The Importance of a Sinking Fund in an Owners’ Management Company
An article published in the property section of the Galway Advertiser , March 9th 2023.
The Multi Unit Development Act, 2011, commonly referred to as the MUD Act, introduced a framework to regularise private developments where Owners’ Management Companies (OMC) operate. These developments typically include apartments and other residential units but may include some commercial property.
The MUD Act has specific provisions in relation to the establishment and operation of a sinking fund in an OMC. A sinking fund can be viewed as a rainy day fund where monies are ring-fenced by the owners in a separate OMC bank account for non-recurring future capital expenditure. The legislation outlines a recommended minimum annual financial contribution of €200 per unit, however, this amount is simply a guideline and may not be an entirely suitable contribution amount for every development. It is important that OMC directors are aware of their responsibilities to ensure the creation of a suitable sinking fund provision for both expected and unexpected future capital expenditure. A good tip for property managers and OMC directors is to establish a comprehensive list of crucial structures, plant or other items in a development and outline expected costs and timeframes for their replacement or upgrade. The result of this analysis, which should include a contingency element for unexpected events, can accurately advise the OMC on an appropriate annual sinking fund contribution per unit.
According to the Society of Chartered Surveyors, Ireland the majority of OMCs do not currently have adequate sinking funds in place, due to issues such as a lack of an appropriate annual invoicing scheme or a company carrying large debtor balances, meaning that present owners and future purchasers may face higher service charges than previously experienced. In some EU countries more accustomed to apartment living such as Finland, which has a similar sized economy to Ireland, there is a direct correlation observable between the financial health of an apartment complex management company and apartment property prices. In Ireland as our apartment buildings age a similar relationship may become evident.
In essence, the earlier that an OMC puts in place an appropriate annual sinking fund contribution scheme, the greater the long term protection of their members’ assets. I often get asked by prospective apartment purchasers what they should look out for when surveying the market. I would advise them that one of the most pertinent questions to ask is what is the overall financial health of the management company, and the position of its sinking fund.
Joseph Ronan is a Senior Property Manager in Ocean Property Management. Ocean Property Management was established in 2013 and offers a full range of professional property services.
Checklist for Apartment Buyers!
Knowing what to look out for when viewing an apartment for sale can save you time, stress, unpleasant surprises and help to choose the right property for you. We prepared a checklist of things to look out for to help buyers ask the right questions and make an informed decision.
When you are buying an apartment as oppose to a house, you need to consider additional factors like: condition of the building, service charges, term of the lease and bylaws among others. If you intend to live in this property you are buying into a community that will have an impact on your day to day life.
1. LOCATION
When buying an apartment it’s good to get to know the surrounding area, transport links, shops, restaurants, schools, parks, gym.
What is the amount of traffic, will it be noisy at peak hours? Are there a lot of night bars in the area? Is the apartment building close to motorway?
It’s worth to visit at least a few properties to get an idea what your money can buy. Check recent sales in given area to know the re-sale value of properties and evaluate if the price is reasonable.
2. BUILDING
Some buildings require more maintenance than others. Consider the building’s age & finish.
Will it require regular painting, wood treatment or is it all brick work?
What is the roof like? If it’s flat there might be additional cost involved when insuring the building and carrying out inspections.
Is there a lot of green areas? On one hand they provide a welcome respite in the city on the other they an be quite costly to maintain.
Are the lifts in good working condition or do they seem to be coming to the end of their life and will need to be replaced in the near future?
What are the parking arrangements?
3. SECURITY
What are the security and access control measures in the building?
Is there a manager or concierge in the building?
Does the area have a high crime stats?
4. LEASE
We would advise to pay particular attention to the lease which outlines the rules of the development. They will be legally binding once the contracts are signed. .
If you are a pet owner make sure there isn’t NO PET policy in place.
There can be also restrictions on the aesthetic changes you can make to your property.
5. MANAGEMENT COMPANY
Check if the management company employs a reputable managing agent or are the residents maintaining the development themselves.
Is the service charge realistic?
Is there a sinking fund in place?
