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January 2016

Question

I own a house in a private mixed development which consists of apartment blocks (which have lifts), private houses and duplex flats (these do not have lifts).

The management company has a sinking fund that each unit pays into. I understand that this is a communal fund for emergencies which should benefit all who pay into it.

However, it appears that the sinking fund has been spent on lift maintenance. I do not use the lifts, as I do not live in the apartment block. I understand that sinking funds cannot be used for recurring costs.

Can sinking funds be used for maintenance that is not of an emergency nature? Also I pay my service charge, but am I legally obliged to pay into a sinking fund?

Answer

Lift maintenance is an annual recurring charge and therefore does not qualify as a charge associated with a multi-unit development sinking fund. The maintenance charges associated with a development’s lift would be itemised in Section B of your budget. Section 19 of the Multi-Unit Developments Act 2011 (MUD Act) clearly states the qualifying costs deductible from a sinking fund.

Refurbishment, improvement or maintenance not recurring within each subsequent year, and qualified advice for same, are considered to be acceptable costs deductible from a sinking fund.

An owners’ management company (OMC) must observe Section 18 (2) of the MUD Act for the service charges to be binding on all members and are recoverable thereafter as a contract debt. That is to say that the members democratically accept the draft budget for the pending financial year at the general meeting.

If some members do not avail of the specific service and feel aggrieved about the charge, they may take comfort in the fact that the capital value of their property is being maintained. In a development where houses and duplexes co-exist with apartments that have lifts that are out of service due to insolvency, all properties are affected by way of a reduced capital value due to the run-down nature of the development and are exposed to capital requirements to ensure the OMC is resourced.

I would draw your attention to Section 24 of the MUD Act where changes to the apportionment of charges where equitable can be made, subject to a Circuit Court order. Other options are to establish numerous OMCs where only one may exist. Rights of way, easements and other complications would need to be considered and as such specialised legal council would be necessary and costly.

Paul Huberman is a chartered properties and facilities management surveyor and a member of the Society of Chartered Surveyors of Ireland