Property Clinic: New company is billing her for service charges arrears from 2008
My daughter bought an apartment in 2006. She had problems with the management company from the start regarding leaks etc in the apartment which were never rectified.
In 2008 she ran into financial trouble due to the recession and owed arrears. In 2015 a new property company took over the management. They keep sending her letters regarding arrears from the previous management company. The current management company is paid up to date. What is her liability for the previous arrears relating to problems that were never dealt with? She has sent numerous letters regarding these problems. She is very worried as she is not in a financial position to pay these arrears. Can you give us any general information on this situation?
Many problems have been encountered by people with management companies through the years. Problems do continue for some owners but have been alleviated to an extent by the introduction of the Multi-Unit Developments Act 2011, known as the “Mud Act”.
Since April 1st, 2011 the Mud Act regulates the ownership and management of common areas of multi-unit developments. It provides for the setting up of managing companies to manage such areas. In general, a management company should not expect to be paid arrears of charges due to a previous company, particularly if it has been placed in liquidation or is no longer trading.
If it is the new management company that keeps sending letters regarding arrears of payments due then the first thing to check is the title documents, generally a lease.
Check what are the covenants (obligations) under the lease? And then whether they oblige the owner of the apartment to discharge and pay all arrears of management charges even to a company no longer trading.
While there is generally an obligation to pay service charges, there is also an obligation on the management company to deal with the common areas. There are a number of questions that should be asked: Have the common areas been transferred under the Mud Act? If they have not been transferred to the management company then the owners of the apartments have rights and remedies under that Act as members of the management company.
Ask whether there was a transfer of the debts from the previous management company to the new company? If there was no transfer of the debts then the new management company may have no legal right to collect the arrears.
If the problems that were experienced through the years with the previous management company in relation to leaks and other matters were not rectified then there may be a “set off” in respect of such charges against the cost of remedying the leaks.
While the law is perhaps on the side of the apartment owner, it may be best to try and come to some practical solution such as an agreement on a without prejudice payment to clear such arrears.
The cost of going to court to have the matter resolved would outweigh the arrears of charges and the costs of the remedial works required.
Patrick O’Connor is a solicitor with P O’Connor & Son, Co Mayo.