# Service Charge on apartment which is not fully habitable due to years of water ingres



## tutankhamunv (14 Oct 2014)

The Owners Management Company are requesting full payment of service charges from me on an apartment, which is not fully habitable or lettable due to water ingress problems coming from the common area over many years.

Is there a formal way I can contest the fees being charged and have them reviewed in a fair and equitable way. Does this breech the lease agreement on the side of the Owners Management Company with me ?


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## so-crates (14 Oct 2014)

Firstly, by not paying the service charge you will be (or possibly already are) in breach of your leasehold agreement. Without reading your lease it would be impossible to determine if there are any derogations allowed in payment of service charges in the situation you outline - probably not though. There is no independent arbiter available or standard body you could appeal to. 

There is a good chance your situation is the same one being played out time and time again. You have a problem-it isn't addressed to your satisfaction (probably because the management company is underfunded as a result of non-payment of fees) - you withold fees as a "protest" - the management company remains underfunded and still can't do anything about your problem - cue vicious circle....

The way to resolve it is to pay your fees. Turn up to the AGM. Volunteer to become a director and start getting active in your involvement. Then you may have a chance of something actually being done. 

The notion of not paying your fees or getting a reduction on your fees being a good thing is not wise. You only handicap yourself and your management company. They cannot work magic from nothing.

So unless you want the situation to continue or worse still deteriorate I would swallow the "principle", look objectively at "fairness" and pay up.


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## tutankhamunv (14 Oct 2014)

*Accommodation is just not fit for purpose*

Hi "so-crates" thank you for the reply. I can assure you that this  situation is not the same one being played out time and time again, i.e.  the won't payers. We fully appreciate the need for everyone to pay  Service Charges and the consequences for all of non-payers.

Our  circumstances have only become a real issue recently due to the severity  and number of years the defects have dragged on for.

We have  three young children and due to the damp, mould and spores, followed by a  constant run of chest infections we were left with no choice but to  move out of our own home for health and safety reasons.

This  extra cost of alternative accommodation has essentially left us with no  choice as we are now unable to meet all our financial obligations but we  are still paying what we can afford to pay of the Service Charges,  which is currently 70% of the monthly fees. even though we now can't  live there through no fault of our own.

Not paying fees in full  annually is indeed in breach of the leasehold agreement but the  fundamentals of the lease are based on the Lessor (Mgmt Co.) providing a  "lettable" or habitable area. Which this is clearly not.

The  accommodation is just not fit for purpose.  I understand the Auditor  signs off on the Management Fees annually based on the ratio of  "lettable" areas and then splits that amount amongst all apartment  owners but you are right who do we appeal this to ?


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## lantus (14 Oct 2014)

when you say 'many years' what are we talking here? How has it gotten to this stage? You may have directors who are not as proactive OR are doing the very best they can with a lack of funds, but then what have you and the other unit owners done to get involved and help? Have you helped arrange quotes, provide full details in writing with photos to the company of the issues on an ongoing basis and made sure these were updated on a regular basis? Have you met the directors or agent? how many times? What did they say?

Is the problem simple or complex? Leaks are often the latter. Do the company accounts show good payment percentages. Are the fees high enough to cover the costs? You will of sat through at least two or more AGMs if the problem is going on years. What was discussed and what did the directors say they would do? Did the members not agree to put in place emergency budget measures to cover the costs if the directors had not? If you did not then why not?

Even 'good' owners can tend to have welfare state mentality in that they want to pay peanuts each year but get angry when they can't start writing blank cheques for repairs that directly affect them. I've paid my €500 service fee now I want that €10,000 problem solved today!

Doesn't work like that except for those few companies that have a six figure sum of cash in their rainy day fund. (one complex in Dublin has almost half a million and is maintained immaculately anyway.)


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## tutankhamunv (14 Oct 2014)

*There must be some protection for owners under these exceptional circumstances*

Hi lantus, we are talking over 5 years now. The issues in the development are vast and complex. I believe the directors are doing the best they can given the complexities.

