# Small development 55 units, fair apportionment of mgt fees between 3 types of unit.



## jacob

Hi.

I am a director of a small development of 55 units. Our development consists of townhouses, 2 bed apartments and 3 bed duplex's. 

A question has come up regarding how our management fees are divided among the 3 different types of units. The townhouses are not covered by block insurance which is normal. Apart from the insurance all other items listed on the annual service charge relate equally to each type of unit ( street lighting, cleaning, vermin control, auditor's fee's, management agents fee etc). 

Now my question is can the ratio of how each unit type fees are set in the lease be changed to reflect the actual  and fairer cost? 

At present the 3 bed duplex's pay 2.1 times the fees of the townhouses and and 1.2 times the fees of the 2 bed apartments. The 2 bed apartments pay 1.7 times the fees of the townhouses.

We have no lifts and all units have there own hall doors. There are no common areas bar gardens.

Jacob


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## ontour

There are probably a number of answers to your question.

The percentage assigned in the lease is a legal agreement but not impossible to change.  The main challenge is that by changing the contributions of different units there are inevitably some that you will expect to pay more than what they agreed to when they purchased the unit. 

Have a look at the MUD act although I am not sure it provides a great deal of guidance on the steps to change the apportionment:


a) as between different classes of units in such a development sections 18 to 21 are complied with and a fair and equitable apportionment of the costs and expenses attributable to the different classes of units is applied


The service charge should be apportioned among owners based on a transparent methodology applied consistently throughout the development. Information on apportionment should outline the costs for each type of unit within the property. Specific services provided to only some owners should be set out in additional specific schedules.  The management company should regularly review the apportionment methodology and report on any related issues at the company’s Annual General Meeting (AGM).


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## shesells

To alter the apportionment of fees from the calculations set out in the leases would require all owners to sign new leases, a legal nightmare, expensive and highly improbable that any owner would sign a new lease which would mean that they would pay more.

We have looked into it in our development, not a runner.


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## jacob

*Management fee's*

Thanks for the replies guys. It's much as I thought. An owner in our development has raised this question and I didn't think it would be easy to change. As you say nobody is going to vote to pay extra charges no matter how unfair the fee's are apportioned in the lease. Although in the MUD act it does say any at least 200 euro per unit is added to the sinking fund each year. We have our AGM coming up and it will be raised with the Management Agent and we will see what they come back with.

Jacob


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## lantus

As per other posts your lease document will prescribe how it should be apportioned. Dont take it for granted that the way it is being done now is correct. Many a savvy apartment owner has done some light reading and offloaded huge costs onto house owners because the lease documents were written so as to an equal apportion rather than proportional to each unit type.


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## shesells

jacob said:


> Although in the MUD act it does say any at least 200 euro per unit is added to the sinking fund each year.



That is a recommended amount, not a requirement. We are lucky and have a healthy sinking fund, we put 10k into it per year. 200 per unit would almost double that amount and force fees upwards. We would increase the contribution if the fund dropped significantly but for now we are happy. Having said that I am sure we are the exception rather than the rule.


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## Bronte

jacob said:


> . As you say nobody is going to vote to pay extra charges no matter how unfair the fee's are apportioned in the lease.


 
If it was unfair at the beginning then the fault is with those who signed, those who pay more 'unfairly' agreed to it.  They should have raised this at the point of sale not a few years in.  And if they want it changed they should pay the costs of changing same.  

Actually unfairness doesn't come into, all agreed initially.  Caveat emptor.


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## 10amwalker

Jacob,

If the owner who raised the issue wishes to apply to the Circuit Court under the MUD Act he/she may do so- Section 24 of the MUD Act.

They could argue that the covenants entered into by way of the lease are unfair and they would have to suggest what they should be altered to or how for example the service charges should be allocated.

It was accepted during the drafting of MUD that some leases were structured or prepared in a less than transparent way and trying to have all owners agree to changes in the leases would be next to impossible therefore Section 24- Dispute resolution and rehabilitation of multi-unit developments was included.

In saying that a provision is included to allow changes be effected you do have to follow the procedure set down in the MUD Act prior to applying to the Circuit Court.

10amwalker


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## jacob

We have since discovered that the division of management fees was never set out in the lease. It was devised by the Management Company as instructed by the developer. We intend raising this at the AGM and coming up with a new and fairer way of apportioning the charges with the agreement of all owners (easier said then done).


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## alexandra123

How does one go about seeing their lease agreement for an apartment/duplex ? Do they have to go back to the solicitor, bank or mgmt company ??


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## markpb

You or your solicitor should have a copy of it.


