Abrupt management fee hike of +50%

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Orion's Belt

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Is there anything I can do about this case of sharp practice:

Last October, I bought my first home, a one-bedroomed apartment. Before doing so, I rang the management agent to check the management fee, and to query whether it would rise. The agent said I should anticipate a 5% increase for 2008, payable quarterly. I expected a bill from the management agents in December. No bill arrived.

Last Friday evening, the management agency hand-delivered emergency notices full of exclamation marks and block capitals to our mailboxes informing us that our power would be cut off this Friday if we did not pay €10,000 to the ESB on the 11th of January. Our fees have been increased by over 50%, payable immediately. There is apparently a large outstanding ESB bill from 2005 that has never been settled.

The developer who built the apartments is also the management company director, along with his accountant. About a third of the apartments pay no management fees, according to the management company’s annual report which sets outs how much each apartment pays. I know that at least one of these apartments belongs to the developer, as I viewed it. I do not know whether he owns the rest of them, or why they are exempt from fees. The unpaid ESB bill dates back to 2005 when the apartments were being built. It strikes me as possible that this was the electricity used to build the apartments, not light the communal areas etc.

There was an AGM in November, which I foolishly did not attend. No minutes were subsequently sent out. If there’s a residents association, I don’t about it.

Anything I can do about this?
 
Orion's Belt said:
Last October, I bought my first home, a one-bedroomed apartment. Before doing so, I rang the management agent to check the management fee, and to query whether it would rise. The agent said I should anticipate a 5% increase for 2008, payable quarterly. I expected a bill from the management agents in December. No bill arrived.
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You should not have taken the agents word on this. First off they probably had no authority to speak on behalf of the management company and secondly they had a vested interest in telling you what you wanted to hear in order to sell the property to you.
Last Friday evening, the management agency hand-delivered emergency notices full of exclamation marks and block capitals to our mailboxes informing us that our power would be cut off this Friday if we did not pay €10,000 to the ESB on the 11th of January. Our fees have been increased by over 50%, payable immediately. There is apparently a large outstanding ESB bill from 2005 that has never been settled.

The developer who built the apartments is also the management company director, along with his accountant. About a third of the apartments pay no management fees, according to the management company’s annual report which sets outs how much each apartment pays. I know that at least one of these apartments belongs to the developer, as I viewed it. I do not know whether he owns the rest of them, or why they are exempt from fees. The unpaid ESB bill dates back to 2005 when the apartments were being built. It strikes me as possible that this was the electricity used to build the apartments, not light the communal areas etc.
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You might want to ask your solicitor if you should be liable for accrued liabilities of the management company but I presume that by buying and signing the management company lease agreement you are.
There was an AGM in November, which I foolishly did not attend. No minutes were subsequently sent out. If there’s a residents association, I don’t about it.
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As you say this was very foolish on your part. You may have missed your chance to discuss any proposed changes to the budget/management fees. Note also that even if a residents association exists it is unlikely to have the official clout of a management company which is an incorporated entity with specific responsibilities.

I doubt that you can do anything about this other than perhaps come to some arrangement for payment (e.g. phased DD rather than lump sum) if necessary. However if you feel that you were the victim of sharp practice (by the agent and/or the management company?) then talk to other property owners and/or your solicitor.
 
Thanks Clubman. I've arranged to talk to a solicitor on Thursday, and will in the meantime make contact with an owner occupier. The flaw, as I see it, is that the developer controls the management company, and can thus bill us as he sees fit. Fees could rise again in 2009. All apartments should pay fees, not just two thirds of us, thus the cost would be spread fairly.
 
Orion's Belt said:
Thanks Clubman. I've arranged to talk to a solicitor on Thursday, and will in the meantime make contact with an owner occupier. The flaw, as I see it, is that the developer controls the management company, and can thus bill us as he sees fit.
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If you are a full member of the management company and have the right to attend general meetings, speak and vote then this may not be the case. However you and many other property owners/residents who are management company members/shareholders would need to exercise your rights in terms of controlling how the company is run, budgets set, etc. If two thirds of the properties are not held by the developer then that should mean that "ordinary" residents have the controlling share of the vote so should have a lot of control. However I have no idea of the specific make up of your company or the rules that apply. You might want to ask your solicitor for advice on this.
 
Your solicitor at the time of sale should also have checked whether the management company was adequately funded. They may have this information still?
 
If you feel that the development is being badly managed and this feeling is widely held in your development, you may be able to call an EGM to get an explanation of the outstanding charges and a justification for the increase.

As regards the fact that only 2/3 of the residents are paying. Each contract should contain a percentage of the oveall charge applicable to that unit. The units that are not paying should have a penal interest charge levied against them and if necessary utilise legal means to recover the outstanding charges, ensuring that all costs are bourne by the offending unit owner. I know a development that charges 15% interest on outstanding fees!
 
