Owner management companies, the ‘wild west’ of regulation – The Irish Times

Tens of millions of euros a year are paid to management companies of apartment block owners who operate in “the wild west of governance and financial regulation”, MPs and senators have reported.

At a briefing in Dublin on Tuesday, politicians heard calls for a regulator to be appointed for the sector as a matter of urgency, particularly before billions of euros extra are spent on repair schemes for homes with construction problems. or fire safety.

Brian O’Gorman, chief executive of housing agency Clúid, said there were “landlord management companies where voluntary directors were paying themselves huge amounts of money”. He said many of them faced significant financial and governance challenges. “We need a regulator to instil good practices,” he said.

“Too many owner management companies were on the brink of insolvency,” he added.

Bryan Maher, president of the Apartment Owners’ Network, told the meeting that the financial situation of owner management companies as a sector was largely unknown. He said his mandate to collect management fees for ongoing maintenance also included maintaining “a sinking fund” to deal with major issues such as structural defects and roof replacement.

However, he estimated that about 25 percent of landlords were in arrears with their management fees, and 10 percent of landlords were in significant long-term arrears, perhaps going back decades.

Maher said items such as insurance, energy and waste costs were often paid for from sinking funds. She said that, 25 years after the Celtic Tiger construction boom, the question was: “When the pumps, roof and elevators need to be replaced, will there be money?”

The Multi-Unit Developments Act 2011 suggests an annual fee of €200 per apartment goes into the sinking fund, but investigations suggested it should have been about €1,000, he said. Since many owner management companies adopted the figure of 200 euros per year, “a deficit of 800 euros per apartment per year was accumulating.”

Several speakers, many of them individual apartment owners, spoke of a lack of transparency in the finances of management companies.

Meeting convener Pat Montague said there was an urgent need to reform the Multi-Unit Developments Act, but while this was promised in the government’s programme, the most recent information from the Department of Justice was that the reform would have to wait for the government’s repair plan. for defective housing.

But he said reform “must precede legislation for the defect remediation scheme, so that owner management companies are fit for purpose from a governance perspective in applying for public funds through that scheme”.

“The legislation for the proposed defect remediation plan will have no bearing on the service charge and sinking fund issues, so there is no reason to delay it,” he said.

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