Report on Multi-Unit Developments - Law Reform Commission

C
Remedial measures for non-payment of Service Charges and
Building Investment Fund Contributions
7.06 It is clear to the Commission that ensuring the payment of both
service charges and building investment fund contributions is an issue which
needs to be addressed urgently. Non-payment by unit owners hinders effective
management and leads to a great deal of frustration and further administrative
burden for the owners‘ management company and/or for managing agents.
Good cash flow, prompt payment and co-operation between unit owners are
key features of the viability of management organisations and non-payment has
the potential to seriously thwart this. Formal enforcement methods for nonpayment
requires court-based action, which may ultimately result in further
expense and inconvenience for the owners‘ management company. 5 Where the
owners‘ management company fails, however, to ensure payment and allows
the cost to be absorbed by the other unit owners, this leads to disillusionment
and a wider propensity for non-payment.
7.07 Ultimately, the snowball effect of non-payment can result, in extreme
cases, in dereliction and consequent devaluation within a relatively short
timeframe for a development. Consequently, the Commission considers that
speedy, equitable and straightforward enforcement options must be open to
owners‘ management companies and other residents‘ associations in order to
create a wider culture of compliance with payment of service charges and
building investment fund contributions. The Commission believes that court
action should only be used as a last resort and that alternative enforcement
mechanisms should be examined and developed.
7.08 Non-payment of service charges is also a major issue in other
jurisdictions who, as a result, have developed a wide range of innovative and
generally successful enforcement mechanisms. These range from denial of
right to vote at company meetings (to a certain extent), through ―name and
shame‖ sanctions, to suspension of services and, ultimately, formidably high
interest rates on monies outstanding. 6 Sanctions are imposed upon defaulters
by the courts or, in some circumstances, by the management associations
themselves. Those who fail to pay their service charges can generally be
divided into two categories: financially sound unit owners who can afford to pay
but opt not to, for whatever reason, and unit owners who are not in a financially
5
The management undertaking, as owner of the reversionary interest of the unit
can invoke a landlord‘s remedies for breach of covenant by a tenant. Cf Wylie
Irish Landlord and Tenant Law (2 nd ed Butterworths 1998).
6
See further van der Merwe and Muniz-Arguelles, ―Enforcement of Financial
Obligations in a Condominium or Apartment Ownership Scheme‖ (2006)16 Duke
Journal of Comparative & International Law 125, at p.128.
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