What is fair in war and service charges?

July 2012

Question

We bought an apartment in a mixed development of apartments and houses in Co Meath about four years ago. It was brought to our attention that a number of people in the houses are refusing to pay their service charges because they don't get any of the services that those in apartments do such as lifts, gates, cleaning etc. The management company explained that they benefit from street lighting, a water fountain, grass-cutting and maintenance. The non-payers now say they want the council to take charge of the development. I am worried because the council won't look after cleaning common areas in the apartment blocks, lift maintenance and insurance etc. If the houses continue not to pay, are we in effect subsidising the services they get? What can be done?

Answer

In multi-unit developments, where there are both houses and apartments, there are usually two service charges. One is for the apartments and it applies to and is paid for by the apartment owners only. The second one is for the amenity areas (grounds and roads) and is paid for by apartment and house owners, generally on an equal basis. The amenity service charge should be the only charge payable by the house owners to cover services such as public liability insurance, street lighting, and maintenance to the roads, signage, grounds and landscape. The apartment owners pay the amenity charge and the separate apartment service charge, which would cover building insurance and services within the buildings such as Lifts, pumps, fire safety, lighting, cleaning, repairs and renewals as well as a sinking fund for future redecoration and refurbishment. In multi-unit developments where there is a lack of information this frequently gives rise to confusion and misunderstandings which then leads to some owners withholding payment of their service charges. Information and clarification on what items are included in your service charge and how much you are paying for each one is vital. It is important that each owner be provided with enough information so that they can familiarise themselves with how their management arrangements work, their estate documents which detail their rights to services and, equally, their obligation to pay for them and how they are apportioned among each type of owner within the development. It may be that the house owners want to have certain services in the estate taken in charge by the local county council. However, in the meantime it does not excuse a house owner from paying for their share of the remaining running costs and yes, the paid-up owners are, in effect, subsidising the services for them, which is at the very least unfair. In terms of what can be done: first obtain and furnish the information necessary (full service charge cost and category breakdown) to all owners so that owners from each dwelling type understand the services from which they benefit and for which they are legally responsible. The board of directors of your Owners' Management Company (OMC) and your managing agent should have this information. Second, you could ask the OMC to investigate if the option of taking in charge certain services actually exists. Generally county councils may take roads, footpaths and street lighting in charge, but this is usually conditional upon them being brought up to a "taking in charge standard" which might impose a heavy financial burden on the OMC and owners. In the event of persistent non-payment, the estate documentation will generally set down penalties and interest that may be applied to the accounts of owners who do not pay their service charges and ultimately these accounts can be passed to your OMC's solicitors for collection.

Siobhan O'Dwyer is chair of the Property and Facilities Management professional group of the Society of Chartered Surveyors.