Major new study reveals the vast majority of apartment developments do not have adequate Sinking Funds in place for the maintenance and replacement of essential services and structures in common areas such as lifts, stairs, roofs and fire alarms
The Key findings of the SCSI’s ‘Real Cost of Apartment Maintenance’ report are:
- Approximately 1 in 10 apartment developments do not have a Sinking Fund in place
- The main reason Sinking Funds are not adequately funded is apartment owners’ unwillingness to pay higher charges and lack of knowledge about Sinking Funds
- Case studies in the report show properly financed Sinking Funds require contributions of circa €2,000 per unit per year
- Currently apartment owners are typically contributing between €200 and €300 per unit annually
- SCSI says average annual shortfall of €1,800 per unit owner is not sustainable
- “Apartment owners are facing significant financial risk in the future unless funding gaps in their development’s Sinking Funds are addressed”
- SCSI calls for guide figure of €200 per year as a Sinking Fund contribution in the MUD Act of 2011 to be removed
Wednesday 23rd October 2024: A new report indicates that the vast majority of apartment developments in Ireland have not set aside adequate funds for maintenance and replacement of essential services and structures while a significant minority have set aside no funds.
According to the report, which was carried out by the Society of Chartered Surveyors Ireland, 88% of property managers say they manage Multi Unit Developments or MUDS – which do not have adequate sinking funds in place. Separately up to 9% said they manage MUDS which do not have any sinking fund in place.
Sinking Funds are the reserves which the Owners Management Company – the bodies responsible for managing apartment developments – set aside to maintain and replace key services or structures in a complex such as lifts, stairs, roofs, boilers and fire alarm systems etc
When asked what percentage of the developments under your management do you believe have adequate Sinking Funds in place, over half the respondents (53%) indicated the number was less than 30%.
Data for the report, which is entitled, ‘Real Cost of Apartment Block Maintenance – Examination of Sinking Funds’ was gathered from 70 Chartered Property and Facilities Management Surveyors and members of the Apartment Owners Network1, representing 495 MUDs and c 38,000 apartments.
It was launched ahead of the SCSI’s Property and Facilities Management Conference which is taking place today (Wed 23rd Oct).
The President of the SCSI, Kevin Hollingsworth said underfunding on such a scale is unsustainable and apartment owners are facing significant financial risk in the future unless gaps in their development’s Sinking Funds are addressed.
He said the fact that a majority of apartment developments do not have an adequate Sinking Fund and that approximately one in ten don’t have any Sinking Fund in place is deeply concerning.
“It’s very disappointing to see that the issue of underfunding has seen little improvement since the SCSI published our last Sinking Fund report in 2018. According to our survey 40% of property managers believe property owners do not want to pay higher charges, 27% say there is a lack of knowledge by owners of the level of long-term expenditure required while 20% say property owners would rather pay larger levies as and when expenditure arises. Thirteen percent say there is a lack of knowledge by Managing Agents of the level of long-term expenditure required.”
“So not alone are we seeing a lack of willingness of property owners to pay higher fees we are also seeing a knowledge gap on the part of these property owners and a governance gap in the way most OMCs are running their developments.”
“Property owners must recognise that an inadequately funded Sinking Fund undermines the OMC’s ability to carry out essential maintenance and replacement projects. As a result, the standard of the property will decline, residents’ living standards will decline and their health and safety may even be compromised.”
“The report indicates that there is a higher representation of older MUDs among developments with no or inadequate Sinking Funds and this poses real challenges for properties approaching 20 years of age. Many of these developments were constructed during the Celtic Tiger era and while property owners in them may already be dealing with wider defects issues, it is crucial that they prioritise building an adequate sinking fund, to ensure that monies are available to replace key services and structures when the time comes” Mr Hollingsworth said.
Case Studies
One of the main objectives of the report was to assess the levels of funds being set aside each year by MUDs and to compare this with the estimated costs for repairing, maintaining, and renewing ‘common areas’ in apartment blocks such as roofs, lifts, balconies and car parking as calculated by chartered building surveyors.
The survey identified that the average Sinking Fund contribution provided by apartment owners per year is currently between €200 to €300.
The report analysed nine case studies of varying sizes and ages across the Dublin area. Using real cost data from Building Investment Fund2 (BIF) reports for these 9 developments, the report calculated the resources required to properly maintain and replace common area elements over a 20-year period.

The report found that there was a clear shortfall between what apartment owners are paying into a Sinking Fund compared to what the BIF calculates. This shortfall varied from €1,431 per unit per year to €2,198, depending on the size of the development.
Kevin Hollingsworth said that while the figures might come as a shock to apartment owners, this was an issue they and the Government needed to address sooner rather than later.
“The average underfunding figure across the four different sized developments is €1,800 per unit owner. While this will come as unwelcome news to owners, the fact is that if adequate reserves are not set aside for Sinking Funds, apartment owners will be forced to pay multiples of that figure when key services or structures such as boilers, roofs or the lifts in their development needs replacing.”
