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Consumer - Management Companies

Friday, 12 February 2010

For those living in an apartment or gated community, management fees are a yearly expense. But how is the management company set up, what exactly do the fees cover and most importantly who do you approach when you have problems with the management company?

Tina Leonard, our consumer expert

What is a management company?

If you are living in an apartment complex or a gated estate, it will have several common areas accessible to all the residents. These typically include the lobbies, stairwells, lifts and main corridors.

There may be other areas that the owners share collectively, such as the roofing and possibly some common parking places and green spaces around the development.

Many new housing schemes and apartment blocks have a management company, which is responsible for the maintenance of these shared spaces and services.

Why a management company?

There is no legal obligation to form a management company (there will be under the new legislation) but they can be an efficient means of management, they become the legal owner of the lease-holds and as the rules of company law applies they offer a structure for administration and ownership.

How management companies are set up:
. Set up by the developer or builder even before construction starts on the scheme.
. As more units are sold, each buyer becomes a member of the management company (on completion of the purchase transaction and receipt of certificate of membership). But the developer often retains the largest shareholding, and therefore continues to control the management company.
. At the other end of the scale is a finished development where all units have been sold, and the management company is now totally owned by the householders - perhaps after a residents' association has lobbied the developer for more control.
. Regulation

Currently management companies are not regulated. However a new Bill (the Multi-Unit Developments Bill) was passed last summer and is due to be enacted this year and this will address many of the current concerns.

Your rights

When you buy your unit and receive your membership certificate you legally become a member of the property management company. This means it is not a 'them and us' situation!

Once you sign up to a management company agreement, remember that it is legally binding. It sets out your rights in terms of what the company will do for you, but it also places an obligation on you to pay for the services it provides.

Under Company Law you are entitled to a number of things, mainly related to information. This includes notice of meetings and the AGM; minutes of those meetings and accounts and auditors reports.
It is very important that you get this information so that you can attend meetings, know what decisions are made and know how the money is being spent.

What you can do if things go wrong

If things go wrong it is really important to remember that as an owner you have a say. So get the above information and find out what is going on.

Scenario 1: Know who is running the management company or if an agent has been hired on it's behalf. If the management agency is still under the control of the developer, gather the other owners, have a meeting called (or wait for the AGM), and lobby the developer for the owners to take over.

Scenario 2: If the management company has hired an agent and you are not happy with the service, get the documents relating to payments etc and find out if your fears can be substantiated i.e. is the agent paying above the odds for services etc? Then get the other owners together, call a meeting or wait for the AGM, and discuss firing the agent and hiring another, or another option could be the management company taking over the tasks.

Scenario 3: If your maintenance fee is being increased because some owners are not paying theirs, you're in a tricky situation. The management company can write to that owner continuously but if they don't pay up the last resort is taking legal action, which would probably mean spending that sinking fund.

Scenario 4: If you are renting an apartment and you're having problems with the communal areas like rubbish not being collected, leaks in the car park, nuisance kids you should complain to your landlord. As the landlord is the owner, even if he/she isn't living in the property they are still a member of the management company and therefore have a say in how things are run and should be able to address your concerns.