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## lantus

jacob said:


> We have since discovered that the division of management fees was never set out in the lease. It was devised by the Management Company as instructed by the developer. We intend raising this at the AGM and coming up with a new and fairer way of apportioning the charges with the agreement of all owners (easier said then done).


 
bizzare and sloppy. However, the directors should be able to propose a new budget based on any method of apportionment they feel works best. As all budgets require to be voted in approval it shouldn't be a problem.


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## Vanessa

In most cases leases can be amended at an E.G.M. usually a high percentage will be needed to carry the vote. Full notice must be given to all owners.
Check your lease and I'm sure that this procedure will be outlines (in any lease I have seen it is anyway)


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## markpb

Vanessa said:


> In most cases leases can be amended at an E.G.M. usually a high percentage will be needed to carry the vote.



You absolutely can not change a lease unless both parties (the OMC and the owner) agree to it. Like shesells said already, to change the apportionment, all leases have to change so you'd need every owners to agree to it. Having a majority approval at an AGM is not enough.

In addition, even with 100% attendance and  approval at a meeting, putting it to a vote is not enough. You'd have to get your company solicitor to draft an amendment to every lease and have all the owners sign it.

There's a section in the MUD act which allows any related party (owner, OMC, etc) to petition to court to change the lease if it's deemed to be unfair or inequitable but it hasn't been tested yet so no-one is sure how it would work.


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## daooneill

*Management fees apportionment*

Has anyone got an answer to this issue yet?

I am a townhouse owner in a mixed development consisting of 90% apartments. The head lease states the annual service charge should be apportioned - "_*by per cent of the costs and expenses incurred*_". The management agent has calculated fees by unit size (m2). 

Is this the industry norm or just the easiest way of calculation??

Is there not a fair way to administer costs by way of which units require most service?


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## Dermot

I could and would argue that from the wording of your quote that I would only be liable for the % costs incurred on my townhouse. I presume you are paying your own house insurance. Common areas in apartments incur costs that you should not be liable for. I would insist that management co give a breakdown of the costs that you are querying and where necessary receipts to back up.


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## Joe_90

+1


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## lantus

daooneill said:


> Has anyone got an answer to this issue yet..
> I am a townhouse owner in a mixed development consisting of 90% apartments. The head lease states the annual service charge should be apportioned - "by per cent of the costs and expenses incurred". The management agent has calculated fees by unit size (m2).
> Is this the industry norm or just the easiest way of calculation??
> Is there not a fair way to administer costs by way of which units require most service??


 
Calculating by m2 is typically only done for commercial units and sometimes apartments although usually its just done on bedrooms.

I have never heard it done for a house. If it is a private dwelling with no common building elements. i.e. if the roof or wall needs replacing then its your repsonsibility then the only elements you should be paying for are the common company costs and common area costs NOT associated with the common buildings. You wil need to read all the lease though as there are many parts to consider and not just the calculation section.

IF you feel the proper calculation would benefit you then send a copy in and question why it is not being calculated in accordance with the legal requirements and request it is changed. You will of been provided a full breakdown of the budget so you can easily see if your paying for common building elements associated with the apartments.


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## shesells

I am aware of two situations in mixed developments - ours and a neighbouring one.

Development A - fees are apportioned on number of bedrooms irrespective of whether it's a townhouse, a duplex, an own door apartment or a shared entrance apartment. Directors of development A have done extensive research and taken legal advice but based on their leases it is not possible to apportion fees based on services received.

Development B - fees are apportioned based on services received. All unit types pay insurance, car park lights, grounds maintenance etc. Shared entrance apartments pay for all the extras they get such as common area cleaning, lighting and fire safety costs. Much fairer


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## lantus

shesells said:


> I am aware of two situations in mixed developments - ours and a neighbouring one.
> 
> Development A - fees are apportioned on number of bedrooms irrespective of whether it's a townhouse, a duplex, an own door apartment or a shared entrance apartment. Directors of development A have done extensive research and taken legal advice but based on their leases it is not possible to apportion fees based on services received.
> 
> Development B - fees are apportioned based on services received. All unit types pay insurance, car park lights, grounds maintenance etc. Shared entrance apartments pay for all the extras they get such as common area cleaning, lighting and fire safety costs. Much fairer


 
Would it not be the case that members could agree at an AGM to collect fee's in a different manner on the basis that no one insisted that it was done as per the lease agreement? Or would that constitute a non compliant service fee collection?


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## shesells

lantus said:


> Would it not be the case that members could agree at an AGM to collect fee's in a different manner on the basis that no one insisted that it was done as per the lease agreement? Or would that constitute a non compliant service fee collection?



Extensive research and legal advice from multiple solicitors has come to the conclusion that to change fee apportionment they would have to issue new leases to all "owners" and would 100% would have to be signed. This would require apartments in shared entrances to pay higher fees - in this day and age, what owners of such units would agree to that?