An EGM of the management company / residents association (without the agent being present - this can be carried out as a residents association meeting) might be useful. Ask a few owner occupiers if there is a res. assoc. If not put up a sign suggesting that residents meet to discuss the issues at hand. But if a lot of the apartments are rented out you may have difficulty arranging this.


The management company (res association or agent) should have produced minutes from the last AGM. I put the other too in brackets as sometimes all 3 can be involved in this meeting. Our management company effectively runs throughtout the year as a residents association - with issues for voting held at company's agm or egm if required.

Our management company's directors (developer for now) actually sent along the agent to our first company AGM and didn't bother turning up. Not a very effective way of having an AGM as they agent is biased. In fact as a new development they effectively chaired the meeting.

I'd imagine a 50% increase in agent fees should have been voted at your company's AGM (even if the agent was present). I'd check this with other residents. I can't imagine people would have voted for this unless no one in the block has paid any attention to the accounts for the last few years.

A few areas the management company/res association could tackle:
Find out when the first tenant moved in - or closed the sale of their house. Then find out from ESB when the bill dates from. The first closures should indicate the time that the ESB should date from. I'd also have ESB check the meter readings and what is being fed into them. Maybe they could advise on what type of output would be required for a 10K bill - i.e. that 2 years of lights etc could not be the cause of a bill of 10K. If the bill is incorrect, I'd see if ESB will contact the developer.

I'd be checking the agents accounts for the last number of years to find out why they weren't paying for electricity.


I also wouldn't imagine how any solicitor would have allowed you to sign contracts on an apartment where the managment company was in arrears. (I think the management company must file accounts each year with the CRO?). Is this the solicitor you are contacting?


I imagine an increase of issues such as these in the future as many people aren't aware what they signed up to - we've had some interesting questions at AGMs - Why did I get this bill etc? Should I pay it?

The management company can change agent but if it is in arrears would be difficult. I'm wondering is a 2/3 majority enough for a management company to make decisions like this? Or does each management company have its own rules? Would a copy of these have been provided to the resident at closure?

What means can a management company deal with homes that don't pay up ... legal action (carried out by agent is costly/lenthly - though effective if the resident pays all legal fees) / name & shame (leaflets / website) after notice of failure to pay by certain date or arrears?

Best of luck!
 
if the directors of the management company are operating/trading in an irresponsible manner (possibly assuming debts of one of the directors i.e. old esb bill) then it may be possible to refer the issue to the Director of Corporate Enforcement. I am not an expert on this - maybe another poster could comment on the suitability/viability of this course of action?
 
you could also request the management agent to write to the developers requesting that they pay a 'management fee' for the unoccupied units. Some savvy residents in our complex did this in year 1 & 2 and the developer did contribute a % of the management fee to cover lighting for the communal areas & the building insurance. (the developer was also the director at the time).

can't really add anything more as other posters have covered the main points. good luck with it.
 
How is the agent fee agreed for subsequent years?

Interestingly enough we received our new management fee letters with a 5% increase this week...now I had to leave our company/agent AGM early but I don't recall anyone mentioning subsequently about a 5% increase for this year.

In fact we were querying a reduction due to ridculous gardening charges they were using our management fees to fund. (We could find a gardener for less than half the price or employ a full time gardener for the estate for what we are paying.)

So, how many months in advance should a management company get a quote for the following years agent fees... i.e. at the company's AGM (a month prior to agent contract expiry) should the company be agreeing on whether to keep the agent based on the following years agent fees quote and other quotes for reputable agents that the management company has obtained?

What's the process in getting rid of the agent? Once we vote in our own directors who are not associated with the agent, get a 2/3 majority vote at AGM (or does it have to be all households) do we just let them know we've hired someone else? I assume the sinking fund is in the management company's name and not the agent's name?

Any info appreciated.

Thanks.
 
The difficulty that you have is that the developer still owns units and is the director of the management company as well. Many developers will only hand over the management company to residents when they have sold all the units. Until then they retain an interest in the development and will not hand over control.

It is very difficult for ordinary menbers to make changes while this is the case. Some management companies are set up to allow the directors a casting vote in the case of disputes.

You need to get a copy of the management company agreement from your solicitor that you signed when you purchased.
Get in contact with the ESB and get more information on the timeframe involved for the amount of money outstanding. Is it due from when the developer was building the units and before people moved in?
Contact the developers. They should in fairness be contributing money for each unsold unit. See if this is covered in the management company agreement.
In my own situation the developer is also the management company director. As we have one unsold unit we have not been charged any more fees than what we paid on purchase. The developer is currently funding maintenance. That is in his interest though as he does not want to hand over the management company to residents while there is an unsold unit and I suspect he may try to apply for planning for additional units. However our management company is only responsible for maintenance of green spaces as it is an estate of individual houses.

If you do not have a residents association then try to organise one yourself. It is very dificult to deal with all of these issues on your own. You will also find like-minded people who are prepared to help when you have a residents association. Do up a flyer and post it through everyone's door announcing the formation of a residents association. Pick a venue and hold a meeting. Elect a chairman, secretary, treasurer and general members. Make sure you have a written constitution.
You can PM me if you like - I have expereience with setting up a residents association so I'll help with more info if you need it.
Good luck - the area of management companies is a minefield and so far there seems to be no legislation to help ordinary people who have purchased property which has a management company attached.
 
