Dáil Éireann debate -
Wednesday, 5 Apr 2006

Vol. 617 No. 5

Residential Tenancies (Amendment) Bill 2006: Second Stage (Resumed).

The following motion was moved by Deputy O'Dowd on Tuesday, 4 April 2006:

That the Bill be now read a Second Time.

Debate resumed on amendment No. 1:

To delete "now" and to add at the end of the motion "this day nine months".

—(Minister for the Environment, Heritage and Local Government).

Mr. Durkan

I will take advantage of the absence of a Member on the Government side offering to speak. I support the Bill introduced by my colleague, Deputy O'Dowd, and empathise with the sentiments expressed by other speakers. This is an opportune time to debate the imposition on overburdened householders of another payment over and above the other forms of taxation they must bear. People must now borrow four or five times their income to secure a mortgage loan, with payments accounting for most of their income. They hope, therefore, that the housing market will not collapse.

Tenants and householders face countless financial impositions, which continue to increase in cost and frequency. In my time in the House I have never encountered a case such as one I came across a few days ago when I was informed that within two weeks of moving into a house, a tenant of a local authority was informed that he must pay a massive sum of money. The main priority for those who need a home is to be able to move into a house and afford the rent. This has changed, however, because tenants are being flogged to the post by the imposition of development charges.

Mr. Stagg

They amount to as much as €20 per week.

Mr. Durkan

In addition to development charges, they must pay maintenance charges to companies established allegedly for the purpose of maintaining estates. These charges will be extracted from tenants regardless of ability to pay. It is timely therefore that Deputies have an opportunity to register their displeasure at this development.

Most Deputies have been members of local authorities, an experience which places us in a good position to——

Acting Chairman (Mr. O’Shea)

As the Government speakers have arrived, I ask the Deputy to give way.

Mr. Durkan

I am pleased to accommodate the Chair. Now that the Government speakers have arrived in force and Ministers have poured into the House from all angles as they rush to the rescue of unfortunate tenants whom they have smitten hip and thigh for the past five years, I ask that the Government set out its excuses for what it has done to tenants in recent years.

Mr. O’Dowd

Deputies Tony Dempsey, Callanan and Devins should not have to read the same script three times.

Acting Chairman

I thank Deputy Durkan for his co-operation in keeping the debate going and giving way.

Mr. T. Dempsey

According to my watch, I should have been on time but perhaps Wexford and Dáil time are different. I wish to share time with Deputies Callanan, Wilkinson, Devins, Glennon, Kirk and Carthy.

Tááthas orm labhairt ar rud chomh tábhachtach agus atá an Bille seo agus the amendments to it atá curtha ag an Aire. The Government is conscious of the new lifestyles evident around the country. In the past, people tended to live in semi-detached, detached and terraced houses. However, due to the success of the Celtic tiger and the return to our shores of 600,000 people in recent years, apartment complexes have sprung up all over the country. With so many people living under one roof, it is almost inevitable that attendant management problems will arise in such complexes

The problems I have encountered in my constituency frequently relate to poor standards of maintenance, high and escalating charges — sometimes in excess of inflation and imposed without reference to those who are meant to be managed, namely, the dwellers — and delays by developers in handing over control of the management companies to residents of the apartment complex, which leaves them in limbo. The most prevalent problem is associated with the maintenance of and responsibility for the infrastructure of the apartment complex. While these problems are inevitable, it is essential that the response and resolution is well-balanced, diligently thought out and prudently put in place.

I am pleased to support the Minister's amendment because the Government has proven it is conscious of the problems which arise in this area. Given that the Law Reform Commission is examining the matter, it would be premature to introduce measures that may conflict with its findings. It is important to await the commission's report, which should be submitted to Government by the Departments of Justice, Equality and Law Reform and the Environment, Heritage and Local Government, as to do otherwise would not be prudent. While the Fine Gael Party Bill is timely in that it has resulted in a debate on this issue, its response would be inappropriate.

Mr. Callanan

Although I agree with the premise of the Bill, as the Minister for the Environment, Heritage and Local Government indicated, it would not be helpful to place an additional responsibility on the Private Residential Tenancies Board because its work in securing rights for tenants has only recently commenced. Further responsibilities would distract from its main role, which is vital for tenants. I am concerned about estate service management fees because they offer a cop-out for local authorities and some of them have used this. Local authorities have used them as an excuse not to take over estates that they should have taken over some time previously.

In Ballinasloe, an estate called Hawthorn has not been taken over by the town council. One of the excuses was that the estate would have to brought under a management company despite the fact that the first phase in the estate is already in the charge of the council. When the Minister wrote to all local authorities changing this ruling, the council back-tracked. However, this estate is still not under the council and grass cutting has become a problem. Most of the delays are due to the council stating that the construction company had to fulfil certain criteria.

It is now time to push for a new penalty on both the builders and local authorities. Every estate after five years should automatically be taken into charge by a local council. Any builder who has failed to reach the criteria set down by the local council prior to the taking in charge of the estate should be put on a national register of offending builders. All builders on this offenders list should, in any future developments, have to pay a 50% levy in addition to the local authority's normal levy rate. Alternatively, builders should have to pay a bond for estate takeovers which would be reimbursed when the councils take the estates in charge and are content with their standard.

The value of property is high and to retain that value the maintenance of common areas and greens around the properties, whether they are apartments or houses, is vital. One of the biggest issues facing local authorities is the cost of maintaining estates. We must examine the financing of local authorities and what provision can be made to help councils to provide for these matters.

I disagree with housing estates being run by management companies as it negates the responsibility of the local authority and loses for politics one of its great sounding boards, the residents' association. The interaction between council members, politicians and residents' associations keeps our feet firmly on the ground and keeps politics in touch with local issues. The other area of grave concern is that if a management company is paid to look after a new estate for a new community, it could kill the volunteerism that previously bound communities together.

Although I am not a fan of apartments and apartment living, I understand they are necessary in the development of higher density urban living. Many countries in Europe and elsewhere have high quality apartment living and have good rules in place for the management of buildings. However, some countries have introduced a tax incentive for the cost of management fees. I propose the introduction of a tax break on management fees for owner-occupiers. Investors already can offset these costs against income tax. I support the amendment put forward by the Minister, Deputy Roche.