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## lantus

shesells said:


> Extensive research and legal advice from multiple solicitors has come to the conclusion that to change fee apportionment they would have to issue new leases to all "owners" and would 100% would have to be signed. This would require apartments in shared entrances to pay higher fees - in this day and age, what owners of such units would agree to that?


 
agreed. we had an instance where a previous agent set his own 'creative' method of service fee aportionment. We hope to rectify this next year as the lease specify's something quit different. I would imagine that non compliance with the lease could be grounds to lose a debt court case if challenged. The reason why the agent got away with it is because no one understands or even has their lease. Its a 'hidden' document when really it should be highly visible and easily accessible.


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## dubrov

I'm in a similar situation. No mention of apportionment on lease but it does mention year one's management fees (€700, 9000, 1,100 for 1,2 and 3 beds).
This later changed to a ratio of 1 to 1.5 to 2 which is very different from the ratio implied in the original leases. Tge instruction was by the builder who was a director at the time (probably to suit his own holding)

I was wondering if anyone had an opinion as to whether the year one fees specified in each lease could form the basis of a legal argument for fee apportionment?
If so, can this be back dated (5 or so years)?


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## lantus

dubrov said:


> I'm in a similar situation. No mention of apportionment on lease but it does mention year one's management fees (€700, 9000, 1,100 for 1,2 and 3 beds).
> This later changed to a ratio of 1 to 1.5 to 2 which is very different from the ratio implied in the original leases. Tge instruction was by the builder who was a director at the time (probably to suit his own holding)
> 
> I was wondering if anyone had an opinion as to whether the year one fees specified in each lease could form the basis of a legal argument for fee apportionment?
> If so, can this be back dated (5 or so years)?


 
Establishing yr1 fees is tricky and often either over of under of what is required. If there is no apportionment mentioned at all (and you will need to read the entire lease very carefully.) then it is purely down to the directors to decide. IMHO that's a bad lease if there if there are different types of property unit in the development.

What is the basis for the fee? it could be bins or other costs that mean those units should pay more. Typically though a lot of costs can be just equally divided and some costs like bins done on bedrooms as more people will costs more. Parking and key fobs could be ratio'd also. The values your builder has come up with 'could' be very finger in air. They could be perfectly ok though and without budgets its not possible to say.

you cannot back date a fee though. if years one to 5 were for example: -

500
500
600
600
700

you cannot go back and say well we should of charged 800,800,900,900,1000 and you need to pay up. You can say that from NEXT year the fee structure will be different and the price will be xyz.

Bottom line is that builders make very poor directors in nearly all situations. Get residents in and put together a better budget if you can.


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## dubrov

Thanks Lantus.

I've checked the lease and although it is long, the only reference to apportionment of fees relates to the year one amounts.

It seems a massive mistake by the solicitor as it leaves any minority units open to abuse by majority units.

e.g. If 2 beds make up more than 50% of the development they could change the apportionemnt with an AGM vote to levy most of the fees on 1 bed and 3 bed apartments.

The builders are no longer directors but I can see it being very difficult to change the apportionment at the AGM as ultimately some unit types will gain and others will lose out. Those that lose out will vote against.

In my opinion, in the absence of weightings in the lease, the year one fees should form the basis of any apportionment. All owners signed up to these when they purchased and were aware of the distribution at that time. 

I guess I will need to seek legal advice on this though


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## lantus

dubrov said:


> Thanks Lantus.
> 
> I've checked the lease and although it is long, the only reference to apportionment of fees relates to the year one amounts.
> 
> It seems a massive mistake by the solicitor as it leaves any minority units open to abuse by majority units.
> 
> e.g. If 2 beds make up more than 50% of the development they could change the apportionemnt with an AGM vote to levy most of the fees on 1 bed and 3 bed apartments.
> 
> The builders are no longer directors but I can see it being very difficult to change the apportionment at the AGM as ultimately some unit types will gain and others will lose out. Those that lose out will vote against.
> 
> In my opinion, in the absence of weightings in the lease, the year one fees should form the basis of any apportionment. All owners signed up to these when they purchased and were aware of the distribution at that time.
> 
> I guess I will need to seek legal advice on this though


 
Can't the costs be apportioned equally in most cases except where specific costs (bins?) mean that those units have a slight increase.

Gutter cleaning shouldn't be higher for 3 beds, neither should insurance or any other general items like electricity etc. This needs an analytical approach of the budget and clear explanation at an AGM. If costs are transparent then there should be no confusion as to why its x for a  bed and y for a 3 bed. The MUD act means you should have all this information. If your just getting a final figure with no breakdown then request the information from your director team


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## dubrov

If only it was that easy.
So much of the breakdown would be subjective.

For example, the lifts. You could argue 3 beds use the lifts more than 1 beds but by how much? I guess it could be based on average occupancy but everyone has their own opinion on what that is.


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