I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
recognises the growth of the number of people living in apartments and mixed developments in recent years;
acknowledges that multi-unit apartments and mixed developments will continue to be a feature of residential provision in Ireland;
notes the information needs of current and prospective homeowners relating to their rights and responsibilities with regard to management companies, management agents and management fees;
welcomes the Law Reform Commission's Consultation Paper on Multi-Unit Developments which was prepared and published under the Commission's Second Programme for Law Reform 2000–2007;
welcomes the Government's decision to establish a high-level interdepartmental group with the objective of assisting in the development of a coherent and comprehensive response to problems arising in relation to multi-unit developments and the Cabinet sub-committee to which it reports;
looks forward to publication in the very near future of the Law Reform Commission's Report on Multi-Unit Developments which will, following an extensive consultation process, contain definitive recommendations for reform of the law relating to the structure and governance of property management companies;
welcomes the Government's commitment to publish the Property Services Regulatory Authority Bill which will, inter alia, provide for the establishment of a licensing system for property management agents, during the current Dáil session;
welcomes the Government's decision, pending enactment of this legislation, to establish an implementation group and to appoint a chief executive designate in order to undertake preparatory work relating to establishment of the Property Services Regulatory Authority and implementation of the future licensing system;
draws attention to the Government's policy statement ‘Delivering Homes Sustaining Communities' which emphasises the need to improve the quality of the built form as well as the focus on building sustainable communities;
welcomes publication of ‘Best Practice Housing Guidelines' which provide a practical and valuable tool for local authorities, housing associations and private sector clients when formulating the design requirements for housing;
welcomes publication of ‘Design Standards for New Apartments' which are designed to promote sustainable urban housing by ensuring that the overall design and layout of new apartments will provide satisfactory accommodation for a variety of household types and sizes, including families with children, over the medium to long term; and
draws attention to new policy guidance to local authorities concerning responsibility for the maintenance of common shared facilities in residential estates, in particular public roads and footpaths, public lighting, public water supply and sewerage, public open spaces and unallocated surface parking areas, as well as the completion of estates and the taking in charge process.
I thank the Acting Chairman and the Members opposite for their remarks and I look forward to working with them in a spirit of co-operation.
Having read the file pertaining to this matter late last night and this morning, I do not believe this is an issue on which the House should divide. We are all of the very strong view that action needs to be taken in this area as quickly as possible. I have great sympathy with the content of the Fine Gael motion and believe it has a lot in common with the Government amendment. I suggest that, at the end of this debate, we might adopt a reasonable approach. One aspect of the Government's approach is that it believes the Fine Gael motion is a little too prescriptive given that the issue is much wider than it suggests.
It is important to put the Government's position on record. Recent years have indeed witnessed very rapid and significant growth in the numbers of people living in multi-unit developments. While apartment living is a common feature in many other countries, it is a relatively recent phenomenon here. Some of the difficulties now being experienced by owners of units in multi-unit developments stem from the fact that the current legal framework is ill-suited in many ways to deal with the problems arising in regard to this form of residential accommodation.
I assure the House that the Government is determined to deal with the problems arising in this area urgently and in a very thorough and comprehensive manner. Action is already under way in several areas and necessary legislation is in the course of being drafted. The Law Reform Commission has indicated it will publish, within the next few weeks, its report on multi-unit developments. This report, which follows extensive consultation, will contain definitive reform proposals concerning the regulation and governance of property management companies. The Government has already directed that early action be taken by the relevant Departments to address the commission's recommendations. The types of action to be taken will be dependent on the form the recommendations take.
A high-level interdepartmental committee, under the chairmanship of my Department and comprising representatives of relevant Departments and offices, has already met on a regular basis to review the issues that were raised in the Law Reform Commission's consultation paper. The committee will be examining the commission's final report and a key task of the committee will be to identify the legislative and other actions to be taken and determine a timescale for their implementation. The committee is reporting to a Cabinet committee whose membership comprises the Attorney General and the Ministers for Justice, Equality and Law Reform; Environment, Heritage and Local Government; and Enterprise, Trade and Employment.