Mr. Wilkinson

I welcome the opportunity to speak on this amendment. I agree with the Minister's proposal that consideration of the Bill be adjourned for nine months. This is a serious business and we must do it correctly. There are endless problems in estates due to their management, planning problems and so forth.

There are problems with apartment complex management. Reported problems tend to be about poor standard of maintenance, high charges, sharp increases in charges, delays by developers in transferring control of management companies to apartment owners, management companies being given responsibility for infrastructure that developers and, subsequently, local authorities should maintain and companies ceasing to function because of a failure to comply with requirements of company law or inability to meet financial obligations. Responsibility for these deficiencies seems to arise from a variety of sources, especially the practices of managing agents and developers, apartment owners not participating in running the management companies, problems with company law requirements and aspects of conveyancing practice, and inappropriate planning conditions in some cases. This shows the major problem that exists and how necessary it is to get all the required information before decisions are made.

It is easy to see, without access to the figures, the vast number of houses that have been built in this country over the past ten years. Ireland has the highest rate of home ownership in Europe. It is probably a result of the historical fact that owning one's home was a necessity. Everybody has a historical perspective on this. People who did not own their homes or half owned them were evicted in tough times. That left a legacy. Irish people are proud and are anxious to own their own home. That is a good thing.

What is being done to tackle the problems? The regulation of management agents is to be dealt with by the new national property services regulation authority being established by the Minister for Justice, Equality and Law Reform. Provisions have been proposed by the Law Reform Commission for changes to relevant Companies Acts. A review is being carried out by the company law review group under the aegis of the Department of Enterprise, Trade and Employment.

It is simply fantastic what has happened with housing in this country. The Government has successfully promoted a range of measures to boost the supply of housing, to modernise and develop the private rented sector and to provide a range of well targeted schemes to meet the needs of those who cannot afford accommodation in the private sector. Over the past ten years approximately 100,000 apartments have been built. There have been record levels of housing output and a new record of almost 81,000 house completions was achieved in 2005, almost 2.5 times the 1996 level. This shows the Government's tremendous commitment to trying to provide homes for everybody.

Homelessness in some areas is a major problem but our population is increasing at a fast rate. In fact, in 15 years there will be 1 million more people in this country. I support the Minister's proposal to postpone consideration of this Bill for another nine months. He is correct to do so to ensure he has all relevant information before a decision is made.

Dr. Devins

I am delighted to speak on the Residential Tenancies (Amendment) Bill. I welcome the fact that Fine Gael has brought the Bill forward but I agree with the Minister that the Second Stage consideration should be postponed for nine months. I accept that Fine Gael is in a hurry, and not just about this Bill.

Mr. O’Dowd

The Deputy was not even here on time.

Dr. Devins

However, a little reflection on current legislation and proposals by the Law Reform Commission and the Minister for Justice, Equality and Law Reform will identify issues that must be explored before legislation in this complex area should be passed. The issue of management companies has come to the fore in the recent past. While there are parts of Dublin that have had this problem for some time, it would be inappropriate to rush legislation through the House before the Law Reform Commission and the Minister have had an opportunity to present their report. Rushed legislation makes bad law. More appropriate legislation will emerge when the deliberations of the Law Reform Commission are available.

Legislation on management companies is needed. One of the great changes in Ireland in the recent past has been the great increase in the number of apartment complexes. In the past, apartments were called "flats" but we appear to have succumbed to using the American terminology.

While this development has been fairly recent here, other countries have had people living in apartment complexes for some time. There is an obvious need to have some structure in place so common areas such as gardens, roofs, exteriors of buildings or whatever are managed in a fair and equitable way. How this need is met is the challenge. Management companies can supply the answer, but many pitfalls and dangers may be present in badly run companies. Time does not permit me to discuss these perils in detail.

The bottom line is the need for vigilance on the part of apartment owners. Buying an apartment, whether on one's own or with somebody else, can be daunting. The need for a management company, with its associated costs, is often the last thing on the mind of the purchaser. However, in the following years, how the management company works will be of immense importance to him or her.

When a management company works well in an open and transparent manner, the occupants of the apartment complex are happy and content. The way to anticipate and deal with potential problems is through regular communication from the company to its members, the holding of open meetings, especially AGMs, and the involvement of all in the affairs of the company. On the other hand, secrecy, failure to communicate with members in an open way and unhealthy relationships between developers and some management companies all contribute to a breakdown in trust and subsequent difficulties for the apartment owners.

Legislation is needed, but the Minister is right to await the Law Reform Commission proposals and those of his colleague, the Minister for Justice, Equality and Law Reform, with regard to a national property services regulatory authority, before he publishes his legislation. I urge both the Minister and the Law Reform Commission to publish their proposals as soon as possible so the current vacuum can be filled. I fully support the Minister's amendment.

Mr. Glennon

I welcome the opportunity to speak on this motion and welcome Deputy O'Dowd's initiative, which befits the recently crowned Deputy of the year.

Mr. O’Dowd

Thank you. Will the Deputy canvass for me?

Mr. Glennon

I congratulate him on the award, but lest he gets any ideas, I remind him that he is still on the wrong side of the House.

Mr. O’Dowd

We are on our way over there.

Mr. Glennon

The Deputy has been on his way a long time and is still on the way.

I am delighted to have the opportunity to support the Minister's amendment to this motion. The amendment is the essence of common sense. This is a highly complex issue. We need only remember the history we learned in primary and secondary school which gave us a good grasp of the historical difficulties here with regard to land law to understand the essence of the difficulty presented in this case. The Law Reform Commission, as requested by Government, has been given the specific task of reviewing the law in this area, in particular this sector.

I speak from a position of some experience in that management companies have in recent years become quite prevalent in Dublin North, particularly in the towns undergoing rapid population explosion. We have many problems with regard to development in our towns and villages. While many of the developments under construction appear to be of a reasonably appropriate structural standard, thanks to the requirements of statutes in that regard, the emergence of the issue of management companies is quite new and is seen by many people — I have some sympathy with their view — as no more than a developers' scam for a lucrative ongoing flow of income into the distant future.