6. NOISE
Check if the common areas of the building are noisy and if the apartment is located close to staircases, lifts and other high traffic areas.
What are the residents and area demographic like?
Are your neighbors mostly students, families with children, professionals or older couples?
7. SPACE & LIGHT
It’s important to ensure that the square footage of the apartment is large enough for your needs and the apartment has enough storage space within it.
Is there additional storage space available in the basement or attic?
What is the solar orientation of the apartment and is the light coming through the windows blocked by other buildings?
If you are viewing an apartment during the day and multiple lights are switched on, the unit most likely does not get enough natural light.
8. STRUCTURE & LAYOUT
When attending a viewing of an apartment look for red flags such as cracking, mould, wall and ceiling stains, broken sealants, draft coming from around the windows or from under window sill. Ask if the walls have been insulated.
If there is a fireplace ask if it works and pay attention to the chimney, is the paint coming off or you can clearly see paint bulging?
Think about the orientation of bedrooms and living spaces to common areas and neighbors.
Changing a layout of an apartment might involve a lot of work, so if you are fundamentally not happy with what is there it’s best to move on to another property.
Added Benefits to Power Washing Your Property
Thinking of Power washing your property? Here at Ocean Property Management, we manage a number of properties around Galway and, are equipped to handle all your properties power washing needs. In addition to removing built up dirt and grime power washing can also have some added benefits that you may not have considered before.
- Improve your Buildings curb appeal.
It never hurts to boost your buildings curb appeal, whether your building’s owner is looking to sell or lease out the space. Regularly having your building power washed by professional cleaners will make the building look newer and more aesthetically appealing to both onlookers and potential tenants.
- Prevent repairs:
Certain building materials, such as brick, may deteriorate over time if left unwashed. Bird droppings, mould growth, algae and dirt build up are all contributing factors to the wearing away of a buildings structure, as well as looking unattractive. For example, the acidity in bird droppings can weaken the roofs and gutter systems of commercial properties potentially leading to a collapsed roof or break. Simply cleaning the droppings regularly can reduce the risk of structural damage. Regular power washing of walls, windows, roof, and gutters can help cut down these risks and in turn, saving the business money in maintenance costs in the long run.
- Clean associated spaces:
Its not just the walls, windows and roof that benefit from professional power washing, other exterior spaces associated with the building can be power washed as well. Footpaths and walkways in front of a building are some of the most popular and frequented spaces to be power washed. Power washing the paths can remove unsightly gum and rubbish stains caused by regular public use.
- Promote health and protecting against injury:
Power washing can improve the surrounding environment for people in the building by eliminating potentially harmful substances. Pollutants, dust, pollen, dirt, mildew, algae, and bird droppings can all lead to negative health effects, such as trouble breathing, allergies and in some cases disease. When done regularly power washing can help prevent this from happening.
Consistent cleaning can also help prevent slips and falls, power washing the footpaths and other surfaces can help get rid of grease, mould, and other substances that cam cause someone to slip and hurt themselves.
- Get rid of Graffiti:
When it comes to commercial buildings a persistent problem that business can have, is the appearance of graffiti. While it may not hold the same structural or safety risks as mould or bird droppings, graffiti and spray paints can be among the most offensive and unsightly stains on a building. Power washing can help remove the paint and give your building the respectable and professional look that it needs.
Attached are some photos taken by our maintenance team, while hard at work blasting some of the built-up dirt and grime from buildings under our care around Galway so that they remain as appealing and pristine on the outside, as they are on the inside.
Checklist for selling your home!
There are a lot of things to consider when selling your home and you’re guaranteed to be feeling a mixture of emotions about the situation which can be really overwhelming and quite distracting. There are lots of steps in the process leading up to selling a property, all of which are incredibly important, so ensuring that you are well informed about the process can be really beneficial.
There is no denying that selling a house in Ireland can be difficult if you have no idea where to start.
Here are a few tips!
1. GET YOUR PROPERTY VALUED!
Knowing how much you can expect to sell your property for will help you when sorting out your finances and searching for a new property to purchase. Alongside market valuation, it is also beneficial to know what other properties on the market your home will be competing with, get in touch with us today and we can help.
