Management company legislation too little too late
Issued : Friday 9 July, 2010
Speaking in the Dáil debate on the Multi-Unit Developments Bill 2009, Thursday, 8th July
I welcome for the opportunity to speak in this debate on the Multi Unit Development Bill. I am on the record both in this house in various other arenas as stating that legislation for management companies was urgently required. My constituency of Dublin South Central has been blighted over the past decade with many inappropriate, poorly designed and badly finished apartments. It is also the case that there have been many complaints from apartment dwellers trying desperately to establish their rights, to figure out the complexities of the Management Company, the Management Agents and the ever present spectre of a developer who seemed to hold extraordinary control but never any responsibility for many of the shoddy and incomplete apartment blocks.
It was Government policy by means of tax breaks, increased density and planning legislation to encourage a systematic shift in the nature of Irish home occupancy towards apartment ownership. Yet legislation to enshrine the rights of owners was never enacted on the statute books, leaving apartment owners and indeed some householders in a very weak position vis a vis developers. This was yet another classic case of the Government of the day, Fianna Fail and the now defunct Progressive Democrats, favouring a small well connected group, the developers, at the expense of the apartment owners and the majority of the citizens of the state.
If one phrase could best sum up this legislation it would be "Too little, too late". We have waited years for this legislation, yet now when it is finally before the house, we have a case where apartment development has all but ceased as the property market has imploded. We have tens of thousands of vacant or unfinished apartments and houses littered up and down the country, some in frankly ludicrous locations.
The single greatest flaw in this Bill is that it is not retroactive. That is the most important sections of the Bill refer only to developments completed after the Bill has been enacted. Given the state of the Irish property market, there is unlikely to be a large amount of development over the next decade. In contrast the previous decade witnessed an unparalleled and exponential growth in apartment complexes and other housing development which were instituted under the guise of a Management Company. One of the major problems facing apartment owners is where a developer has not handed over the common areas to the management company for whatever reason, or has either weighted the voting rights or kept control of a number of units so as to retain control of the management company. Nothing in the legislation before the house today will affect this situation. I know of a number of cases in my own constituency where an unfair management company structure has been established which effectively discriminates against the rights of the owners to the benefit of the developers. There are hundreds of other cases such as this littered up and down the country. Nothing in the legislation will affect these companies.
Even for the handful of developments that will come under the legislation, the voting system has been set as one unit one vote. This leaves more power with the developers or landlords of several properties as they will receive numerous votes at any meeting. Far better to have established a system of one member one vote. In an Owners Management Company where the company is limited by guarantee, not for profit and established for the benefit of members equally, it is normal to have one member, one vote, according to the report published by the Apartment Owners Network.
In almost every case in the Bill before the house today we have a good idea which is then hamstrung in the next section or even within the same section. For example we have an ability for unit owners to pursue a developer in the courts in order to force them to complete the development under the terms of the planning permission, (section 21). Yet in section 23 states "the Circuit Court shall have exclusive jurisdiction". The maximum fine that a circuit court can levy is €38,092. Since some developments are left unfinished and may require hundreds of thousands in investment in order to complete the development to the planning permission, this does not offer an adequate sanction. Another issue is Section 17 regarding the sinking fund. The quite correctly recommends that a mandatory sinking fund should be established to defray long term major costs. Yet this is not required to come into effect until three years after the "first transfer of the ownership of a unit in the multi-unit development" This appears to be yet another sop to developers who are likely to remain owners of apartments for a number of years, yet will not be required to contribute to the sinking fund even though depreciation begins almost immediately from the time of completion.
Nonetheless, there are several areas that are to be welcomed. One such example is Section 16 states that Service Charges cannot be used to defray outstanding building costs.
However, there are some key aspects of the Bill that are not adequate. It unacceptable that several of the key sections will not be retroactive and will leave thousands of apartment and homeowners in much the same position as currently, with no control over their management company and no real ability to pursue developers who have not completed a complex to the terms agreed in the grant of planning permission.. At purely practical level, it is crucial that every apartment owner or dweller is fully aware of both their rights and their responsibilities. I believe that this information should be available and provided as part of the contract , in an uncomplicated and user friendly fashion. All the cards are held by the developer , who even when they default on their responsibilities, seem to be able to escape any serious penalties. A recent event in my constituency highlighted clearly the vulnerability of the apartment owners relative to the sleight of hand of the developer who controlled the management company because of the number of units held by him, either occupied by him or members of his family or leased to tenants. In effect he simply ran off with the management fees of the apartment owners and the advice they received after a lot of consultation and efforts to bring him to book, was that the legal costs would far outweigh any benefit they might ultimately gain.
The legislation is welcome and there are many valuable aspects to it but it is also the case that there are a number of loopholes that need to be sorted to ensure that the average apartment dweller is fully protected.
