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Things to know if you are buying or selling an apartment

3 Things to know if you are buying or selling an apartment

Buying or Selling an apartment (or a house in an apartment type complex) can be a bit more tricky than buying or selling a house. The simple reason for this is that it involves a Management Company. Effectively, there are three parties involved, the Seller, the Buyer and the Management Company.

The main 3 things to know if you are buying or selling an apartment:

The Service Charges.
The Sinking Fund.
Information on the Owner’s Management Company (OMC).

The Service Charges

Buying or selling your apartment means you must be aware of the development’s service charges also known as management fees. The property owners pay these charges/fees annually to fund for services provided by the development. However, it is possible the property owners, together with the owners’ management company, may agree to monthly payments at the Annual General Meeting. Paying these fees is not an option for an owner, it is a requirement!

Once you sign a contract to purchase an apartment you are committing legally to pay the service charges/management fees. These fees usually cover the following:

Maintenance and repairs of common areas.
Cleaning of windows, gutter and drains.
Inspecting and repairing Lifts.
Lighting and electricity for common areas.
Landscaping and pest control.
Security including -locks and doors, intercoms, gates.
Collecting of Bins.
Building Insurance and the Management Company’s legal and accounting fees.

The Sinking Fund

The Management Company calculate the charges in such a way that they will collect sufficient funds to pay for all the running costs listed above. In addition, they must collect enough to ensure there is a “Sinking Fund” always available. This is a sum of money that is available to cover any major cost, for example, to replace a lift or a roof etc. The Multi-Unit Developments Act 2011 requires the owner’s management company to set aside a specific portion of the service charge for the sinking fund.

The Act also insists that the owner’s management company hold the Sinking Fund monies in a separate account to the management fees. Furthermore, the Sinking Fund is designed for long term type expenses so they do not access it very often.

Apartment complexes developed prior to the 2011 Act had to introduce the Sinking Fund within 18 months after this Act was written into legislation.

If you are purchasing an older type apartment, get in touch with Jacob Law, to ensure there is a good Sinking Fund available. Being older, the development will likely need funds available for items like roof replacement/plumbing issues etc. A newer type apartment development would not likely need early access to a Sinking Fund.

The Management Company

Known as The Owners’ Management Company (“OMC”). The Owners of the apartments set up a Company to manage the apartments in the development. Accordingly, the owners appoint directors from the overall group of apartment owners to run the Management Company. Hence, the OMC run the company for the mutual benefit of all the apartment owners in the complex. There is usually an annual general meeting where they agree a budget for the following year. The OMC discuss which services the budget will cover for the coming year. Moreover, depending on the size of the development and number of owners, they may hire a Management Agent to oversee everything in the complex.

Check out The Apartment Owners’ Network (AON). A group of volunteers run an independent organisation which offers assistance and knowledge to both Apartment Owners and Owners Management Companies.

Two extra costs to prepare for when buying or selling your apartment

Fee for management documentation: The Owners’ Management Company’s Solicitor will be required to submit certain documentation. Therefore, they will charge a fee for this service, approximately €200 to €300. The Seller must pay for this.

Service Charge: This is treated quite similarly to Local Property Tax in that the sale can’t close until fees paid in advance. The Management Company will insist you pay the service charge to the end of that current year, at least. However, it may happen, if their accounting year end is not December but midway through the following year, that they insist you pay the charges up to their year end date. The Seller pays this up front before the sale closes. Once the sale closes the Buyer reimburses the full amount from the closing date to the

If you are a Seller you must pay the apartment’s service charges for the previous years if you still owe them. Otherwise, you will not be able to sell your property. Again, this may be a very significant sum.
If you are a Buyer and plan on renting your apartment, the good news is that the service charges paid are tax deductible expenses.

With fully transparent and automated processes, and unrivalled experience in buying and selling properties, Jacob Law solicitors will make the process of purchase and/or selling a property as easy as possible for you. Our legal services are specifically tailored to your needs. We provide a nationwide service and you can meet us online from the comfort of your home.

Visit Jacob Law Property Purchase Page and get in touch with us for a quote.