Buying And Living in a Multi-Unit Development Property in Ireland
3. Service Charges
Continued3.4.1 Service charge increases
While the amount that you pay as a service charge in the first year is likely to be detailed in your initial purchase contract, the service charge for the following years may not be.
The management company may have a schedule of the costs used for the annual service charge budget and you should ask your solicitor to obtain a copy of this for you.
Your solicitor should enquire and tell you what the service charge to be levied for the development in the first year is and enquire if there is an estimate of charges for future years.
You should be aware that the service charge budget may vary from year to year and the amount that you contribute via your service charge payment may vary accordingly. The service charge payment may increase due to inflation and new/additional services being provided.
In general, future charges should be based on normal wear and tear and average inflation costs.
3.5 Who decides how much the service charge will be?
It is up to the directors of the management company to decide the service charge when setting the service charges budget every year.
The total budget is paid for by each owners individual payment which is based on the apportionment methodology.
The issue of management company budgets is set out in section 14.
While the directors may be advised and guided by the managing agent, ultimate responsibility for the setting and collection of service charges lies with the management company.
3.6 Payment of service charges
Typically, you will be invoiced in writing by the management company (although this service may be undertaken by a managing agent on the company's behalf) on an annual basis.
There should be a payment due date e.g. 14 days shown on the invoice. You should note that some management companies charge interest on money owed or late service charge payments.
The management company should provide you with as much practical information as possible with regard to how last years service charges budget has been spent and how the service charge for the forthcoming year has been calculated.
At a minimum, the management company must once every year, hold a general meeting of the company and file an Annual Return with the Companies Registration Office which contains certain fundamental information about the company and its financial activities (See section 13).
However, in addition to their statutory requirement, the directors should consider providing detailed income and expenditure information in relation to service charges.
Through the work of the Multi-Unit Development Stakeholder Forum, the National Consumer Agency has developed an interactive document to summarise and outline the typical categories of company income and expenditure which can be adopted by a management company to help owners understand how the service charge money is being spent.
Check out the interactive document in the Downloads section of ConsumerProperty.ie
3.6.1 Tax relief for service charges paid
Subject to terms and conditions, income tax relief is available if you pay service charges to local authorities and other independent contractors.
Tax relief is given at the standard rate of tax for any service charges paid in full and on time in the previous calendar year. The following qualify for income tax relief and relate to all service charges paid to:
- Local authorities for the provision of domestic water supply, domestic refuse; collection or disposal, or domestic sewage disposal;
- Group water schemes for domestic water supply;
- Independent contractors for domestic refuse collection or disposal.
Further information on service charges tax relief is available from the Revenue Commissioners' website at www.revenue.ie
3.6.2 Non-payment of service charges
If you are dissatisfied with the service being provided by the management agent or the information on how the service charge is being spent, you should raise the issue with the management company in the first instance.
While a managing agent may deliver services on behalf of the management company, responsibility for service charges ultimately rests with the management company.
Where there is a problem with services, the directors, under the direction of its members, should investigate the cause of the problem.
Where you are dissatisfied with the level of service being received, stopping payment of the service charge is not advised.
Stopping payment of service charges may be a breach of your contractual obligation under the terms of your lease. If an owner does not pay their fees, they may be liable to legal action and any outstanding debts can be tied to the unit.
If your management company does not collect charges, it will run short of money and in time it may not be able to provide even the most basic services.