# Justifying a service charge increase at AGM



## gebbel (1 Oct 2019)

I’ll start with some facts.

Small apartment development of 16 units. 8 ground floor apartments paying €400 per annum. 8 upper duplexes paying €600. Total fees to mgmt company of €8000 per annum.
Annual block insurance €3000 (has been rising).
Repairs and maintenance averages about €1500 per annum.

Development built 2005. Due to mismanagement for the first 10 years no sinking fund provided. Last 4 years has seen major improvements with arrears eliminated and close to €13,000 invested in upgrades and refurbishments. Place looks well now with proper accountability. Sinking fund account created this year with €8000 diverted to it. 

There has not been an increase in service charges since the beginning (2005).

Sinking fund is obviously way behind where it should be for a 14 year old development. Complex at least is not gated nor contains lifts. Haven’t employed any professional to estimate future major expenditure events but common area wooden fencing is something we are all aware of. There’s a lot of it, it has been painted but one day it will need replacing.

I will have to get a vote on a fees increase but based on the above how much is warranted? Thanks


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## elcato (1 Oct 2019)

The two management companies I am a member off charge a specific 100 sinking fund contribution but both have more units than yours. They almost always run a surplus also which goes into the fund. Given that the fees are very reasonable I would aim for 200 and be flexible enough to accept 150 ?
btw - you are not alone on the sinking fund being underfunded. I'd be surprised if anywhere did not drop them during the late noughties/early onesies


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## cremeegg (1 Oct 2019)

Small steps.

If you try to go from €400 to €600 in one go you will be accused of a 50% hike. Put the estimates of what is needed out there, ask for feedback. Dont be seen to be trying to impose a hike.

More important than any set figure might be to get the principal of an increase each year, even a small one accepted. 

You have obviously made solid progress in recent years on existing charges, dont upset the apple tart now.


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## gebbel (1 Oct 2019)

I am unable to say that, for example, by the year 2025 we will need say 30 grand. All I can really say is the fees have never gone up and we have to build that sinking fund higher. I'd be thinking of proposing the duplexes go from €600 to €650 and ground floors from €400 to €450 per annum. This would raise €800 extra per year. But would the ground floor owners moan that their increase is higher %wise?


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## JohnJay (1 Oct 2019)

will the €800 even cover your increase in insurance?
400 and 600 seem very reasonable for fees. I'm sure you could easily raise these by €150 and still be cheaper than the vast majority of developments.


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## gebbel (1 Oct 2019)

Increase in insurance has been €300 (and is holding at that) so yes it would cover it. Raising fees by €150 per annum would be unlikely to pass a vote.


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## messyleo (1 Oct 2019)

What is the current justification for the top floor having a higher fee out of interest? I would have thought it would have been simpler to have everybody pay the same from the outset unless they are a bigger unit - designating it as a specific/ring fenced sinking fund contribution might help get around the % difference aspect.


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## gebbel (1 Oct 2019)

gravitygirl said:


> What is the current justification for the top floor having a higher fee out of interest? I would have thought it would have been simpler to have everybody pay the same from the outset unless they are a bigger unit - designating it as a specific/ring fenced sinking fund contribution might help get around the % difference aspect.



Service fee apportionment is stipulated in the primary lease. The upper duplexes are nearly twice the size by area so they pay more. Some ground floor owners believe they should pay more than they do, as the balconies are also for their use mainly, but it's just a gripe.


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## messyleo (1 Oct 2019)

Sorry I didn't realise there was a size difference from your earlier post - makes sense.


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## notabene (10 Nov 2019)

@gebbel Mud Act section 19.5 suggests a contribution of €200/year per unit to the sinking fund or other contribution as agreed - it is quite a hike but perhaps the residents need to have a frank discussion about potential issues which could arise - they might prefer to put in a relatively small amount each year rather than be hit with a bigger levy if a crisis develops or maybe work out a plan to working up to that sort of contribution 






						Multi-Unit Developments Act 2011, Section 19
					

The electronic Irish Statute Book (eISB) comprises the Acts of the Oireachtas (Parliament), Statutory Instruments, Legislation Directory, Constitution and a limited number of pre-1922 Acts.



					www.irishstatutebook.ie


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## EmmDee (5 Dec 2019)

notabene said:


> @gebbel Mud Act section 19.5 suggests a contribution of €200/year per unit to the sinking fund or other contribution as agreed - it is quite a hike but perhaps the residents need to have a frank discussion about potential issues which could arise - they might prefer to put in a relatively small amount each year rather than be hit with a bigger levy if a crisis develops or maybe work out a plan to working up to that sort of contribution
> 
> 
> 
> ...



+1

I think you need to avoid the impression / perception that YOU are charging them anything extra. I would lay out the facts that there is currently a fund of "X" which will grow at a small rate per year on current levels. There are predictable capital events that are known (even if the exact timing isn't) and very little room if an unanticipated event happened.

So in that scenario, the two options are to start increasing the fund now in relatively small increments or have the likelihood of a large charge be levied at a future date. Even if some residents were thinking of moving in the next few years, I would have thought that the Management Company having an adequate fund would be a helpful selling point


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## Allen (19 Dec 2019)

Should everyone pay the same  amount into the sinking fund?  

Should bigger units pay more like they do for the service charge?


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## Vanessa (5 Jan 2020)

Allen said:


> Should everyone pay the same  amount into the sinking fund?
> 
> Should bigger units pay more like they do for the service charge?


Service charges are paid in accordance with the Lease
Contribution to the SinkingFund is decided by owners at the A.G.M.
An owner could bring a proposal to change the system of contribution


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## gebbel (10 Jan 2020)

To update on this, at the recent AGM a small raise in fees was agreed. The smaller apartments will go from €400 to €420 per annum and the larger units from €600 to €640. Only one attendee voted against.
There are only 16 units, 8 small and 8 large so an extra €480 will go in the pot. Sounds small but it’s better than nothing.


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## L_earner (11 Jul 2020)

Well done. Getting anything extra out of people can be a challenge.
What I did was use a few solid facts.
1. If the apartment needs to pay out a larger than usual bill for something like a roof repair, redecoration, etc., and there is not enough cash in the sinking fund, every owner will have to dig deep at short notice, even though it will almost certainly not be possible for some people to do so. Better to pay small amounts annually to cover this.
2. When anybody is selling their apartment, they stand to attract more buyers the healthier the sinking fund is. It is undeniable evidence available to the purchaser's solicitor that the OMC is well run, and so will attract more potential buyers, generate greater confidence while bidding, and will, on average, yield a greater offer, so the vendor effectively gets their money back.
3. Everybody in the development - owner-occupiers, landlords alike, benefits from a well managed place. It attracts and holds tenants, it is more pleasant to live in, and there are no losers.


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