# Management Fees - % of Defaulters



## Rusty Cogs (23 Apr 2010)

In any development with management fees, what would you think is an average default %, i.e. the value of aged outstanding debtors against total monies owed (of say 2009) ?


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## shesells (23 Apr 2010)

There is no average. Non payment of fees varies hugely from development to development and year to year. Some management companies are more aggressive in how the pursue outstanding debtors than others.

The bottom line is an owner is legally obliged to pay their fees...and the Management Company can and should pursue this, to the point of getting a judgement against the property if necessary.


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## Rusty Cogs (23 Apr 2010)

The spread of varience doesn't stop there being an average but I think I get your point. What I'm getting at is, all things considered, what would you think is a reasonable % recoup of management fees by a management agent. 90%, 95%, 99% ?

As I understand it, if the owner has rented the property and is out of the country, it's near impossible to get a judgement against them.


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## igy (23 Apr 2010)

Rusty Cogs said:


> The spread of varience doesn't stop there being an average but I think I get your point. What I'm getting at is, all things considered, what would you think is a reasonable % recoup of management fees by a management agent. 90%, 95%, 99% ?
> 
> As I understand it, if the owner has rented the property and is out of the country, it's near impossible to get a judgement against them.



On the flip side,I think it's also near impossible for them to sell the apartment, if the proper charges are registered against it. 
I don't know how practical this is, but I saw somewhere that one (nuclear) option was to exclude that unit from the block insurance, services, etc, and particularly in the case of insurance, that would cause them problems with their mortgage provider


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## Rusty Cogs (23 Apr 2010)

That's interesting about the resale issue. Forgive my ignorance, but at what point of the sale would the non payment of management fees be made aware to the purchaser, i.e. how does it stop a sale going through ?

If anyone has seen the other option of withdrawel of services work in action I'd be interested to hear about it.


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## mf1 (23 Apr 2010)

Its usual for a lease to require the managment to consent to any sale and for any person buying the property to become a member of the management company. Consent  will not issue if there are arrears of fees. 

Any prospective purchaser's solicitor will deal with management company issues prior to the purchaser signing contracts so any problems will become an issue  early in the transaction. 

I find it staggering that apartment owners don't get their responsibility for paying management fees. 

mf


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## shesells (23 Apr 2010)

Withdrawal of insurance cover is becoming more common from what I can see, also some developments have introduced permit parking where permits are issued only to units where fees are paid and that seems to also work in many cases.

Every company should strive for 100%...we're about 95% with the other 5% gone legal at the mo.


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## GarBow (23 Apr 2010)

I don't understand how one unit, say in an apartment complex, can be exluded from the block insurance. What about fire/flooding etc? Would the insurance company pay out to re-build all but one apartment. Very tricky. 

On another note, we have one ownner flatly refusing to pay her fees (for the past few years). It is only now we have a new agent in place that legal action is being taken. She has also apointed a solicitor and disputes fees owed as that very few or no services were provided and that they dispute the management company's right to seek fees outstanding prior to the apointment of the new agent.

Is it as simple as 'You signed the lease, you pay the fees' or could there be a way out of it if you can prove that the services provided were inadequate?

I hope the former is true as it's costing us, the company, a fortune in legal fees, that i fear may not be recouped.

PS sorry for hijacking Rusty


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## shesells (23 Apr 2010)

It is as simple as you signed the document you must pay the fees. Particularly if she is the only person. The fees are due to the Management Company regardless of who the management agent it.

Withdrawing insurance cover is usually a very strong leverage tool. It's the condition of every mortgage that you have buildings cover. In the case of apartments this has to be done by the management company as the management company ultimately owns the building and leases the apartment to the "owner". The bank can then cancel the mortgage and seek immediate repayment if they have documentation to prove that no cover is in place.


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## Magpie (23 Apr 2010)

We have 100% payment to our mgmt co. Its small though.


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## GarBow (23 Apr 2010)

To answer the original post.

80% in our development are either paid up in full or attempting to repay outstanding fees.

So 20% not paying whatsoever. What makes my blood boil is that within this 20% there are 10 units; 3 of which owned by the same investor.

The same non-payers complain at the lack of progress within the development and use this as their reason for not paying. The stupidity of some is beyond words.

I'm a signitory on the MC account and last month 50% of the cheques were to pay for legal action against the debtors.

They have also been given ample time (1 year) to repay monies owed and we also decided on a years' break in contributions for everyone to accomodate this.


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## Yorrick (25 Apr 2010)

I cannot accept any reason why an owner should not pay the management fee. Why do they think they can sponge off others?
Of course there are issues of poor management and in many cases this occurs because investors rather than owner residents do not care about the overall standard of the complex, level of sinking fund etc as long as they are getting rent.
The lack of involvement by owners in their management company is also often a problem.
The legislation going through Dail Eireann at the moment should go some bit towards the  issue of proper management.
In anybcase owners have a legal responsibility to pay the management fee. An aggressive legal approach should be taken after a few softly softly approaches. Get a judgement against the property. A solicitor acting for a prospective buyer is obliged to check out such judgements and make enquiries with the Management Company about any debts owed.


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## maybelline (27 Apr 2010)

shesells said:


> Withdrawing insurance cover is usually a very strong leverage tool. It's the condition of every mortgage that you have buildings cover. In the case of apartments this has to be done by the management company as the management company ultimately owns the building and leases the apartment to the "owner". The bank can then cancel the mortgage and seek immediate repayment if they have documentation to prove that no cover is in place.


 
We tried this, the banks didn't care a bit, no reaction at all.


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## Rusty Cogs (27 Apr 2010)

So to recap. Various methods of entreating debtors to pay their outstanding managment fees.

*Interest on outstanding fees*
Positive - A high interest rate may encourage payment.
Negative - Increasing the debt may make payment less likely/affordable.

*Legal sanctions* 
Positive - a solicitors letter can be a strong message that non payment of fees carry serious consequences. The cost of the letter can be billed against the debtor. Any judgements against the property should block a sale of the property.
Negative - it can be ignored and the costs end up being borne by the Management Company. There is little recourse for debtors residing outside of the jurisdiction.

*Withdrawel of building insurance*
Positive - Loss of insurance. Mortgage provider may insist insurance is reinstated (after payment of debts).
Negative - Legally tricky to enforce. Mortgage provider may not care as long as mortgage is being paid.

*Bar for property resale*
Positive - Management Company can effectively block a sale until outstanding fees are paid. 
Negative - Hardly any sales are being completed atm.

*Detail debtors in the accounts of the Management Company at the AGM ('Name & Shame')*
Positive - Resident debtors don't want to be seen as not paying their dues.
Negatives - Landlords may not care (as they are already refusing to pay the fees anyway).

Any comments on the above or any new ones to add ?


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## shesells (27 Apr 2010)

The bar for property resale isn't an option as far as I know, it's standard. You can't re-assign membership of a management company without being paid up so you can't sell. Therefore it's not a threat, it's a fact?


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## maybelline (27 Apr 2010)

Legal sanctions can also result in debtors being brought to court as well.
Another one to add to the list is removal of services - window cleaning (probably more hassle to arrange than it's worth), parking permits, any access codes/keys etc can be withheld. Also similar to the Bar on resale, but agents can be instructed to refuse to do anything for debtors if they call with any issue.


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