Based on the manner in which management companies operate in many instances, the term "mismanagement companies" would be more appropriate. There appears to be total disinterest by most and in some cases a mischievous approach to the management of estates with a view to forcing the issue on tenants to deal with a buy-out of the management company. The issue lends itself to unscrupulous behaviour on the part of developers. This behaviour is targeted at a vulnerable sector of the population. Unfortunately, the people who have walked into these arrangements with management companies are at their most financially stretched limit at the time.

I support the Minister's amendment and repeat what he said last night:

The whole area of property management is complex, involving a number of different dimensions and issues, including the role of developers, managing agents and their relationships; the role and responsibilities of management companies; the role of the new property services regulatory agency; practical issues such as the standard of maintenance, level of and increases in management charges; the application of conveyancing law and practice in this area; issues relating to the operation of owner-controlled management companies and requirements of company law in that context; and linkage, in some cases, between planning conditions and provisions relating to management companies in purchase contracts.

He said he was less than happy with the way some local authorities have operated in this area and went on to state he was less than happy with the way certain elements of the legal profession operated in the area. For those reasons, I strenuously support the Minister's amendment.

Mr. Kirk

I thank the Chair for the opportunity to contribute to this debate which affords us the chance to focus on the area of housing and multi-unit apartments. Anybody who has been in the political arena over the past ten or 12 years will have noticed the significant change in housing provision generally, whether with regard to standards or the expectations of those building, purchasing or renting.

Recently I looked over some statistics for my local authority area of Louth County Council. Twelve or 14 years ago if the planning office received 400 planning applications, it would have been doing well. Last year, it received in the region of 1,800 to 1,900 planning applications. The increase has been consistently on an upward trend over recent years. This is a graphic illustration of what is happening around the country.

County Louth is in the Dublin-Belfast corridor and as a result has seen a phenomenal change in population. CSO figures from the mid-1950s show there were fewer than 70,000 people in the county. The 2002 census showed there were 102,000 and I am sure that figure will have increased when we get the result of the forthcoming census.

This Bill was brought forward by a constituency colleague, Deputy O'Dowd. In many ways, it identifies an area in which there has been very significant change. In the past ten years, almost 100,000 multi-unit apartments have been built, whether for purchase or private rental. They are now part and parcel of our housing accommodation provision. Inevitably, the issue of the management of these multi-unit apartments comes sharply into focus.

When one looks at existing legislation it is obvious that significant legislation has been brought forward by the Government but clearly the development and evolution of a satisfactory template for the management of such units is an ongoing process. The Minister is being quite prudent in his approach to this general area by asking the Law Reform Commission to examine legislation that covers conveyancing, company law, management agents and so forth. These are all elements of the issues that arise for those who have bought units in multi-unit blocks. One must remember that the management of such units is important because the assets in which individuals have invested could be blighted by unsatisfactory management, interference by the developer or by mismanagement, as referred to by Deputy Glennon earlier.

With regard to mixed tenant developments where privately owned units are side by side with local authority units, it is important that section 14 of the Housing (Miscellaneous Provisions) Act of 2002 is respected and adhered to in such circumstances because the potential for a breakdown of working relationships is obvious.

The Minister's approach towards this legislation is wise and prudent. Let us take our time and ensure that the ultimate template that will be applied in these circumstances is based on practical experience. We must remember that multi-unit apartments are a relatively new phenomenon in Ireland. Consequently, the experience garnered and the application of that experience to new regulatory structures will be vitally important going forward.

Mr. Carty

I welcome the opportunity to support the Minister's amendment. I thank Deputy O'Dowd for proposing the Bill. I know that one of his best advisers is a neighbour of mine and a Mayo man.

Mr. O’Dowd

Mr. Eamon O'Boyle, a good man.

Mr. Carty

I am delighted that Deputy Glennon mentioned the land law, which was introduced in my county by the great Mr. Michael Davitt.

Management companies are necessary to deal with the management and maintenance of apartment complexes because of the extent of shared or communal elements involved. Every householder must meet the cost of routine maintenance, repairs and refurbishment from time to time, as well as insurance and some level of security.

This does not affect my county as of yet but with the enormous level of development under this Government, the day will come when there will be large blocks of apartments in Mayo and I look forward to that day.

Mr. J. Breen

I do not.

Mr. Carty

I am aware that Deputy Breen is a little jealous, looking up at the north-west coast.

In the case of apartment complexes, management companies must make financial provision for the maintenance of corridors, lifts, roofs and so forth. These costs must be provided for through fees paid by owners of the units. Obviously, management fees should be reasonable but must also be sufficient to provide against possible future costs. There have been instances of management charges being increased substantially when costs arose because insufficient provision was made.

As members of management committees, it is primarily the responsibility of owners of units to see to it that the company is run properly, the standard of maintenance and management is satisfactory and that charges are reasonable and adequate. In particular, it is in the interest of owners to ensure that any agents hired by their company provide a proper level of service and do not charge excessive fees.

While the management company system is generally essential in the context of apartment complexes, they may also be required for developments containing a mixture of houses and apartments. The Planning Act 2000 allows the planning authorities to attach conditions to planning permission, including conditions regarding the setting up of management companies. It is a matter for the planning authorities to use these powers appropriately.

I thank the Minister of State for his attendance tonight. I know he takes these matters deeply to heart.

Ms C. Murphy

I wish to share my time with Deputies Joe Higgins, James Breen, Connolly, Cuffe and Ferris.

While this Bill deals exclusively with apartments, clearly there is also a problem with traditional housing developments. It appears that the Minister is not calling the shots on this issue. The County and City Managers' Association is calling the shots and we should be clear about that. We need to ask where this policy stemmed from because it is easy to figure out who the beneficiaries are.

When I raised the matter in September, I provided the Minister with background documentation detailing what was happening. I had telephoned six or seven local authorities to determine if the problem is widespread and I believe it is. I did that to prove a problem existed. We have a right to know the policies of the various local authorities on this matter. The Minister has that information because he wrote to the local authorities in that regard and he must publish the results so that we can see who is making the running on this matter.

