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cmcsolicitor
cmcsolicitor, Solicitor
Category: Republic of Ireland Law
Satisfied Customers: 144
Experience:  and Mediator practicing in Cork, Ireland.
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Hi, I live in a small development of 6 homes. Originally the

Customer Question

Hi, I live in a small development of 6 homes. Originally the common areas and agreements were provided for by a lease of easements. Then a new solicitor advised changing it to a management company with the same conditions. He failed to move the two original owners on to the new structure, so now there are 4 on a management company and two on the original lease of easements.
Furthermore, the management company has very onerous accounting liabilites, requiring audited accounts for a small budget of only a few thousand euros. No-one wants to do it and the current accountant leaves it late every year, risking strike off. It's a total nightmare.

Questions - can i change from the current management company to one with no audited accounts or change back to a lease of easements?
Are there any disadvantages to this and what is involved in doing so. Obviously the title of different houses are currently associated with one or other model described and all would need to be transferred on to any new model adopted.
Expensive, worth it? Who could do it?

I'll be very grateful for any help you could give.
Submitted: 1 year ago.
Category: Republic of Ireland Law
Expert:  cmcsolicitor replied 1 year ago.

cmcsolicitor :

Reverting to a Lease of Easements is not the answer. This would make the sale of properties complicated in future. Someone/ some company has to own and be responsible for the common areas and to "own" the sinking fund. The preparation of annual audited accounts should be a very straightforward matter, and perhaps the company should

cmcsolicitor :

...source an accountant who will take over the whole job and even act as "secretary" for the company - paying any bills for maintenance of the common areas etc as well. The annual fee would increase slightly for residents, but it would be hard for them to object unless they are willing to do the job themselves.

cmcsolicitor :

The Lease of Easements model has effectively been done away with by the introduction of the Multi Unit Development Act 2011. All new developments have to have a management company that owns the common areas. Doing away with the management company would involve transferring the common areas to a new entity. Who would that be? If it was transferred to all six owners then they would have to be parties to a new Deed every time a property changed hands. The other major disadvantage would be the question of who would manage the common areas. The residents would have to set up perhaps a c

cmcsolicitor :

...committee. It would become more difficult to deal with those who refuse to pay their share of costs... The Management Co model is not foolproof in this regard at all of course - but it has the advantage of having a piece of new and detailed legislation behind it to deal with procedures and rights etc.

Customer :

Thanks for the speedy reply.

Customer :

I understand your reasoning although I'm disappointed about the lease of easements. I believe that there are two types of company, one requiring audited accounts which we have, and another less onorous type. One limited by shares and the other by guarantee. Is there any requirement for one or the other in a management company scenario and what would be involved legally in switching everone to the less onorous model. I understand that documentation has to tie together. Also, the two owners who are on the lease of easements still....how do they stand and do they have to join the management company?

Customer :

Sorry, I keep hitting return and it sends. Is the original solicitor obliged to finish this off?

Customer :

And, the audited accounts don't seem to be a simple matter. I've tried switching accountants but it's been refused. With a budget of about 3000 euros/year, the other accountants don't want it. The fee is 400 euro/year and an accountant told me that they could be inspected and have all sorts of responsibilities that make such a small affair not worth touching. Hence, getting to a simpler model with simple accounts. Currently we have a good relationship within the small development but I know we need mechanisms to protect interests into the future too.

Customer :

Finally, if we can have the simpler model of company and move all to that, what sort of work and cost is involved. Currently we are going to have to move common areas to the management company and the two who are not yet members will also have to be moved, so it is perhaps the right time to make other changes.

Customer :

Sorry it's so detailed...but I need to cover all the bases before I can know how to go forward. Thanks,

cmcsolicitor :

Re: Accounting - All companies are required to file annual returns. There are certain exemptions for companies with smaller turnovers. However, I don't know whether those exemptions would apply to a management company. Really an accountant is in a better position to advise about this. Your accountant may advise that some of the exemptions that apply to smaller companies could be applied to the management company if the structure of the company is changed. If that is the case, it would be necessary to hold an AGM or EGM and to pass the necessary resolutions and to apply to the CRO to have the Memorandum and Articles of Association of the company amended. I think that the place to start with this is with your accountant - I am not aware that there is an easier way to do this. Certainly, not having a company in place to hold the common areas etc would appear to me to be a bad idea.

cmcsolicitor :

As for the other two residents who are not members, this is an awkward situation. They will be bound by covenants etc that oblige them to pay management fees. The management company will have become the lessor of the common area, so that the company will have the benefit of those obligations. Other than that, it is difficult to enforce their compliance. The MUD act only places an obligation on developers to transfer to management companies - it does not deal with owners who are not members of the company. It would be an advantage for them to become members of the company. Their obligations will probably not increase (I imagine that the covenants require them to pay a management fee to what is now the management company). On the other hand, by becoming members of the company they get a vote at AGMs and they get to have their say about what the fees should be, as per the MUD Act.

cmcsolicitor :

Management Companies are a messy business, and expensive. However, I am not aware that there is a better legal model out there at the moment.

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