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Property Law Property Purchases and Sales

Buying a House Versus an Apartment-Which is the Best Buy?

 

buying a house ireland

Are you thinking about buying your first residential property?

Have you decided whether you prefer a house or apartment?

In this piece I will give you my opinion about which is the best buy. I am assuming, in this article, you wish to live in the house, and not buy the property as an investment property.

But first, why should you pay any attention to me?

Firstly, I bought my first property in 1986. It was a small shop unit in Dublin with a one bedroom apartment overhead. Since then I have bought sites, other retail businesses, a petrol station, a pub, sites with planning permission, sites without planning permission, apartments, and houses.

I have also built a small (8 units) block of apartments. So, I have had a pretty long and, for the most part (with the exception of the property crash a few years ago), successful relationship with buying and selling property.

Let’s take a look, shall we?

The first big difference between buying a house and apartment is the legal interest you will be acquiring. Buying a house will mean you are buying a freehold interest; buying an apartment will involve acquiring a long leasehold interest.

From a legal perspective, this is not a problem. The leasehold for the apartment will be a long lease with a very small, insignificant rent. I have written elsewhere on this site about the differences between buying an apartment and house from a legal perspective.

The Management Company

Where problems may arise, however, is in the whole area of the management company.

In an apartment development each apartment owner becomes a member of the management company which will be needed to be set up. This management company’s job will be to manage and maintain the common areas-for example stairs, lifts, roof, of the development-and will have to appoint a managing agent who will manage it on a day to day basis.

However, problems with management companies can be common enough and some apartment developments are not well maintained with an understandable frustration for apartment owners and occupiers. Property owners will then retain the annual management company service charge, thereby making matters worse because the management company has even less money to provide the services.

Management companies also have to prepare and file annual accounts and collect the management fees from the owner of each unit.

In addition, it may have to pursue the owners who won’t pay by way of debt collection procedures which will be time consuming, expensive, and leave a bad taste all around.

Another factor to consider is that many apartments were purchased by investors as investments and future pension pots. This means that a large percentage of occupiers in an apartment block are likely to be renters. If you have a young family this may be less attractive for you given the likely higher turnover of occupants, and the lack of social cohesion in the “neighbourhood”.

Physical Problems

There is also the problem of anti social behaviour and noise pollution in an apartment complex versus living in a terraced or end of terrace house.

A problem I have also encountered from my own personal experience is leaking from balconies, and even bathrooms, causing damage being to neighbouring units. These problems can be hard to sort out, expensive, and lead to bad feeling between neighbours.

In summary, the problems I have seen with apartment living are

  1. Poor management companies or agents
  2. Noise pollution and hassle
  3. Apartment units more likely to be owned by investors than owner occupiers.

The advantage of buying an apartment versue a house are

  1. They are, all things being equal, cheaper than a house
  2. They are lower maintenance, for example you will not have any garden to maintain.

Conclusion

My advice, and this is not legal advice but practical property advice from my own experience and observation since buying my first one in 1986, is that I would choose a house over an apartment if I could.

That is assuming that all things were equal, and we are comparing like with like-that is, a house and an apartment in the same area- I would choose a house, especially if I had a young family. If you are a retired person, then an apartment may well make more sense and you will not want to have to maintain a garden, access to public transport may be better etc.

Obviously you need to take into account your own personal circumstances-for example your family situation, your work circumstance, and budget-before choosing.

And my advice generally in relation to buying a property is to buy the worst property in the best area, rather than the best property in the worst area.

You can change many things about your property and make improvements over time, but you can never change its location.

Categories
Property Law Property Purchases and Sales

The Zen Guide to the MUD (Multi Unit Developments) Act, 2011

mud-act-2011

They’ve been doing it in Europe for years.

But apartment living is a relatively recent phenomenon in Ireland.

The Multi Unit Developments Act, 2011 came into effect on 1st April, 2011 and applies to multi unit developments with shared facilities and services.

A multi unit development under the act has not less than 5 apartments and the Act applies to housing estates too which has an Ownership Management Company (OMC) taking responsibility for common areas.

The OMC (Owners’ Management Company)

The OMC is a company set up to own and be responsible for the common areas of the development once it is completed. It also looks after the estates services such as lighting, cutting green areas, landscaping, cleaning, waste management, and insurance. It would generally appoint a managing agent to carry out this work on a daily basis but would have statutory obligations to file returns with the companies registration office.

Each property owner is a member of the OMC and has one vote. Any member is eligieble to become a director of the OMC and a members’ meeting must be held every year to discuss the accounts, service charge for the coming year, and other matters which arise such as a sinking fund for repairs.

The managing agent is obliged to register and be licensed with the Property Services Regulatory Authority.

The Multi Unit Developments Act, 2011

The Act deals with 4 broad areas:

  1. The transfer of ownership of the common areas by the developer to the OMC by 30th September, 2011. The OMC must allow the developer access to finish the development, where applicable, and the developer must indemnify the OMC against any claims during completion of the development.

The OMC should have independent legal advice to ensure compliance with its statutory duties.

  1. The obligations placed on the developer for the completion of the development stage of the estate and the extinguishment of the developer’s beneficial interest. The developer makes a statutory declaration stating that his beneficial and legal interest has merged and transferred to the OMC.

The developer would also hand over documents such as technical documents, service test records, title deeds, specifications etc.

  1. The MUD Act, 2011 provides new mechanisms for the resolution of disputes and allows the OMC to represent the owners as a collective body in the Circuit Court. Prior to this property owners had to take action on an individual basis. Mediation is strongly encouraged as a dispute resolution mechanism.

If an OMC has been struck off the Companies Register an application for reinstatement can be brought within 6 years. It used to be only 1 year.

  1. The MUD Act, 2011 provides new regulations for service charges, sinking funds, governance and reporting and imposes greater, added responsibilities on the Board of Directors of the OMC. These responsibilities would include a greater obligation to consult with and report to the property owners.

The Act also include obligations in respect of repairs and maintenance and maintaining a sinking fund for the upkeep of the development eg the roofs of apartment blocks.

Service Charges

The MUD Act, 2011 provides that every property owner must pay service charges. The developer is responsible for service charges of unsold units.

Service charges can be pursued through the Courts as a straightforward debt collection task.

Sinking Funds

All multi unit developments must maintain a sinking fund for refurbishment, maintenance of a non-recurring nature, improvement.

Sinking fund monies must be kept separate from the service charge monies in a separate account to ensure that the money is only spent in appropriate ways, and not for ongoing maintenance.

One Vote

Each property owner has one vote.

House Rules

The OMC can draw up house rules for the development, provided they are fair and reasonable, and agreed by the owners.

Summary for buyers of apartments

The benefits of the MUD Act, 2011 for purchasers of apartments, therefore, include:

  • Improved protection and dispute resolution
  • Transfers control of the development from the developer to the OMC
  • Equal voting rights
  • Compulsory transfer of the common areas from the developer
  • Reporting about service charges and sinking funds and how they are calculated
  • A real say in the running of the development by the property owners.