Everyone, directors and owners, are working extremely hard and pulling together to try and resolve the issues, working with surveyors, getting repair quotes, insurance claim forms, photos, loss assessors, legal proceedings against the insurance bond and developer.

Overall repair work will run into > 1 million, hence the many years of costly legal proceedings and form filling.

The company accounts are in good shape with good payment percentages but there are people like myself now who are struggling to continue to absorb these costs. Especially now, as owners are being forced from their own home in order to protect their family for health reasons. A very unfortunate situation for all concerned and a loss loss for everyone involved until the defects are repaired, which does not look like anytime soon given the costs involved.

There must be some protection for owners under these exceptional circumstances?


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## lantus (14 Oct 2014)

That's an appalling situation and the costs are truly frightening. I'm guessing that this is a building fault, otherwise your insurance would of dealt with it already?

well done to all your unit owners in pulling together!

When you say bond do you mean the builders bond lodged with the council or Homebond? leaks are typically 3, 5 and I think 7 years if they pay extra (which they almost never do.)

If you had 200 units and you had to foot the bill yourself your talking 6k each if its around 1.2million.

There is more legal protection if you had bought a kettle than a property of any type. Its a cowboy industry from almost every angle and the attempts at setting up regulators like the PSRA for estate agents has not really worked. They have not enforced a single case against a single company or person since they came into being. If the builder is still in operation there is his insurance but I'm not aware of any case where a builder had to pay out. I think you'd almost need to prove negligence which is neigh on impossible.

Most building contracts have huge exclusions of liability in for builders and basically once they walk away from site your on your own. Your experiences represent the tip of the iceberg I feel for Ireland. I don't know of any development where there isn't some sort of problem or defect or issue with the building or the developer is in receivership or its an unfinished estate or a combination of all three.

It seems to be largely ignored by the media. Presumably worried that if we admit all our property is that badly built values will be even more realistic and houses will exchange hands for a few thousand at best. Not the good news story the government wants to tell.


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## tutankhamunv (15 Oct 2014)

It certainly is an appalling situation for all involved. There are  numerous building faults and hence the delay in identifying the issues,  which will be used for the 10 year latent defect insurance - structural  warranty.

Agreed, it seems you certainly would have more legal protection buying a kettle than a property.

Just  to get back to my original question,  I want to clarify if there is a  breech in the Lease agreement with the Owners Management Company and I,  if the property is not habitable or "lettable", basically not fit for  purpose and which continues to let in water over a number of years,  which as a consequence poses a serious health risk to the occupants. 

Surely  Service Charges etc. would have to reflect this situation in exceptional circumstances, given the  extent and duration of the defects and the consequences it has on the  owner financially ?


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## lantus (15 Oct 2014)

you should review your lease in detail and if you don't have it get it ASAP.

typically the OMC is not liable for building faults and so its exposure it limited. While this is a very extraordinary circumstance which it was never intended would occur I don't see how a member can argue for non payment of partial or full fees for any reason. It would be counterproductive as the ability of the company to correct the problem would be compromised.

Typically  a lease would say the OMC is not liable for any fault to the lessee. But they must their best to resolve and in the mean time the contract stands as it is regardless so everyone is bound by all the covenants (inc service fee payment.)

In very simple language.

insurance is still required, maintenance etc.

I would look at everything that could be sacrificed for a few years even if the place looks a tip to remedy the real problems. landscaping, painting, anything even extreme measures should be considered. could you all rent out your car park spaces for a few years if in a prime location to a nearby company? other wise I would suggest the OMC levies a service fee of say 4k for three years (assuming 200 units) and plans to resolve in three years time. 

Best of luck with homebond! leaks are not covered under the structural element, they are limited to 3 or 5 years typically. homebond are not paying out in many cases and dragging their heels in all others to the point where people give up and move on to resolve themselves. Hopefully they will resolve for you. Please let us know how it goes.

Unless the building is structurally unsound, in which case you would of been evacuated already, it would seem unlikely they will resolve the problem under the structural bond.


