance of Property Management Companies, with a view to publishing a guideline for apartment -owners.

If you are currently encountering difficulties similar to those outlined in this area, you can contact our highly skilled conveyancing team at Malcomson Law by filling out an online enquiry form or by calling 01 8744422. Your enquiry will be forwarded to a solicitor who specialises in Property Law and Conveyancing.

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