# Management Company- Possible to sell the debt?



## djh (19 Apr 2011)

Hi Folks, 

quick question to any apartment owners that are on their Management Company's board of directors or to anyone who may know also. 

Is it possible for a management company to sell some of their debt (monies owed to them by apartment owners) the same way that a credit card company or bank can sell your loan debt to other companies?

I am sure there is a hefty discount that might apply but might be attractive in getting something back from long term debtors who may not pay up even after lengthy court proceedings. 

Thanks
DeeJay


----------



## GarBow (19 Apr 2011)

We have tried every avenue with limited success in the collection of outstanding fees. I once suggested debt collection agencies to our agent who said, understandably, he wanted nothing to do with the idea.

Since then, the directors of another MC which he acts for have used a company called Debt Recovery Solutions based in Dublin which was very successfull. We have since gone the same route on stubbern debtors but it is early days so too early to judge yet.

This company don't buy the debt, but take a pecentage of any monies collected. 15% if i recall. No admin fees etc and no payment without success.

Absolutely no affiliation here and I can't recommend until we see more debts being recovered. They did seem very professional though.


----------



## purpeller (19 Apr 2011)

Interesting - our agent looked into it and found that debt collection agencies wouldn't take on the problem.


----------



## shesells (20 Apr 2011)

The AON had a guest speaker on Debt Collection recently, check out www.apartmentowners.ie for more info


----------



## redfedora (20 Apr 2011)

its possible alright the question is will they take it on. there's two different types that i know of, the ones that GarBow describes where they take a portion of the debt recovered and the other type that buy the debt from you. option 1 is similar to using a solicitor except that a solicitor will continually write letters to the debtor and eventually file in court, MUD now allows for these debts to be filed as a simple contract debt making it to my understanding a tad easier to recover. that said you cant get blood from a stone. The courts are also finding in favour of the MCs more often these days. the company will continually turn up at their door requesting payment, maybe turn up at the pub or place of work, there’s a guy that operates in the UK and Ireland that drives a big white transit that just says "Debt Collector" or something on the side in big writing and he basically follows the person about, parks beside them knocks on their door with a jacket on that says debt collector on the back etc and basically embarrasses/harasses people into paying. OPM if you want details don’t want to be seen to advocate one supplier over another.

The second option is to sell the debt, basically a company will pay the MC a percentage of what is owed; from reading it can be as low as 50%. The debtor is no longer in debt to the MC for that money but to the debt collector. So they can’t then come back to the MC complaining about the guy’s methods because the debt is no longer in the hands of the MC


----------



## djh (20 Apr 2011)

Cheers for all the replies. 

We currently are about a year into using a solicitor to chase the debtors. Some reasonable success on small (up to 4000euro) debt. Basically they are units chancing their arm not paying and seeing how long they can put it off for. 
We are left with very stubborn debt, 10000euro and upward in a few cases. Some have gotten as far as a "judgement" mortgage, but that really means nothing as we will never see the money unless the apartment gets sold in the future. 
We also have a few where the owners are going to defend the action in court. 

Would be interested to hear how GarBow gets on with the debt collection company. Do you know if they are an off shoot of a solicitors firm or a separate entity?


redfedora, do you now of any particular companies that might be interested in purchasing such debts from a management company?

Just thinking that it might be difficult if all debt up to 2010 was sold, and then the next years fees were billed, so the Management Co would still be chasing them, albeit for a lesser amount than before, they are just as unlikely to pay. 

Must have a proper read of the MUD Act and see if it applies retrospectively to debt or only for debt accumulated from this year onwards.


----------



## redfedora (20 Apr 2011)

I havent used any to purchase debt I'm pretty sure that the viper does it though but is that a route you really want to gown down? . just do a search and you should find some more.  I'd use this option as a last resort to be honest because the MC could end up loosing what little respect those that do pay have, Also I wouldnt be selling the 2010 debt on yet. a lot of the time a court date should get all but the most stubborn to start paying up. 

Judgement mortgages are a waste just like you said because if the property isnt sold you never get your money back. However I think it does have an impact on the owner in that it ruins their credit rating so they may find it difficult to get personal loans etc. maybe your head lease has a cluase for expelling members, that could cause them difficult because if they are expelled you dont have to insure their building or provide them services so if you use keypads or fobs then just cancel them same again with parking permits.  