Management fees do not have to be approved in advance at an AGM, the budget for the development is approved by the Directors of the management company, in this case the developer.

In our development the ESB in communal areas was the responsibility of the developer until the last unit was sold.
 
Has anyone in a newer development went through the process of

  1. appointing new management company directors with all units sold - (replacing developer)
  2. reducing agent fee in cases where fund is being misused
  3. changing agents
  4. dealing with non-paying owners
  5. getting local authority to take over their responsibilities
The latter is a possiblity for some management companies where a management company was not stipulated as a condition of the planning application.
 
Once all units were sold in our development, the Developer resigned as a Director at the next AGM.

We are now on our 3rd set of owner/directors, well we now have 2 Directors and they both have been directors since that first AGM, numbers of directors have fluctuated at each AGM.

Management fees came down the first 2 years, went up about 5% this year but still less than year 1.

Management agent, we are in the process of looking into changing agents so can't help on that. Again that does NOT have to go before an AGM, the directors are elected to act in the best interest of all owners and can (and should) act on behalf of the development except when it involves changing the leases/sale deeds signed at purchase (these changes eg bringing in allocated parking have to be approved by an A/EGM).

Solicitors letters have been issued to any non-payers and we have a very high level of payment. Outstanding fees can be recovered on sale of unit if you don't want to go down the route of taking owners to court.

Council is due to take control of some woodlands in the development but there seems to be a standoff between the council and the developer.

Hope this helps AKA - we've only found out some of the info I posted from trial and error. We initially believed, like you, that AGMS/EGMS were required for pretty much any changes in the development, particularly financial, but that is not the case. An AGM/EGM can alter items like add/remove things to a budget but bear in mind that an AGM only has to take place every 15 months so it is possible not to have an AGM in a financial year.
 
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Thank you to everyone. All I've managed to establish thus far is that a developer is not legally obliged to pay management fees on unsold units. This, from the management agent. So no fees have been paid on the unsold units in my development since they went on sale in 2006. So our fees must subsidize that.

The management agent also told me that the developer did not attend the AGM, but that the residents voted him back in for 2008 because they don't want him to evade his responsibilities. Clearly, there's a whole lot more going on than I know about. I need to make contact with a resident. My thinking was that we need to get rid of him.

The escalation in fees was not decided by the owners at the AGM in November, but by the director (the developer) and his accountant last month. And the developer is possibly in financial difficulty - he put his staff on protective notice last month.

There have been a lot of phonecalls to the management agent on foot of this abrupt rise, the agent tells me. He says I'm not the only one to be querying the huge ESB bill (over €40,000 owed on fifty odd apartments, and there's another €20,000 owed to non-specified parties) but the agent assures me they've done their sums and the electricity bill checks out. I will of course ring ESB myself.

I'm afraid I'm just confused at this point. I've said I'll pay the fees quarterly. There are a lot of retired local people living in the development. I can't see them lending support to the erosion of their pensions. I'm going to see a Citizens Information solicitor tomorrow.

Long road ahead.
 
Thank you shesells. Yes, there's not much information out there and we are learning via trial error too. We are lucky that we have an active residents association.
 
Orion's Belt said:
So no fees have been paid on the unsold units in my development since they went on sale in 2006.

...

There have been a lot of phonecalls to the management agent on foot of this abrupt rise, the agent tells me. He says I'm not the only one to be querying the huge ESB bill (over €40,000 owed on fifty odd apartments, and there's another €20,000 owed to non-specified parties) but the agent assures me they've done their sums and the electricity bill checks out. I will of course ring ESB myself.
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A 40K ESB bill is extremely high for 50 apartments.

The apartments went on sale in 2006 but when did people first move in?

Let's say it was 50 apartments for 24 months that's €33 an apartment per month. I assume you pay a seperate ESB bill yourself.

What exactly does your ESB meter feed...a few lights, electronic gates, lift etc. I couldn't imagine how the bill could be that high...that's more like the electricity for each apartment being fed into the one meter.

Get an itemised bill for the €20K owed to other parties.

I wouldn't sign up to pay anything until I knew what I was paying for.
 
I spoke to a solicitor today, who felt that there is a case against the management agency as I had a verbal contract with them that the fees would rise by approximately 5% per annum, and not 50%, as in this case.

The solicitor will also write to the developer/management company director to ask for an explanation regarding the electricity bill. The bill appears to date from 2005 (details offered are very vague). Residents moved into block 1 (26 apartments) in August 2005. Block 2 and 3 were also being built that year. It's difficult to accept that the 26 apartments in block 1 racked up over €40,000 of electricity in 5 months.

Yes, we all are metered separately in our apartments for electricity. The management bill is for communal lighting and gates alone.
 
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