Unspent management fees

ALEXA

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112
What is the general practice regarding unused/surplus funds derived from management fees at the end of the financial year? Is the remaining balance usually:
(a) rolled over to the next financial year,
(b) transferred into the sinking fund,
(c) returned to property owners
(d) alternative?

I would appreciate input from any contributors who have experience in OMC issues and in particular the above and would welcome their opinion as to what should be done in best practice. Thanks in advance.
 

Zenith63

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433
At an OMC I’m involved in it would be (b) until the sinking fund has reached the level deemed sufficient for the size of the complex, followed by (a).

We’ve had members ask about (c), but it just creates unnecessary work for the OMC, when rolling it to the next year and reducing the fees for that year achieves the same outcome.
 

Threadser

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237
As a resident Director of an OMC, the scenario you describe would be rare. Most OMCs have a schedule of upgrade work which should be completed from the sinking fund. However very few OMCs have sinking funds of sufficient size that can cope with the level of expenditure required amd work has to be prioritised. In my development we have prioritised fire safety amd roof upgrades. 15 year old lifts will need to be replaced too but this will have to wait, as will repair work to ventilation and interior amd exteriot painting of blocks. Most OMCs have similar work pending so amy excess funds will be transferred to the sinking fund.
 

ALEXA

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112
Thank you both for your replies. Our sinking fund is very low as nothing has been deposited in it by previous Directors since sinking funds became law in 2011 I think. In the past a number of owners didn't pay their management fees and those that did now feel that because they subsidised those who didn't pay for so long they should be entitled to refunds when the bank balance is quite healthy - due to the sale of properties and arrears recouped. My feelings are that the sinking fund should be addressed and neglected improvement work carried out.

Have you ever heard of the practice of unused funds being divided among fee paying owners and accumulating on a year on year basis eventually leading to quite considerable amounts appearing to be owed to those owners ( on account only) and they expecting to have the monies repaid to them over a number of years? What would the legal point of view be in this situation?
 

notabene

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379
I’m a resident director on our OMC also and I would say all surplus into your sinking fund or towards works in the following years budget. Our development is pretty small and we’ve had to put up fees as we just don’t have the economies of scale to put them down, that said they remained steady for a number of years. As a resident while I don’t like paying management fees per say I would have always felt once that money was paid it was gone - it wasn’t something I could get change from

We have had three significant issues in the last 12 months that have come to 1/3 of our sinking fund and they have been things that will happen overtime but have come together. Ours has been a well maintained development, just age of the development & bad luck they’ve come together. The Mud Act suggests €200 per year per apartment but this is probably on the low side depending on the size of your development.

It’s important for the owners to understand also that if the money isn’t in the sinking fund or if anything out of the ordinary happens and the money isn’t there they could end up with a whopping bill to cover it as well as their management fees which I would suspect most owners wouldn’t be too happy with. There is always something to be improved, upgraded or just kept in proper order - if the sinking fund is well maintained it’s important to focus on those works also to ensure there are no surprises later on and to maintain the value of your investment at the very least
 

Threadser

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237
Have you ever heard of the practice of unused funds being divided among fee paying owners and accumulating on a year on year basis eventually leading to quite considerable amounts appearing to be owed to those owners ( on account only) and they expecting to have the monies repaid to them over a number of years? What would the legal point of view be in this situation?
To be honest I have never heard of this practise. I can't comment from a legal perspective but I cannot understand how responsible Directors would think it was in order to offer refunds when it would be much better practise to transfer these funds to the sinking fund for future projects. Is there an amount per unit per year transferred to the sinking fund? If not there should be and it should be specified in the budget. If you are in a poisition to volunteer to become a Director yourself then you can effect change and stop this dubious practise before the OMC's funds are eroded further. A healthy sinking fund is in every owners interest.
 

peemac

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693
Even if some are not paying, the fees continue to mount for them and they should be informed of that.

Their property cannot be sold without settlement of outstanding fees.

Shrinking fund should get the surplus until it has a reasonable balance, then you can look at reducing the annual fee.
 

Threadser

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237
On site clamping is the way to go to get the non payers to cough up. Unfair that other owners were subsidising bin collection, insurance etc. Our level of debt has decreased dramatically since we introduced it and we can go ahead with important upgrades now....
 

ALEXA

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112
We've managed to recoup a considerable amount of fees arrears when properties were sold over the past couple of years and this has at last made our bank balance look reasonably healthy and should allow us to put money into the sinking fund as there has not been any percentage of fees allocated or deposits made over the years. This would allow us to build up a reserve for future emergencies or improvements that are always likely to need attention. I'm hoping that this will be addressed at the next AGM.

All your replies have been very useful and I appreciate them very much.
 

Vanessa

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211
To be honest I have never heard of this practise. I can't comment from a legal perspective but I cannot understand how responsible Directors would think it was in order to offer refunds when it would be much better practise to transfer these funds to the sinking fund for future projects. Is there an amount per unit per year transferred to the sinking fund? If not there should be and it should be specified in the budget. If you are in a poisition to volunteer to become a Director yourself then you can effect change and stop this dubious practise before the OMC's funds are eroded further. A healthy sinking fund is in every owners interest.
A healthy sinking fund in my opinion is a sign of good management. When solicitors are examining company documents as part of a purchase it is one of the first issues they will examine and a small sinking fund is a red signal.
Building up the fund could prevent the need for big levies when it comes to replacing lifts, electric gates etc
 
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