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## tutankhamunv (16 Oct 2014)

*Lease and MUD Act*

Thanks Lantus, I did get a hold of my Lease. While all this can certainly be argued that the issues and defects are outside the control of the Lessor but also outside control of the Lessee... the following are the main points of interest

The lease states....
(a). As per the Covenants on the part of the Lessor (Oweners mgmt Co.)

"The Lessor shall keep the Retained Parts and all fixtures and fittings therein and additions thereto in a good and tenantable state of repair decoration and condition including the renewal and replacement of all worn or damaged parts"

(b). As per the Provisions for the Calculation and Payment of Service Charges

"This schedule shall be constructed to ensure that on an annual basis the entire expenditure for Service Costs is apportioned amount among all the 'Lettable' areas"


(c). "The Lessee shall pay such sums in advance and on account of the Service Charge as the Lessor shall in his sole discretion deem to be fair and reasonable interim payment on account of the service charge for the year then commencing."

MUD Act.

"It is the Right of the Management Company to effect essential repairs where it is essential that the repairs or maintenance concerned be carried out in the shortest possible period, so as to reduce or minimise any loss to the owners’ management company or the owner or occupier of a unit in the development."


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## tutankhamunv (20 Oct 2014)

So based on the terms of the lease above, service charges are based on the 'lettable' area. If the property is not lettable year after year how can it continue to incur a Service Charge ?


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## lantus (21 Oct 2014)

apportionment means how the overall service charge is divided between the units.

Without seeing the entire document and the other relevant sections it could mean equally between all the units or it could mean that the larger units pay more on area.

It doesn't mean that you are paying for a 'lettable area' in exchange for your service fee. 

Our lease specifies that apartments pay based on number of bedrooms. If you spring a leak in one bedroom you can't say I'm only paying what a one bed pays because that room is temporarily unusable. If your unit is a two bed you pay that rate and any issues must be resolved.

Sorry but your not getting out of it like that 

Do you have letters from Homebond? If not contact them yourself and see what they say.


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## tutankhamunv (21 Oct 2014)

Lantus, the main issue is just the length of time the issues remain unresolved. People are left with no alternative but to just leave their property until everything is resolved or stay and face the health risks.

This is not a case of trying to get out of anything, nobody in their right mind should be expected to pay for services they do not use because a property cannot be occupied.

I am now paying for services on another rented property that my family occupy until we can return to our original home.  Family health and well-being take priority here.


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## lantus (21 Oct 2014)

its a horrendous situation and I have nothing but sympathy for you. But unless all the members pay into the system there will never be any money to address these issues. SO the issue will never be fixed unless by magic and after 5 years homebond and/or the developer start throwing thousand euro notes at you!

You need to get some real hard facts on the table (not with me but with you and all the members.)

1/ What exactly is the problem, is it fixable and how much will it cost?
2/ Will Homebond or the developer cover it? Can or are they able to pay? There is no point getting a high court judgement against a poor developer.
3/ If no to number 2 then how many years are we going to have to realistically raise money for to fix this. There should be a specific amount set aside for this and possibly even a special bank account set up just to store this money separate from the sinking fund and daily running account with protections put in place to safeguard the cash. 3 or 4 signatures needed to release funds etc. 

After 5 years there should be a fairly good idea of where the liability sits. Developer, Home-bond or the members. 

Without a solid plan as to the big picture you wont get these things resolved. I know your concerned with your unit and rightly so but every member needs to take on a sort of director role.

There should be project management meetings on a regular basis and projected timelines and budgets being put in place possibly for the next 3-4 years. 

You need to get answers to those three questions. Before you do your all just wondering what's going to happen. Once you do then it will be a matter of getting on with it. A task I do not envy.


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## tutankhamunv (22 Oct 2014)

Thank you for the advice Lantus, we have point number 1. covered and are currently working on number 2 but even in the early stages it looks like we are heading towards point 3. Here's hoping for a resolution in the not too distant future... Life is too short for the likes of this.


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