I have a huge issue with the mandatory minimum contribution to the sinking fund of €200 per unit. It's going to bump up our fees hugely and our sinking fund is already healthy.
You are probably almost unique by having a healthy sinking fund !
Why would any apartment owner want to put money away now for a replacement roof in 20 years time? The perspective of many apartment owners is still that apartments are owned for a few years. IMHO MUD should have made it mandatory for the developer to retain an appropriate professional to produce a schedule of replacement works and projected costs. This could provide a schedule of sinking fund contributions appropriately spread over the life of the assets. Part of this is covered in Schedule 3 but it is incomplete.
The act is welcome but it is patching a very flawed system.
The definition of common areas in the act does not refer to balconies or windows, two areas where there seems to be great confusion. A much clearer definition of common areas would contribute greatly to providing clarity around what block insurance should cover. If block insurance was not such a dark art, more insurance companies might compete for the business.
The assumption that the problem with multi unit developments is passing the care of the development from a nasty developer to a waiting collection of owners with the skills and available time to be directors is flawed. There is not a queue of people who want to give freely of their time to act as a director of a management company. The act should make some provision for the compensation of directors to encourage the appropriate skilled people to volunteer. It could be something like a provision that up to 33% of a directors management fees on a single unit could be waived in recognition of their contribution to the management company.
The act deals primarily with one part of the lifecycle of a multi-unit development, namely the transition from development to owner managed. It does not deal with the planning, construction, ongoing administration and maintenance in any great detail.
The fact that the service charges can only be reviewed annually may cause problems. If one month after the AGM the fire safety system needs urgent replacing to ensure safety, the management company must try to fund this extraordinary expenditure and wait 11 months to add it to the next year's service charge. An EGM should be able to amend the service charge.
The direction on the sinking fund would appear to indicate that sinking fund contributions should be a fixed amount per unit rather than a weighted amount per unit. Not sure if that is intentional or me reading too much in to the wording!
The act should require that a prospective purchaser is provided with a statement of the sinking fund balance and the projected sinking fund requirement. It is important that there is a clear value placed on sinking funds for purchasers and sellers.
I could not see anything in the act about the sale/ transfer of units and the management fees. Should the seller pay the management fees up to the date of sale and be reimbursed the balance or is it like car tax and it runs for a cycle regardless of when the unit is bought or sold.
Under the House Rules section there is a note with regard to the actions that can be taken for breaches of house rules: "may recover the reasonable costs of remedying such breach" This would appear to make it more difficult to apply monetary penalties to discourage breaches of rules. A retrograde step IMHO. The references to the court system to solve problem would appear to be time consuming and expensive.
The payment of management fees is also lightly covered. It should prescribe that owners can pay quarterly without penalty rather than one annual lump sum. It should also set in place some rules about the application of interest to overdue accounts.
Reference to the role of the management agent, an integral part of most multi unit development, is fairly light. Nothing to protect the less vigilant or less experienced directors from getting fleeced by management agents.
The act tries to put structures in place to process issues rather than avoiding issues. High management fees are one of the most significant gripes of owners, many of these could be avoided by better energy management, waste management etc. For example, why is it not compulsory that all windows have to be accessible for cleaning. Many of these issues link to the planning process which should be changed for future developments. The act could address development where the developer has yet to hand over to the owners.
The act is welcome but I fear that multi unit developments in Ireland are a BP style problem and we are looking optimistically at the MUD Act as if it was the little hat that was going to solve the problem in the gulf of Mexico a few weeks ago. It is right to be positive and optimistic but is this act up to solving the current and future problems of MUDs?