Last week the "Gerry Ryan Show" covered the topic and I was contacted by the programme researchers for some background information. I was told a spokesperson for Fingal County Council said the council introduced the policy relating to management companies because it could not afford to take housing estates in charge.

I was in the public gallery last week when the Kildare County Manager put down a marker about taking on maintenance obligations for a large number of additional estates, with significant deficiencies in some. He said it will cost dearly and hard decisions will have to be made. There is no need to read between the lines. Local authorities are taking the Minister on with regard to this issue. They are side-stepping their responsibilities, despite the fact that the Minister said he would not allow that to happen. Resources are an issue, particularly in areas that are developing rapidly and councils are at breaking point. The Government cannot continue to ignore that.

I am also appalled by the advice given by some solicitors to prospective buyers. I sent the Minister a copy of a letter that a solicitor sent to a client who was buying a house and who was paying him for his services. That letter was simply a pack of lies.

Deputy Joe Higgins and I hosted a public meeting about management companies last Saturday. We heard first hand from the attendants of pending court actions about fees ranging up to €3,000 per annum and so forth. We know about the scams with apartments where the developer holds on to the last unit or creates more shares in the company than there are units. This has been going on for too long.

While I accept this Bill is deficient, it is the only legislation before us at the moment. Action should be taken immediately. The Minister should meet the City and County Managers' Association, the Law Society, the Office of Corporate Enforcement and the Construction Industry Federation. They are all part of the problem and could be part of the solution. The more complicated scams are, and these scams are complicated, the easier it is to get away with them and real people are paying the price.

Mr. J. Higgins

Management companies in apartments must be regulated. However, this is only half a Bill because it is confined to apartments but the problem is also critical in housing estates. Since Deputy Catherine Murphy and I raised this matter last Autumn it has, thankfully, been opened up to public discussion. Management companies are being foisted on young people purchasing their first home. In turn, management fees are extorted from them, for what? Is it for public services, public open spaces, public lighting, public liability insurance? These are the services the developer will have to sustain before he hands over to the local authorities and then which the local authorities will provide. It is a huge scam by developers, saving themselves a fortune on the shoulders of those who made them a massive profit by purchasing houses in the first place. It is privatisation of local services done in an underhand and sneaking way by local authorities following on from the developers and is a new local tax on home owners.

Fine Gael must be clear on where it stands on this issue. I stand for the abolition of management fees in housing estates and a return to the maintenance of public services. However, the Government and its backbenchers comment on the situation as if they were not in power. The Minister for the Environment, Heritage and Local Government says it is wrong and such charges should not be foisted on residents. He claims local authorities should take over the estates. He is the Minister. Why does he not issue an edict to the local authorities to stop planning conditions by councils and liquidate those companies that already exist where the residents want out?

In Castlecurragh estate we have a ridiculous situation where Fingal County Council built 700 social and affordable homes. Some 400 homeowners boycotted the estate management charge. The council then informed the residents that the management company is suspending services to the estate. Ridiculously the council is the management company's board of directors. I call on the Minister to contact Fingal County Council to resolve the matter at Castlecurragh.

Mr. J. Breen

Legislation to regulate management companies of apartment complexes was long-promised under the programme for Government. Residents of such complexes have sought protection under proposed legislation for years but have been met with long delays and one postponement after another.

The Residential Tenancies (Amendment) Bill highlights the weak leadership of the Government in this matter. It took an Opposition party to comprehensively address the shortfalls in the area. The Bill seeks to give home and apartment owners a level playing field. I welcome the extension of the powers of the Private Residential Tenancies Board and the introduction of a code of practice for property management agencies. The same areas that need to be addressed arise repeatedly in apartment complexes. Chief among these is the lack of maintenance of apartment complexes while management companies charge excessive index-linked management fees with no provision for a sinking fund to cover the costs of future renovation works.

The Bill's one weakness is that it states such sinking fund provision may or may not be included. I call for the mandatory provision for such sinking funds. Young people who cannot afford to buy a house and have been failed by the inaction of the Government on the affordable housing scheme are driven to purchase apartments. Everything must be done to protect their future asset base in this regard.

Another weakness is the lack of a clause precluding management agencies from collecting full maintenance fees in the first year until all work is completed in a development. I prefer to see stronger legislation in favour of the purchaser to protect those who are often trying to take their first step on the property ladder. The Bill should not offer any protection to those whom the Government always represents: greedy developers, construction companies and umbrella companies which squeeze every last cent from those bearing more than their fair share of the financial burden.

Mr. J. Higgins

Hear, hear.

Mr. J. Breen

It is time for the Government to show, however late, that it cares for those made vulnerable by weak legislation. Heavy financial penalties must be introduced for those who fail to meet the other requirements of the Bill. It might show the Government is serious about this long-awaited legislation. It is time for the Government to get serious and take action on the promised affordable housing scheme.

Mr. Connolly

The Residential Tenancies (Amendment) Bill aims to provide a regulatory framework for property management companies and management agencies. Apartment and home management companies have proliferated in recent years and have radically altered the implications of home ownership. It is becoming an additional payment burden alongside the mortgage repayments for new home owners. Often, it is a substantial amount which young home owners cannot afford.

These companies generally accept responsibility for common areas such as gardens, open areas, lifts, etc. Often, it can be two years into a tenure before it is realised work is not being done and contracts are not being maintained. For many new homeowners it is often too late. At that stage the management company does not care as it has received its fees. Management companies often do not file returns to the Companies Registration Office. There can be a charge against the estate management company which has a knock-on effect when people try to sell their homes.

It can also have a negative knock-on effect on the price of the property. When a starter-apartment owner attempts to sell on the property, the value may have dropped because the area it is located in is not maintained. Most first-time buyers will start off with an apartment. Nationally approximately 40% of building applications are for apartments while it is 70% in Dublin. It is a new way of life which we have been used to seeing in Canada and America. Problems will emerge down the road on this issue if it is not addressed soon.

I know of one situation where the ESB was owed €45,000 by an estate management company. The ESB would have been within its power to switch off the electricity supply. It left the homeowners in an awful situation. Legislation is urgently needed in the area. I compliment the Members who introduced the Bill.

