I live in a multi-unit residential development that includes both duplexes and apartment blocks. The Owners’ Management Company (OMC), together with the managing agent, maintain separate Building Investment Funds (BIFs) for apartments and duplexes.
I’m concerned that funds from the duplex BIF are being used to cover works in the apartment blocks, including items that appear to be general maintenance rather than capital expenditure. For example, there was additional planting that was carried out that is listed under BIF expenditure as well as fixes to the apartment alarm systems, even though these issues did not affect the duplexes. The OMC accounts indicate there are now insufficient funds to address urgent works in the duplexes. What can we do?
Many multi-unit developments (MUDs) contain both apartments and duplexes (and indeed, in some cases, houses). As such, the issue you raise is one that has a wide relevance.
There are a couple of interlinked issues here. In relation to the Building Investment Funds (also commonly known as sinking funds), you say that your OMC has separate funds for the apartments and duplexes. This is the case in some MUDs, and it would be interesting to see what precisely the lease agreements set out in that regard. Also, if apartments and duplexes share other parts of the common areas (eg entrance gates, car park etc), is there perhaps a further BIF for these matters?
RM Block
If this is the arrangement, then good practice would suggest that the sinking-fund contributions made each year by individual owners should reflect the medium-term and longer-term capital investment requirements of their part of the development. These should then be held in separate accounts with the balances of the accounts shown clearly in the OMC annual accounts.
As such, if the planning is good, then each BIF should have appropriate funds to deal with the issues it is required to address as the relevant capital projects arise. This demonstrates the importance for any owners’ management company of commissioning BIF reports in good time so as to ensure funds are put in place for required projects. Such reports normally set out the capital-investment requirements over a 20-year period and are a very useful source of information for OMC boards and members, and for managing agents.
A further issue arises in relation to the purpose of a BIF in any development. This is set out in Section 19 (1) of the 2011 MUD Act. This notes that a BIF is for the purposes of refurbishment or improvement of a multi-unit development or for maintenance of a non-recurring nature.
Based on your query, it is not clear that the two examples you cite fall under one of the above categories. Additional planting or fixes to the apartment alarm system could possibly be viewed as part of the regular maintenance work of the OMC and the OMC may budget for such projects under the regular annual budget. This would need to be clarified.
Certainly, it is the case that installation of a new alarm system, for example, would be for the BIF to fund and would not be paid for through the normal budget.
As regards good practice around the matters you raise, I would suggest firstly that the OMC annual accounts provide transparency on the balances of the different BIFs. If this is not already the case, then the OMC and its managing agent need to request this from the company auditors.
Secondly, it would be useful to have a discussion on this matter when the OMC budget is being agreed each year. How much is being contributed to the BIF by the different classes of property owners, how is this calculated and what is it being used for? The managing agent and the OMC board need to explain these matters clearly to members.
Thirdly, I would suggest that the OMC board should contain at least two property owners from both the duplexes and apartments so that these directors can provide input at board level to ensure both adherence to lease agreements and a voice in decision making for the different classes of property owners.
You note that there are urgent works required in the duplex units and this is perhaps where the focus should lie in the short-term. Depending on the answers to some of the above points, it may be that clarity is required as regards payment for this.
It may also be that, as in many MUDs, contributions to the BIF need to increase as the development gets older and with various capital projects now coming down the tracks. This would reflect the findings of the October 2024 SCSI report (Real Cost of Apartment Block Maintenance) which found that the vast majority of Irish apartment developments are very much underfunded as regards their sinking fund requirements.
This report is available to download free of charge from the SCSI website and is worthwhile reading for all property owners in multi-unit developments.
Finbar McDonnell is a chartered property manager and a member of the Society of Chartered Surveyors Ireland
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