2. ORGANISE YOUR LEGAL DOCUMENTS.
Another important step is getting in touch with a solicitor. Your solicitor will then be able to request the title deeds and supporting documentation for your home. These are usually held with your bank if you still have a mortgage on the property. If you don’t have a mortgage then your solicitor will draft contracts for sale so that they are ready to issue as soon as the property is sale-agreed. Completing this step early can help to eliminate potential delays further down the line. Documents needed when selling your property include proof of identity, planning documentation, PPS number, marital status, title maps, NPPR certificate, BER cert and title deeds. Our sales team can manage the headache of this for you.
3. GET A BER CERT FOR YOUR HOME!
You must ensure you have an up to date BER cert before selling your property. This is a mandatory certificate that almost every property being sold must have and provide to the buyer. The cost of a BER cert varies depending on the size and type of property, but generally costs in the region of €120-€220.
5. PREPARE YOUR HOME AS BEST AS POSSIBLE!
Like anything your home has to be marketed, and fixing up minor issues and painting old bathrooms and windows can help improve the look and attraction of your property.
Every property we sell has something wonderful and unique about it. The secret is how to let it show and let your buyers fall in love with it.
- We support you through every stage of the sale process.
- We don’t just advertise your property. We’ll actively help you present it so that it generates as much interest as possible.
- We can deploy a team of in-house tradesmen to help you refurbish your property before we bring it to market.
- We use the latest technology to market your property (professional photography, video tours).
- We offer unbeatable savings in commission.
ATTRACTIVE COMMISSION
ONLY 1% OF THE SALE PRICE
GET STARTED TODAY!
SELL YOUR PROPERTY WITH OPM!
IT’S NEVER JUST A HOUSE FOR US!
Every property we sell has something wonderful and unique about it. The secret is how to let it show and let your buyers fall in love with it.
- We support you through every stage of the sale process.
- We don’t just advertise your property. We’ll actively help you present it so that it generates as much interest as possible.
- We can deploy a team of in-house tradesmen to help you refurbish your property before we bring it to market.
- We use the latest technology to market your property (professional photography, video tours).
HOW DOES IT WORK?
1. REGISTER YOUR PROPERTY WITH US.
Simply fill out our contact form and one of our agents will be in contact to arrange for free property valuation.
2. PROPERTY VALUATION.
We don’t just give you a realistic price, we use our unbeatable knowledge and understanding of the local property market to offer the best valuation of your property.
3. WE MARKET YOUR PROPERTY.
We will make sure your property gets the exposure it deserves and that it gets in front of the right buyer.
4. WATCH YOUR BUYERS FALL IN LOVE.
Let our agents do what they do best and inspire buyers by showing them the true value of your property.
5. NEGOTIATE.
We use our experience to negotiate the best offer for you. You will stay in control as you move from an agreed price to a completed sale.
6. GET READY TO MOVE.
Let your solicitors handle all the legal and technical bits. We will make sure everything runs smoothly.
7. CONGRATULATIONS!
You have sold your property.
ATTRACTIVE COMMISSION ONLY 1% OF THE SALE PRICE – GET STARTED TODAY!
Irish House Price Report Q4 2016 by Daft
Irish House Price Report Q4 2016 by Daft.ie
The new housing mantra is supply, supply, supply… Accoring to Daft report, in total, Ireland needs at least 40,000 new dwellings a year and probably closer to 50,000. These will be concentrated in and near the urban centres and will be disproportionately homes for one- and two-person households, such as apartments, downsizer homes and student accommodation. As the latest figures show, without this kind of supply, we will all have to spend more and more of our income just to have a home.
To read more please visit Daft website here.
Property market in Galway
The Galway Advertiser published recently an interview with three local aucioneers. The main findings concerning the property market in Galway include:
- return of buyer confidence
- increased property sales
- severe shortage of supply
- residential letting at a historic high for demand
- auctions not achieving prices as good as the sale of similar houses by private treaty