One of the most common queries we receive from property owners is to clarify what is included in their annual service charge.
What are service charges?
Service charges are the annual fees that property owners pay for services provided to the development by the Owner’s Management Company (OMC). The OMC is legally obligated to oversee the maintenance and management of the common areas of the development. Many OMC’s will employ a Licensed Property Service Provider (e.g.: a Property Managing Agent such as Petra) to manage these services on their behalf.
What is an Owner’s Management Company?
The Owner’s Management Company is a legally constituted management company, registered in the Companies office. All owners are Members of the Management Company and contribute funds (via service charges) to the upkeep of the development. Members also have the right to attend the Annual General Meeting of the development to vote on the annual budget and other resolutions (e.g.: changes to the development’s Code of Conduct).
How are service charges calculated?
The service charges payable by property owners is always apportioned as per their Lease Agreement. They are typically billed on an annual basis, but in some cases the billing period may differ.
Am I legally obligated to pay service charges?
Service charges are not an optional payment and make up an important part of your Lease Agreement.
Not paying your service charge may leave you open to legal action, and any outstanding debts can be tied to your property. Additionally, the OMC can charge interest on overdue accounts as per the terms of the Lease. This can have long-term consequences on your credit rating.
What items are included in my Service Charge?
The first port of call for understanding your service charge bill is to review the accompanying budget.
The budget gives an itemised breakdown of what is included in your service charge. It is drafted after a competitive tendering process where Petra Management requests three quotes for all major services. It is then circulated to all owners and agreed by the Members of the OMC as part of the Annual Budget Meeting, which typically takes place on the same day as the Annual General Meeting.
The composition of the budget can vary significantly from development to development as the facilities and services required can be very different. Some of the most significant items include:
Managing Agent Fee: Typically an owner’s management company will engage a managing agent to look after the management of the development. The responsibilities of the managing agent include (but are not limited to):
– Assisting owners with queries,
– Common area property maintenance
– Contractor management
– Insurance claim management
– Financial management and service charge collection
– Other administration and legal duties.
Petra offer a comprehensive service in this regard and our list of services can be found here. A sample annual fee is between €130-€175 per unit, depending on the size of the development and volume of work involved. Some ancillary services are billed separately, such as 24-Hour emergency service and postage and stationary disbursements.
Insurance: Since owners do not own the common areas (e.g.: external structure of an apartment block, internal common areas, roofs, grass areas, footpaths, car parks, etc.) , the Owner’s Management Company must insure them on their behalf. This cover provides for property damage to the buildings (all risks), loss of rent/alternative accommodation, public liability, malicious damage, fires, leaks and employer liability in situations where a Janitor or caretaker is employed by the OMC. The block policy does not cover the contents of individual property owners.
Electricity: Electricity covers the cost to power all common area lighting and equipment. This includes (but is not limited to): lights in stairwells, lights in car parks, street lighting, gates, intercom systems, lifts and generators.
Common Area Cleaning and Landscaping: The Owner’s Management Company engages specialised contractors to maintain the internal and external common areas. The contract for these jobs are awarded on an annual basis following a competitive tendering process.
Fire Systems: Fire systems cover the maintenance of fire alarms, emergency lighting, automatic opening vents and fire extinguishers. These items are given high priority and must be maintained in line with fire safety regulations.
Repairs and Maintenance: The management company is responsible for all general repairs and small jobs related to maintaining the common areas of the building, i.e.: replacing broken windows, drain clearing, common area leaks and repair works from vandalism or misuse. All contractors are approved to carry out works by the Managing Agent and hold the appropriate insurance and health & safety statements.
Maintenance of Property Plant and Equipment: This includes the maintenance of lifts, auto/pedestrian gates, ventilation systems, generators, water pumps, water tanks and all other plant and equipment which is shared by property owners.
Annual Financial Audit: The Owner’s Management Company is required to hire an audit firm each year to examine the accounts and prepare audited financial statements for submission to the Companies Registration Office.
Contribution to Sinking Fund: Since the introduction of the Multi-Unit Development Act in 2011, property owners are required to make an annual contribution to a Sinking Fund. These funds are ring-fenced and used accumulated over a number of years so that funds are available for major refurbishment projects (i.e.: roof replacement) or in the case of an emergency. By putting away some funds every year, owners won’t be asked to pay for a sudden hike in the service charge.