If you have managed to get judgement have you also published them in the stubbs gazette just for the embarresment factor?


----------



## Rusty Cogs (27 Apr 2011)

What about setting the mgt agents fees as a % of mgt fees collected. i.e. if they bring in 80% of the annual mgt fees, they get paid 80% of their own annual fees. Might put a fire under MA to collect debts ?


----------



## redfedora (27 Apr 2011)

Rusty Cogs said:


> What about setting the mgt agents fees as a % of mgt fees collected.


 

that would have to be agreed with the agent when the contract for their services is signed by the directors of the MC and i honsetly can't see any agent doing this. maybe something like this. their fee is 50K.  they automatically get 25K. the remainder will be paid to them based upon their performance, so if they recover 75% of the fees they only get 75% of the remainder. but they may recuire some form of sweetener along the lines of if they get 100% of the money they recieve a bonus or something. 

the thing is the agreement with the agent should include a schedule of duties/areas of responsibility and some form of SLA. if the agent does not perform those duties then technically they have breached their contract with the company and can be dismissed. say the contract says one of the duties is "collection of all service charges" well if they dont recover 100% of that money then they have breached the contract. there may be a clause that says if there is a breach then the party that breaches must be given an opertunity to fix the situation.


----------



## Sunny (27 Apr 2011)

When it comes to unpaid fees, we found that it helps to be creative. I don't think we would ever go down the debt collector route to be honest. We tried the following things. If you have universal parking spaces, introduce permit parking and clamping and only allow permits for those up to date on fees. (even for guest parking spaces). We also put locks on the rubbish sheds and only gave codes to those people up to date. We changed access codes on block doors once a month and again only gave the new codes to people up to date. We changed locks once and only gave out keys to those people who were up to date. We offered discounts to people who signed up for direct debits. We got the Agent to refuse to deal with any queries or complaints from people that weren't up to date. 

All in all, we had good success but it was time consuming and not everyone agreed with it (voted for at the AGM though) and also it is beginning to slip again. We found that it worked particulary well for rented apartments where tennents were putting pressure on landlords because of the hassle.


----------



## redfedora (27 Apr 2011)

Sunny said:


> If you have universal parking spaces, introduce permit parking and clamping and only allow permits for those up to date on fees. (even for guest parking spaces)..


 this works a treat because it hits them in their pocket immediatly



Sunny said:


> We changed access codes on block doors once a month and again only gave the new codes to people up to date. We changed locks once and only gave out keys to those people who were up to date.


 
did you take legal advice on that>? becaus eI'm not entirly sure its legal, you cant legally prevent someone from accessing their home.




Sunny said:


> We offered discounts to people who signed up for direct debits.


 does this not adversly affect your operating budget after all your budget is based on 100% payment. if you offer a discount you cant take in 100% of your budget and cover your costs. you'd have to inflate your service charges to cover the discounts, would it not be better to apply penalties for late payment


----------



## Sunny (27 Apr 2011)

redfedora said:


> did you take legal advice on that>? becaus eI'm not entirly sure its legal, you cant legally prevent someone from accessing their home.
> 
> 
> 
> does this not adversly affect your operating budget after all your budget is based on 100% payment. if you offer a discount you cant take in 100% of your budget and cover your costs. you'd have to inflate your service charges to cover the discounts, would it not be better to apply penalties for late payment


 
Yeah we did. There is no problem because we are blocking access to common areas owned by the management company. We are not blocking them from getting into their apartments. To be honest, it is really only about causing them some inconvenience. People usually got codes from neighbours etc but it just annoys them!

We got cheaper deals on a lot of the services and simply passed on the savings to pay for the discounts. We offered the 10% discount to those that paid up front and I think a 5% discount to those that paid by DD over 12 months. We figured we are better off trying to guarantee cash coming in than chasing late payments. (Usually if they are late, they are not going to pay whatever penalty you impose)


----------



## redfedora (27 Apr 2011)

Sunny said:


> Yeah we did. There is no problem because we are blocking access to common areas owned by the management company. We are not blocking them from getting into their apartments.


 
do they have their own front door at street level or something, they dont have to walk though an internal hall/corridor to get to their apartment.


----------