“These findings underscore the gap between current provisions and the projected costs to maintain the common areas of MUDs as calculated using BIFs. One of the issues highlighted by property managers in our survey were the problems generated by shortcomings in the MUD Act of 2011.”
“The MUD Act included a guideline Sinking Fund contribution of €200 per unit per year. Now thirteen years later it seems most MUDs are still using that figure because it is perceived as an acceptable benchmark. The discrepancy between current provisions and real provisions highlights the urgent need to reform the MUD Act.”
“The €200 figure needs to be removed to ensure Sinking Funds are adequately resourced and updated legislation should include a mechanism to enforce the collection of Sinking Funds contributions and their protection from inappropriate use. This will ensure that property owners will be able to meet the costs associated with future maintenance and replacement costs and avoid major government intervention should critical elements fail” Mr Hollingsworth said.
Low take up of Building Investment Fund reports
One of the key tools used by Owner Management Companies to quantify Sinking Fund contributions are BIFs. These specialised reports calculate the cost of a building’s depreciating assets and the funding which will be required to repair or replace them over a 20-year period.
One of the other main findings in this report is that take up of BIFs among OMCs can be as low as 13%. Kevin Hollingsworth says the lack of uptake of BIFs indicates that a majority of OMCs do not know the scale of funding required for long term maintenance and renewal of common areas.
Some of the key reasons identified for this lack of uptake related to a lack of knowledge around who would complete these reports, that the OMC would not have sufficient funding to complete the report and that some believed that the unit owners would not accept the higher fees proposed by the BIF report.
Ten percent of the population is now living in apartments. While this figure is low comparted to European norms, it’s clear this figure is set to grow.
Kevin Hollingsworth says what’s also clear is that we need more education around the proper governance of MUDs.
“Our report shows that 13% of MUDS which have a Sinking Fund in place, do not have a separate bank account as per the MUD Act. Some respondents in our survey also pointed to the improper use of Sinking Funds to address ‘day to day’ expenses by management agencies which undermines the Fund’s intended purpose. This is not how you properly manage a building.”
“The Government needs to increase public awareness campaigns around the importance of Sinking Funds. We need to introduce statutory regulation to educate and support OMCs to ensure they are adequately funded and managed for the benefit of all occupiers, and we need to introduce Dispute Resolution Service measures to provide for effective compliance with Sinking Fund / Service Charge contributions. OMCs need to be encouraged to take up BIFs and to see how an adequately resourced Sinking Fund is in their own interests and represents an investment, not a cost.”
“The non-payment of service charges in MUDs is a related issue which needs to be addressed, and we recommend that changes be introduced to make it easier for OMCs to collect service charge arrears.”
“There’s a considerable amount of work here but unless we progress it, circa over 200,000 apartment owners in this country will continue to face serious financial challenges, many of which with good governance would be entirely avoidable” Mr Hollingsworth concluded.
1The Apartment Owners Network (AON) is an independent, non-political organisation run by volunteers that represents the interests of owners and OMCs in managed estates.
2Building Investment Fund reports or BIFs are reports which quantify the cost of a building’s depreciating assets and the funding which will be required to maintain or replace them. They are used to calculate the level of contributions required by Sinking Funds.
For media queries please call the SCSI at (01) 6445500 and ask for Patrick King.
Note to Editor
About the Report Over the last six months, data was gathered from Chartered Property and Facilities Management Surveyors and members of the Apartment Owners’ Network (AON) representing approximately 38,000 units and 495 MUDs. Interviews were also provided by representatives from approved housing body (AHB) Clúid Housing, and from the Land Development Agency (LDA). To gain further insights on MUD maintenance, repairs and renewal costs, nine case studies from Chartered Building Surveyors were provided. The case studies were from Dublin and ranged in size from 18 to 250 units, and from 6-60 years of age.
Sinking Funds separate to Apartment Defects Issue
Sinking Funds are specifically intended to cover future capital expenses related to the common areas in a MUD. It is important to note that sinking funds are not meant to cover the day-to-day costs of maintaining the MUD or to address legacy building defects such as structural safety, water ingress or fire safety issues.
The Government has announced plans to draft legislation to support the remediation of apartments and duplexes with such defects which were constructed between 1991 and 2013. The legislation will provide for the establishment of a remediation scheme. For more information go to Remediation of Defects in Apartments and Duplexes | The Housing Agency
The SCSI
The Society of Chartered Surveyors Ireland (SCSI) is the independent professional body for Chartered Surveyors working and practising in Ireland. It works in partnership with the Royal Institution of Chartered Surveyors (RICS), the pre-eminent chartered professional body for the property, land and construction sectors around the world.
The SCSI and RICS act in the public interest: setting and maintaining the highest standards of competence and integrity among the profession; and, providing impartial, authoritative advice on key issues for business, society and governments. The SCSI, which has its headquarters in Merrion Square in Dublin, has over 6,500 members across the 12 surveying disciplines. For more information go to https://scsi.ie