Warning over apartment block maintenance
Sinking funds, or the annual maintenance fees paid by 204,145 apartment dwellers, owners, and developers, are falling short of meeting long-term bills and will lead to future problems, it has emerged.
The warning comes from the independent Society of Chartered Surveyors Ireland, who, in a 30-page report, say guidelines in the 2011 Act, that apartment owners pay a minimum €200 a year into a sinking fund, are totally inadequate.
Citing the 2016 Census, that apartments are increasingly popular, the surveyors warn that there are shortfalls in most funds for upgrading boilers and doing basic maintenance in future years in so-called multi-unit developments (MUDs) run by owners’ management companies (OMCs). It wants government to play a more active role.
The warning is significant, because the Government is relying on a huge increase in new apartment construction to ease the worst of the housing crisis. The debate has so far surrounded the high cost of building apartments, but, as the surveyors’ report makes clear, there is another issue that needs to be tackled.
It calculates the annual payments required over different types of units: An OMC comprising a large, high-end development of 333 homes requires an annual €250 payment at the start, rising to €1,100 by year 20; an OMC of a medium-sized, mid-quality development of 74 properties requires a payment of €1,014 at the start, rising to €1,422 on year 13, and falling back to €1,232 by year 20; while an OMC in a large, mid-quality development of 652 homes requires a payment of €457, rising to €980 in years nine, 10 and 11, and falling back to €457.
“This report was prepared by SCSI Chartered Property Management Surveyors, due to a concern, on the part of professional managing agents in Ireland, that many multi-unit developments, and in particular apartment complexes, are not adequately budgeting for future building investment needs,” it warns.
“The requirement for an MUD to establish a sinking fund was set out in the 2011 MUD Act. This contains a guideline contribution of €200 per unit per year, although, as MUDs differ widely, this is purely a notional figure,” it says. At just over 98%, almost all apartments have a sinking fund, and have, in “a positive finding”, separate bank accounts. But it warns: “An inability to put aside an adequate contribution to the sinking fund each year is, in part, due to wider challenges that OMCs face in collecting service charges from owners who refuse to pay them. Changes to make it easier for OMCs to collect service-charge arrears would assist OMCs in this regard.” The surveyors also want the Oireachtas and the Government to make regulations detailing the types of spending for a sinking fund and for OMCs to be obliged to review plans every five years.
It also recommends amendments to the MUD Act to ensure a sinking fund is set up from the start and for government to help produce guides for OMCs and “incentivise” OMCs. “It is likely that some MUDs will face funding shortfalls in the coming decade, for essential repairs and investment projects...The Government, the Housing Agency, local authorities, and other stakeholders need to consider if they will be willing to support investment projects in such MUDs, especially where health-and-safety issues are involved,” it says.