Mr. Cuffe

It is always good to see the Fine Gael Party make sound and decent proposals that Members on each side of the House are agreed upon. I compliment the party on its worthy proposal that the PRTB should be given additional powers. There are two other means that could be used to achieve better results in the private rented sector. Much clearer housing guidelines are needed. The residential density guidelines are being revised and could be used to give a much clearer model on how to build decent housing in the 21st century. Considering the standard of housing, the bar is very low and must be pulled up. In assessing planning applications, the advice notes to planning authorities should be taken into consideration. Again, they are under revision as the current ones date from 20 years ago. I hope the guidelines will give clarity to the conditions that planners will put on planning decisions.

The enormous bias is in favour of development when design and quality standards need to be raised. Much junk is being built, especially in the apartment sector. They are not up to scratch and the planning authorities are not holding the line. There is an onus on the Minister to improve matters in this regard. There are many cheaply built and expensively sold dwellings. A large gap exists between the visions in the property pages of the national newspapers and the reality. Members will be aware of this from the complaints they receive about noise insulation, dampness and poorly finished estates and apartments. We need to grasp that point and ensure that standards are higher. There is a sea of mediocrity in design that will build up problems in years to come.

Building regulations are not being enforced and I do not think the Minister knows what is going on in that respect. When I asked him how many prosecutions had been brought against developers, all he could tell me was that three years ago 88 cases were taken but he had no details of what parts of the building regulations had been infringed. Did they concern accessibility issues for people with disabilities or were fire or hygiene regulations infringed? The Minister did not have the relevant statistics. There is a real lacuna there because neither the Minister of State, Deputy Noel Ahern — I am glad he is with us — nor the senior Minister knows where the problems arise. They might relate to thermal comfort, accessibility or hygiene but we do not know. Unless we get to the root of those problems we will not make much progress in confronting such issues. Tenants raise these issues with their management companies which, as Fine Gael has pointed out, are sometimes not sufficiently representative of tenants' interests. Much needs to be done in this regard.

The Private Residential Tenancies Board should be given a mandate to examine the wide range of issues a tenant requires, whether that includes thermal comfort, accessibility, heat, light or other issues. Currently, all they do is tick the box when one registers with them. They simply put down on paper the fact that a landlord has registered but that does not go far enough. The State should have a strong, ongoing role to ensure that tenants are living in, and owners are providing, decent accommodation. That is not happening at the moment. There is a lot of mediocrity and a failure to enforce the building regulations properly. The Bill is heading in the right direction and we in the Green Party support it.

Mr. Morgan

I welcome the opportunity to discuss the urgent necessity for regulation of housing management companies. Many Members of the House have been highlighting this issue for some time. If apartment living is to become a viable option for the future, people need to be assured that the management companies of apartment complexes will be accountable and that owners of such complexes will be protected against extortionate management fees. My party advocates rent control and believes that fees for the management of apartment complexes should be subject to control. Currently, such management companies can do what they like both in terms of fees and the delivery of services. Home owners are at their mercy. The issue of a sinking fund has been mentioned, which must be addressed as it is likely to become a significant problem in the years ahead as these complexes age and common areas need refurbishment.

It is necessary to regulate the management of apartment complexes in the same way as in the private rented sector. I am not convinced, however, that they should come under the remit of the same regulator. This issue is somewhat different. Perhaps a sister regulatory body, based on the PRTB model, would be more appropriate. It would require more substantive legislation than this Bill. It would need to set out in greater detail the responsibilities of management companies. As regards the proposal before us, I am concerned that extending the remit of the PRTB in this way would distract it from its primary role of protecting tenants in the private rented sector.

Another concern is that the PRTB is unable to cope with its current responsibilities. If anything on the lines of the Fine Gael proposal were to go ahead, substantial resources would have to be provided to cope with the additional responsibilities.

The Minister should fast-track legislation to regulate housing management companies. We cannot continue to wait on the Law Reform Commission working group's consideration of the law on the management of apartment complexes and other multi-unit developments before taking action. Increasing numbers of people are being affected by the absence of a regulatory regime in respect of these companies.

I also wish to address the problem of the increasing prevalence of management companies as an alternative to taking in charge housing developments by local authorities. This is causing serious difficulties for the householders affected and the Government is failing to tackle the problem. Whatever need there is for management companies in apartment complexes, there is no necessity for them in housing estates which should be taken into charge by local authorities. The householders affected pay taxes in the same way as the rest of us and deserve the same services from their local authorities.

In the past, the Minister claimed that section 180 of the Planning and Development Act is sufficient to deal with the growing problems but this is clearly not so. The problems are persisting and householders seeking to have their estates taken in charge continue to be frustrated. This matter needs to be dealt with without further delay. I hope this evening's debate will cause the Minister to think again and act immediately.

Mr. McCormack

I propose to share time with Deputy Pat Breen.

It was necessary for Fine Gael to introduce this Bill as, quite obviously, the Government has no intention of introducing such legislation. In its 2002 programme for Government, the Government indicated it would introduce such legislation but four years later nothing has happened. Is the Government again afraid of offending developers and management companies, which in most cases are the same people? I acknowledge that this matter applies to housing estates as well as to apartment complexes. In my experience, developers appoint the management companies sometimes with the same directors. On 22 November 2005, I raised this matter by tabling Parliamentary Question No. 585 and in his reply the Minister for the Environment, Heritage and Local Government, Deputy Roche, stated:

Once housing developments are taken in charge, it is the local authority's responsibility to maintain public infrastructure such as roads, footpaths, sewers, water mains and public lighting. The existence of a management company should not override the legal obligation on developers to complete estates, and, where required by the planning permission, to maintain estates until they are taken in charge. Section 34 of the Planning and Development Act 2000 introduced a number of provisions designed to ensure that all housing estates were finished as soon as possible, maintained to a satisfactory standard for the benefit of the people living in them and taken in charge by local authorities. In addition, section 34 recognised the common practice of establishing management companies, control of which is transferred to the owners of the housing units, to maintain or manage residential developments.

