An apartment can be a wonderful place to live – at least for a while… It’s usually in a central location; well-serviced by public transport; safe and secure; with good facilities onsite or nearby and generally no grass to cut !
Legally-speaking, it is very different from owning a house.
In an apartment you never own the structure – you share the building walls, foundations , roof, steel etc with everyone else. You own the inside of the apartment space – a cube of air, if you will.
A Management Company then owns the areas that everyone shares – known as the Common Areas.
Every owner pays a Service Charge to the Management Company so it can provide things – the Fire and insurance Policies for the building and the grounds; the refuse collections; the general maintenance; the elevator maintenance ; the lighting in public spaces; the car park system; the general electric, water, drainage and broadband utilities and so on.
If there is a problem in collecting the Service Charge, that often means the Estate or Scheme runs into trouble.
That affects values and ability to sell your Unit.
When buying such a Unit, it is vital you have a Solicitor who understands how these Schemes should work; who knows what to look for and will not be afraid to tell you not to buy if all is not right.
Apartment Owner Rights
Are you one of the many Apartment Owners who bought in good faith at the top of the market and are now FRUSTRATED that the Scheme is not being run properly or are being obstructed by a stubborn or missing developer?
Owning an Apartment is very different from owning a house.
- you only own a cube of air !
- a lot of the building structure and services have to be shared between many users.
- Service Charges are applied to fund central facilities
- Rules apply to usage
The legal rights of all those users are set out in the Title to the Apartment – usually in the Lease. The legal device most used is to have a Management Company “ in the middle” as it were. Owners are billed a Service Charge by the Management Company, ( assuming that the Development has been transferred to the Company) which it uses to pay for the common services , like building insurance, lighting in corridors, in car parks , refuse collection , security and so on.
Apartment owners left powerless
In practice, developers set up the management structure to suit its interests, rather than those of unit owners. Developers retained significant control over developments (including the common elements) long after completion of the development by having the voting rights in the Management Company weighted in favour of the developer’s nominees. This was clearly to the detriment of the unit owner members until the transfer of the common areas takes place. In many cases, unit owners were left powerless to get the Common Areas transferred to the Management Company or have completion of the development itself. In extreme cases, certain developers structured their developments so that existing unit owners were obliged to pay service charges for unsold units or to include costs within the service charge attributable to the original construction costs.Some of the problems are :
- A lack of understanding of the different roles and responsibilities of Owners, Tenants, Builders, Managing agents and Management Companies
- Builders holding on to effective control of the Management Company , even after most of the Units have been sold
- Failure by the Developer to transfer ownership of the Common Areas to the Management Company
- Liquidation of Developer , where Common Areas have not been transferred
- Managing Agents having too much administrative control of the Management Company
- The AGM of the Management Company not being held , or if held , organised at short notice and at an awkward time or place
- Increases in Service Charges not being explained or discussed
- Failure to set up a Sinking Fund
- Failure by Owners to pay Service Charges
- Lack of clear arrangements for those Developments already in trouble
In recognition of these problems, the Multi-Unit Development Act 2011 was enacted. Let’s call it “the MUD Act”.
It provides answers but needs careful application.
We can help in assessing the issues for you and then advising on the legal strategy that can be adopted to ensure your rights are protected.