Around one in every ten apartment developments does not have a sinking fund in place to deal with maintenance and repairs to common areas.
Research by the Society of Chartered Surveyors Ireland (SCSI) also found that 88% of property managers said multi-unit developments (MUDs) they manage do not have a sinking fund of adequate size.
Over half of the respondents said less than a third of the developments which they manage have adequate sinking funds.
The survey was carried out among 70 Chartered Property and Facilities Management Surveyors and members of the Apartment Owners Network.
Collectively they represent 495 MUDs and around 38,000 apartments.
The SCSI said such underfunding is unsustainable and that apartment owners face a significant financial risk as a result.
"It's very disappointing to see that the issue of underfunding has seen little improvement since the SCSI published our last Sinking Fund report in 2018," said President of the SCSI, Kevin Hollingsworth.
"According to our survey 40% of property managers believe property owners do not want to pay higher charges, 27% say there is a lack of knowledge by owners of the level of long-term expenditure required while 20% say property owners would rather pay larger levies as and when expenditure arises."
"13% say there is a lack of knowledge by managing agents of the level of long-term expenditure required."
Sinking funds are most commonly used for repairing, maintaining and renewing 'common areas’ in apartment blocks such as roofs, lifts, balconies and car parking.
According to the findings of the research on average sinking fund contributions provided by apartment owners each year ranges from €200 to €300.
The report found that across nine apartment blocks in Dublin, the shortfall of sinking funds per unit ranged from €1,431 to €1,805 per year, depending on the development size.
"The average underfunding figure across the four different sized developments is €1,800 per unit owner," Mr Hollingsworth said.
"While this will come as unwelcome news to owners, the fact is that if adequate reserves are not set aside for sinking funds, apartment owners will be forced to pay multiples of that figure when key services or structures such as boilers, roofs or the lifts in their development needs replacing."
He added that the guideline of €200 per unit per year in the now 13-year old MUD Act, which is being used by most developments, is out of date and needs to be removed to ensure sinking funds are adequately resourced.
Mr Hollingsworth also said that the legislation needs to be updated to include a mechanism to enforce the collection of sinking fund contributions and their protection from inappropriate use.
"This will ensure that property owners will be able to meet the costs associated with future maintenance and replacement costs and avoid major government intervention should critical elements fail," he said.
The report also highlights that many Owners Management Companies are unaware of the scale of the funding they need for long-term maintenance and renewal because they are not getting Building Investment Fund reports carried out.
SCSI also claims that more education around proper governance of MUDs is needed.
"Our report shows that 13% of MUDS which have a sinking fund in place, do not have a separate bank account as per the MUD Act," Mr Hollingsworth said.
"Some respondents in our survey also pointed to the improper use of Sinking Funds to address ‘day to day’ expenses by management agencies which undermines the Fund’s intended purpose. This is not how you properly manage a building."