In practice, however, that is not the case. It is not what happens because, first, management companies are not in control of house owners. When one purchases a house, a condition in the planning application is that a management company be established. The developer sets up the management company so the purchaser of the house has no say in it whatsoever at that stage.

I raised the matter of management charges in housing estates with the Minister, Deputy Roche, some time ago and he said he would make it clear to local authorities that where a housing estate is satisfactorily completed and an application is made to take that estate in charge, the local authority should do so. My experience has been quite different. I wrote to the director of services at Galway City Council on 14 February and again on 28 February concerning the Roscaoin estate in the Roscam area of Galway city. While I received an acknowledgement to my letter, I never got an answer to my question. I queried the matter again today with Galway City Council and I am informed that where it was a condition in the planning permission that there should be a managing company, the estate might not be taken in charge by the local authority. Will the Minister of State clarify whether that is the position?

Following my inquiries to Galway City Council's planning section, I was told it can insert, and still is inserting, conditions in planning application grants that management companies be established. In November, however, the Minister assured me that he would put a stop to that. Obviously he has not done it in the case of Galway city or anywhere else. He will refer to the commission he established but it has not reported back.

Developers establish management companies but the house purchaser is not aware of it. It is not included in advertisements for the house or the auctioneer's literature. The purchaser becomes aware of it when he or she signs the contract and it is pointed out that it is subject to management fees. Often the commitment is already made at that stage. Perhaps the previous house the purchaser either rented or owned has been disposed of and he or she has no option but to go ahead with the purchase.

The purchaser is not told he or she has purchased what is a burden for life in some cases. It will continue for life unless it is eliminated and local authorities take over estates. My local authority does not indicate to me it has any intention of taking over estates with management companies. The burden of the charge is on the householder for life, without control over what it may cost each year. There is no justification for the trend developing in Galway city and county whereby large housing estates are not taken in charge by the city or county council but the responsibility is taken over by management companies, which pass it on to the house purchaser.

In many apartment developments in Galway, the charge is €1,200 per year and in many private semi-detached estates the charge is €450 increasing to €520 in some cases this year. On east side of Galway city, including Doughiska and Roscam, approximately 1,150 houses are now under management companies with an average charge of almost €500 per year. That amounts to more than €500,000 in management charges. Where does that money go? How much goes into the administration of the management company? The policy of this Government is that no matter what charge is added in stealth tax, whether it is VAT or development charges, it is all passed on to the buyer of the house. This Government has added approximately 50% of the cost to a first-time buyer of a house. All these stealth taxes put an unacceptable burden on the purchasers of new houses.

Development charges last year amounted to €400 million, an increase from a total of €57 million in 1997. In Galway city up to €10 million was collected in development charges, unrelated to management companies. This is paid by the householder in addition to management company charges. The Government directly collects that money. Some people resist paying management charges. However, it only adds to the burden on their houses. If, in five or ten years time, that person wants to move or his or her job changes, that burden will have to be cleared before the house can be sold. There is no way out of this.

It is time the Private Residential Tenancies Board had the power to investigate management charges and the management companies being established. The householder is trapped after moving into a new estate. He or she cannot move for the foreseeable future. If it becomes the norm, as it has in Galway where I have most experience, that management charges are included as a condition on most planning applications granted, the only person who will pay in the long run is the house purchaser and that should not be the case.

Mr. P. Breen

I commend my colleagues, Deputies O'Dowd and McCormack, for tabling this Bill.

The Government's failure in recent years to protect home owners who opt, or are forced, to buy apartments following the explosion in house price inflation in recent years is shameful. The rise in apartment accommodation is partly driven by the fact the traditional house is outside the reach of many thousands of people. Apartments can offer advantages in terms of central locations and can often be an attractive option for single people or couples without children.

In every town and city, not least in my constituency of Clare, the rise of apartments as a form of private dwelling has been a phenomenon of the last decade in particular. This growth is welcome in most cases. Ennis, the chief town, has seen a huge growth in the provision of accommodation as have other towns such as Kilrush, Kilkee, Lahinch, Ennistymon, and Tulla. I recently drove through many new housing estates in our second largest town, Shannon, with a local councillor and was astonished to see the amount of houses being built. Almost every month, a housing estate goes up in Shannon. There is a shortage of new houses for young people in Shannon and pressure is on Clare County Council to zone more land to accommodate them. From speaking with builders I know young people queue up to buy houses because of the shortage of accommodation.

In valuing this growth, we must regulate it and this is what this Government has failed to do. The Residential Tenancies Bill is narrow in scope, in seeking to regulate the management of apartments, which now make up one in five of every dwelling built in Ireland and house approximately 210,000 people.

Most of these people, particularly if they are single, are mortgaged to the hilt and often find themselves at the mercy of unregulated management fees, to which my colleague Deputy McCormack referred in his contribution. Many purchasers fail to factor in properly the annual management fees to their mortgage costs. Fees of a few thousand a year essentially increase the monthly mortgage repayment by 20%, 30% or 40%.

Last night I looked up the websites of Dublin auctioneers. I was astonished to see the shocking cost of management fees on these properties. It must be reviewed and I am delighted the issue has been raised. Apartment owners can find themselves at the mercy of these fees and it is fair to say apartment dwellers have been left without proper State protection against these management companies and agents.

Builders or management companies often evade their responsibility to maintain the property, whether it is failing to clean stairwells, keep lifts operational, provide a proper refuse service or maintain the structure itself. When problems arise, all too quickly it becomes apparent that these management companies hold most of the good cards. By simply doing nothing, issues can drag on indefinitely, making life a misery for the owners of these apartments.

Fine Gael proposes this Bill to establish a code of practice for apartment management which would make up for the imbalance in regulation in this area. This imbalance is all too obvious when we compare ourselves with our EU partners who, by and large, have more experience in this area. By widening the role of the Private Residential Tenancies Board and allowing it to become the regulator in this area, apartment residents would be protected by a three-year set management fee after a complex has been built. They would also have the certainty that fees would not be fully payable until all services were provided. They could pay into a special fund to provide for major refurbishment of common areas as the need arises.

