UNPAID SERVICE CHARGES: AN UNFAIR BURDEN ON COMPLIANT PROPERTY OWNERS

The successful working of a management company is dependent upon the co-operation of all members. Without this there is an imbalance of responsibility, as is the case with the significant number of property owners who are neglecting to pay their service charges, placing an additional financial burden on compliant property owners who participate in their management company. The Multi-Unit Development Act 2011 promised further protection for property owners, however no amount of legislation or mediation will recover debts due by bankrupt property owners in the short-term.

Fifteen years ago apartments were a relatively new phenomenon in Ireland. As the addiction to property took hold, apartments in which the operation and maintenance of the structure and grounds are overseen by a management company were purchased in multiples by investors, many of whom are now delinquent in their duties as members of these management companies. These duties include the legal obligation to pay the annual service charge that goes toward the smooth running and maintenance of the property. This obligation is increasingly difficult for the compliant property owners saddled with the additional burden of new taxes introduced in the government’s recent budgets and austerity packages.

The situation is further exacerbated as there is little or no recourse for the compliant property owner. With the exodus of the property developer from almost all sites around the country, including finished and unfinished developments, property owners have had to put their hands in their own pockets to ensure basic and necessary utilities are provided and common areas are finished to acceptable standards. These abandoned responsibilities include finishing installations of the sewerarge treatment plants, laying tarmac surfaces and landscaping. In addition to these unexpected costs, now property owners are forced to contend with the legacy of debt in their management company by the reckless investor. 

An apartment block in a small and vibrant country town with 30 apartments built under the Section 23 Tax Relief Scheme in 2005 attracted such wayward investors. The town was home to hundreds of young foreign construction works all looking for rented accomodation. One investor borrowed 100% of the finance and paid circa €200,000 per apartment. Services Charges were paid in the first year as this was a condition of sale. But for six years now this property owner has not paid any service charges. Once the econonmic crisis hit and the construction work dried up, the workers left the town leaving behind them an excess of vacant property combined with the oversupply of newly constructed developments. Today these apartments lie vacant, in such a 'Section 23' location. The recent census results showed that this region has the highest overall property vacancy rate in the country with over 30% of property vacant. 

To complicate matters even further, the above investor is ‘in NAMA’. What does ’in NAMA’ mean to property owners in this apartment block who are funding this investor’s unpaid service charge bill that currently stands at 100% of the annual budget. ‘In NAMA’ means nothing to them. There is no accountability or allowance ‘in NAMA’ for unpaid service charges. We have received correspondence from NAMA advising us that they are not responsible or accountable for service charges on properties. Service charges do not fall within their brief. Instaed they fall on the doorstep of the compliant property owner. They are picking up the tab. Of the other 25 apartments there are ten owners, one of whom is also in arrears for the past five years and is currently unemployed. The other nine property owners struggle to keep the bills for the entire development paid. The entire budget to manage the development annually, including a 10% sinking fund, is approximately €35,000.

Of course unpaid services charges is only one challenge within the wider torrent of issues that property developers have left in their wake. On top of management company finances, there are unfinished housing estates with unfinished roads all across Ireland, and no amount of government legislation will change this. It is only an improvement in economic conditions in the country that will see changes in this area. The economy may have hit the dirt road but it’s the bumps and potholes that are shaking us to the core.