If the director of our Owners Management Company becomes the managing agent too, who will monitor it?

If the director of our Owners Management Company becomes the managing agent too, who will monitor it?

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  • Property Clinic
  • Owners' Management Companies

Question

I live in a complex of 240 units and am very concerned about recent decisions made at our agm. It appears that the secretary/director of the owners management company is going to be the managing agent as well, so almost all the functions will be controlled by one person. Who is going to monitor this? What happens if that person becomes incapacitated? In addition, the common areas have not been handed over under the MUD (multi-unit development) act and a director of the developer company has been re-appointed to the board which seems reluctant to pursue the transfer as required under the MUD act.

Answer

With 240 units in your development it is likely to be a complex one. Self-management by any board of directors can be difficult, unpaid and thankless. You are right to think that there are concerns and risks that should be addressed.

The Property Services (Regulation) Act 2011 states that anybody providing property management services to an owners management company requires a licence.

A licence is granted to a property service provider if they meet certain Property Services Regulatory Authority (PSRA) criteria, which include evidence of qualifications, proper control of client monies and professional indemnity insurance.

Simply, anyone being paid to provide property management services to a multi-unit development should have the relevant licence and, as such, must have professional indemnity insurance.

In addition the PSRA has started to build up a compensation fund for victims of fraud, or similar activity, caused by a licenced property service provider.

Licenced property management agents should also have a depth and breadth of knowledge not only regarding the health and safety requirements for a multi-unit development, its insurance requirements, lease interpretation and benchmarking of service providers but also from a problem-solving perspective because many of the issues that arise in apartment complexes have arisen before, and the OMC can benefit from such experience.

Continuity and record-keeping are a vital part of the operation of any owners management company: not only are there statutory requirements regarding the keeping of company records but there may also be practical reasons, from a building-maintenance perspective.

Self-management of any multi-unit development can be an admirable, economic and beneficial route for a board of directors, its OMC and development, but it is time-consuming and does remove some of the protections and benefits of having a licenced PSP.

The conveyance of the reversionary interest in a multi-unit development can be extremely difficult and complex, particularly if the development is not complete or all the units have not been sold.

In any conveyance, a willing vendor and a willing purchaser is preferable and saves legal fees.

In summary, I believe that your concerns are genuine and that you should write to your management company requesting the following:

  1. Is the director acting as a manager who will be paid a salary and as a direct employee of the OMC?
  2. Is it the manager’s intention to be licensed by the PSRA?
  3. What reporting mechanism is in place between the manager and board of directors?
  4. What protection does the OMC have should he make negligent decisions?
  5. What controls are in place to protect against fraud and how is the OMC bank account controlled?
  6. What steps are being taken to transfer the common areas?

Paul Mooney is a chartered surveyor and member of the Property and Facilities Management Professional Group of the Society of Chartered Surveyors Ireland.

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