Essentially, this is consumer protection legislation which would also provide for full information for owners or occupiers of apartments who often find they must organise themselves collectively to engage with negligent management companies. Empowering the Private Residential Tenancies Board would enable us to provide such regulation as the imposition of a one-year probationary period so if apartment owners decide to change management company, they would not be locked into a multi-year contract as a condition of signing on the new company.

The Minister might acknowledge the failure of his Government over the past nine years in contributing to the badly planned sprawl that makes up much of the greater urban areas. If we are to go down the route of high density housing in our urban areas, we must tighten up the regulation in areas such as Dublin. I thank the House for providing me with the opportunity to deal with some aspects of the Bill. I would like more time to speak on it. I urge the Minister of State and the Government to support Fine Gael, this Bill and the provisions required to rectify this problem.

Minister of State at the Department of the Environment, Heritage and Local Government (Mr. N. Ahern)

I thank the Deputies who contributed to the debate. I understand many of the points raised, which are those we come across as public representatives. I share the concerns but I do not agree with the approach taken. The Bill is concerned with regulating managing agents. Provision for this will be made in legislation by the Minister for Justice, Equality and Law Reform as he will establish a new properties services regulatory authority. I am surprised that Fine Gael did not seem to know that.

Mr. McCormack

When is it due?

Mr. N. Ahern

I am not sure that Fine Gael is fully behind its proposal to make the Private Residential Tenancies Board responsible for regulating managing agents. It was not set up for that purpose. While the proposed Bill contains some interesting points, it would not deal with a range of issues that give rise to problems with apartment complex management.

It is right to focus on managing agents because they seem to be a major source of difficulty and the source of many of the complaints we hear, especially in respect of levels of fees, quality of service and accountability. This Private Member's Bill addresses almost exclusively the regulation of property management agencies, which is only one strand of the complex issue.

I welcome the announcement last year of the new national property services regulatory authority to regulate these operations. This authority, established by the Minister for Justice, Equality and Law Reform on foot of the report from the auctioneering and estate agency review group will have the function of licensing, regulating and dealing with complaints about property management service providers or agents. A serious gap in the Bill is its failure to deal with several of the problems that need to be addressed, particularly those connected with conveyancing and company law.

It has been claimed in the debate that nothing has been done since the motion before Christmas, which is unfair because a great deal of work is taking place. Such hollow cheap shots have no basis in fact. The Department of Justice, Equality and Law Reform is drawing up legislation to establish the national property services regulatory authority and provide for its regulatory regime, including the regulation of managing agents.

My Department has put a great deal of effort into providing detailed and comprehensive input into the Law Reform Commission's study. Negative comments from Deputy McCormack and others to the effect that we should not wait for the Law Reform Commission seem rather stupid. It is important on a matter that is new to all of us, and to society, to have a wide-ranging consultation process. That is the best way to ensure that the different views on this matter are clarified and addressed. If the Department simply put forward its own views, the Opposition would criticise it for not giving other people the opportunity to put their points of view.

In taking the rare step of proposing a deferral on this Second Stage rather than voting it down, the Government acknowledges that the Bill appears to be well intentioned and has some merit, even if its approach is flawed. We are signalling our commitment to ensuring that effective action is taken on the different aspects of this matter.

The Law Reform Commission report is due in the summer. Many of us know some of the actions that need to be undertaken after that but we want to engage in the public consultation process and move forward on an agreed basis. Legislation will then be introduced but it will be more wide-ranging than the Bill before us. This Bill gives us the opportunity to debate the issue but it is very narrow and does not strike at many of the real problems in this issue.

Mr. Crawford

I wish to share time with Deputies Ring and Durkan.

I thank Deputy O'Dowd for putting forward this important Bill. The Minister of State says the legislation is flawed but none of us in this House is perfect. Even Bills that have undergone scrutiny have turned out to be less than perfect. It is an effort, as the Minister of State admitted, to initiate a discussion on this major problem.

Until recently, apartment management companies would not have been considered a major issue in a constituency such as mine, Cavan-Monaghan. That situation is changing with the exorbitant price of housing and different family structures.

It is important if one lives in an apartment that there be a clear regulatory understanding of who is responsible for the overall maintenance of the building and its general cleanliness, etc. Apartment living has recently become a way of life for many people, allowing cheaper access to the property ladder for many young people. In 2002 almost 9% of all households were in apartments. Apartments feature largely too in sectors such as student accommodation.

There are serious problems in apartment complexes throughout the country and many residents seem to be, or feel, powerless. These problems relate to common areas and the failure of builders or management agents to maintain them while charging high management fees that increase annually without any consultation.

People living in houses are also burdened with management companies and fees and this issue perhaps should be included in the Bill. Many young people, in their eagerness to get onto the property ladder, do not realise the additional costs for which they are liable and these costs often create serious financial problems. It is important that these management fees be payable over a period and there must be a clause that if the agreed services are not provided, the payments will stop.

Some builders demand the first year's payments before handing over the keys to the new owners although the area is often a building site with few services finished. The law should allow owners to withhold a portion of the fees until all services are available. The quality of the build is very important at any time but more so today than ever given the extraordinary prices of apartments and houses.

Quality control is another issue. While this example is not relevant to this Bill, it makes a point. There is a local authority affordable housing unit in Ballybay, County Monaghan. One year on there is an unbelievable and unacceptable scale of problems. These include falling ceilings — the ceiling in one house fell down, electric wiring posing dangers, cracks in walls, faulty fitting of windows and doors and serious difficulties with landscaping and surrounding areas. It is unfair that contractors who are incapable of doing a proper job should be allowed to take on contracts.

Under EU law such builders would have a case against local authorities if they were not given the contracts because they tendered lowest price. While this issue does not form part of this Bill, it should be considered in respect of all housing estates. We must ensure that laws exist to protect the owners.

Mr. N. Ahern

Is that a local authority housing estate?

Mr. Crawford

Yes, it is scandalous.

Mr. Ring

I am glad that Fine Gael proposed this Bill and the Government has accepted it with its own amendment, which is fine. I agree with it because there are several problems in apartment complexes, especially where builders and developers pass the management of apartments to the householders although they have made a fortune out of the development.

The Government makes 50% of the take in respect of every apartment sold and the first-time buyer is caught by the greedy builders who cannot get enough money for their buildings and control the market on the basis of the land they have for apartments and houses. Builders pay levies to local authorities which are then passed on to the unfortunate person who buys the house. Residents of apartment blocks and private estates also face management charges. I have personal experience of this. After I moved into a development consisting of five houses, residents were forced to set up a management company and pay its management charges through their solicitors. This is fine if one has minor problems, but what happens if one is faced with a major water leak or problem with sewage or roads? The unfortunate residents are then forced to pay more money to the management company after giving a considerable amount of money to builders and paying charges to the local authority, while the local authority wipes its hands of the problem.

What do local authorities do with all the money they collect? I understand that my own local authority has collected €19 million in levies. I have yet to discover where this money has gone as I have never seen as many potholes in the roads and as many footpaths left unfinished and there is no lighting in housing estates. The local authority is doing no work but is still collecting money from people. I believe it boils down to benchmarking. Money is collected to pay benchmarking pay awards to staff.

An increasing number of people live in apartments, not by choice but because they cannot afford to buy a house. They must start with apartments. It is terrible to witness young couples being forced to live in apartments for many years with no facilities for them or their children before they can attempt to buy a house which will allow them some space to raise their families. This is a sad scenario. It is sad that the Government and the Minister of State, in spite of all the revenue the Government has collected over recent years, have done nothing significant to help young couples enter the housing market.

Mr. Durkan

Hear, hear.

Mr. Ring

I expected to see such a measure in the last budget. I thought the Government would abolish some taxes.

Mr. N. Ahern

Deputy Ring should read about what the Government is doing.

Mr. Durkan

Fantasy.

Mr. Ring

It is no wonder there is a hole in the tent at the Galway Races which all these builders wish to put their big heads through to give their large cheques to Fianna Fáil because they are making so much money. They cannot even put it into offshore bank accounts because aeroplanes are not capable of carrying it. It is time to stabilise the housing market, give young couples a chance and take on the builders. Management companies are set up in apartments and small developments, the builder washes his hands and takes the money and it is again left to young couples and people starting out in life to pick up the tab. These people must pay the builder and the local authority. They must pay refuse collection charges and will soon be forced to pay for their water because the Government has arranged matters in such a way that we will be forced to pay for every glass of water.

It is time that the Minister of State and the Government did something about the housing market in this country. I am tired of hearing the stories of young people who do not want the local authority to do anything for them. They want to do it themselves but they are being excluded from the market by greedy builders and investors. These builders are taking over this country because they support the correct political parties. However, this state of affairs will change shortly.

Mr. Durkan

On behalf of my colleague, Deputy O'Dowd, I thank all those who contributed to the debate. I do not often thank the Government but I thank it for accepting this Bill. That it accepted this Private Member's Bill is indicative of the fact that even it recognises there is a need to do something about the ever increasing burden of charges and fees placed on the heads of the unfortunate new generation attempting to buy a house.

The Minister of State and I have exchanged views on this matter, not always amicably. I make no apology for raising this subject again. I am appalled when I, like everyone else present, including Government Deputies, meet young people in my clinics who, having struggled to buy an apartment or house to get onto the first rung of the property ladder, find themselves burdened with a refuse bill and discover that a management agency has come on board to extract more money from them. In addition, they must repay their mortgages. The situation is incredible and I do not know whether Deputies on the Government side of the House have fully assessed the impact and likely impact in the future of this burden on young couples.

One of the most significant problems now facing young couples in relationships is the financial burden imposed on them. This burden is so great that it can cause disputes in the early stages of the relationship. In many cases, the relationships of young couples living in rented accommodation break up before they even obtain a permanent home owing to the enormous burden of financial responsibility imposed on them. Both men and women must work and do overtime if they are to have a chance of holding on to whatever property they have managed to obtain.

A case concerning rented property was brought to my attention last week. It involved a private development with a portion of affordable housing under Part V of the Planning and Development Act. These were local authority houses in the middle of a private estate. I will not discuss the quality of the houses because the Minister of State is aware of my views on this subject. I believe people should be given ample space and that they need to be able to provide for their families in the future. We have had a tradition of doing so in this country. However, our apartments and general accommodation are getting smaller.

It is embarrassing how few houses are available for families. In most cases we have nothing to offer these families. This is certainly the case in my local authority. The degree to which people are capable of meeting all the financial requirements of the property, irrespective of whether it is rented or owned, is such that if they fall sick or are forced to visit the doctor or be off work for a week, the entire burden closes in on them. It is quite common for a relationship to break up in its early stages simply because of the mounting financial burden of bills and charges.

Ireland is supposed to be one of the wealthiest countries in the world. We are told by the Government that we are doing better than any other country in the world, that we have money to burn and that the country is awash with money, yet this particular group of people are herded into a corner and kept there. Their chances of breaking out of this corner are slim to non-existent.

I will not delay the House other than to say that our society should be able to provide the new generation with ready access to a house, flat or apartment. If members of this generation want to improve themselves and move on, which all people wish to do, they should be facilitated in doing so. People always want to buy their homes. Ireland has a built-in tradition of home purchase. Several Ministers have argued that arrangements are different in other countries. I accept that this is true but we have our own traditions, to which we are entitled.

I hope that by accepting Deputy O'Dowd's Bill, the Government has now recognised that the mounting financial burden on householders has got out of hand and must be tackled. I hope it is. According to the Minister of State, the Department of Justice, Equality and Law Reform is responsible for drawing up regulations.

Mr. N. Ahern

For management agencies.

Mr. Durkan

I do not wish to be disrespectful but people should not hold their breath. If it takes as long for the Department to draw up these regulations as it has taken for it to draw up other legislation in which it has been involved over the past four or five years, some people who hope to have the financial burden of management agencies alleviated could be waiting a long time.

I thank the Minister of State for accepting the Bill but I hope it is not a ruse to get by in the next general election. I hope it is an indication of meaningful intent by the Government to recognise that the burden placed on people by virtue of these extraordinary charges is such that it must be dealt with. I congratulate the Government if this is its intention. Otherwise, we must wait and see.

Amendment put and agreed to.

Motion, as amended, agreed to.