The Government is already committed to publishing the Property Services Regulatory Authority Bill in this session to regulate property service providers, including property management agents. The Bill will contain extensive provisions to protect the interests of home owners.
The main functions of the new authority will be to operate a comprehensive licensing system covering all providers of property services, including property management agents; to set and enforce standards for the grant of licences, for example, educational and training standards and levels of professional indemnity insurance, in addition to standards to be observed in the provision of property services by licensees; to establish and administer a system of investigation and adjudication of complaints relating to the provision of property services; to promote increased consumer protection and public awareness of property services in general and the cost to consumers, risks and benefits associated with the provision of those services; and to establish, maintain and administer the compensation fund.
The legislation will provide that all property management agents providing services for property management companies will be required to be licensed by the authority before providing such services. Both the company and the staff providing such management services will require a licence to operate. It will be an offence to provide a property management service without such a licence.
The Bill will provide that an application for a licence must be accompanied by references as to the applicant's character and competence as the authority may require; certification by a suitably qualified person that proper financial and control systems are in place for the protection of clients' money; evidence of the availability to the applicant of the required level of professional indemnity insurance; and the prescribed fee.
The authority will refuse to grant a licence if it is satisfied that an applicant is not a fit and proper person to provide a property service, is under 18 years of age, has been adjudicated bankrupt, does not comply with any requirements of the Act or detailed regulations under it, has not furnished the authority with written evidence of there being available to the applicant the prescribed minimum level of professional indemnity insurance, or has not paid the prescribed fee or the prescribed contribution to the compensation fund. Similar provisions will apply to companies and partnerships. Licensees will be required to renew their licences on an annual basis and the authority will keep a register of licensees.
In order to ensure compliance with the legislation, the authority will be empowered to investigate, on the basis of a complaint or on its own initiative, both persons licensed to provide property services and those who may be engaged in providing such services without a licence. In order effectively to discharge this function, the authority will have extensive powers of investigation including powers to enter premises, to require the provision of information and documents and to require persons to attend before it. If satisfied that the licensee has been guilty of misconduct or of a contravention of the Act or regulations made under it, the authority will be empowered to revoke the licence or suspend it for a specified period or to issue a reprimand, warning, caution or advice.
In the case of an investigation into the provision of a property service by a person who does not possess an appropriate licence, the authority may seek an injunction from the High Court requiring the person to cease the activities that the authority reasonably believes to be in contravention of the legislation. A person who is aggrieved by a decision of the authority will be able to lodge an appeal with the property services appeal board that is to be established under the legislation.
Further protections provided for in the Bill include a requirement to provide clients with a letter of engagement setting out details of the service to be provided, costs etc.; strict provisions relating to the keeping of client accounts; and the establishment and maintenance by the authority of the compensation fund, to which licensees will be required to make an annual contribution. The purpose of the fund will be to compensate clients in respect of losses arising from dishonesty on the part of licensees.
The protections of clients of property services providers will also, subject to appropriate modifications, apply in respect of property services provided in the State by persons from other member states.
Pending enactment of the proposed legislation, an implementation group has already been established to assist and advise on practical matters relating to the establishment of the new authority and to prepare for a new licensing system. The implementation group has recently published a code of practice for auctioneers and estate agents. This code identifies the key principles and values that should guide day-to-day practice of the industry and sets minimum standards of professional conduct to be expected of service providers. It also incorporates a complaints system which enables complaints concerning non-compliance with the code to be investigated.
The code has been sent to all licensed auctioneers and estate agents and they have been requested to sign up to it on a voluntary basis. I am informed that, to date, approximately 60% of licensed auctioneers and estate agents have signed up to the code. In addition to those who have already signed up, a number have indicated they are amending their current administrative procedures to enable them to comply fully with the code, at which stage they will agree to be bound by it.
The implementation group is currently drawing up a code of practice for management agents that it hopes to be in a position to launch in the near future. The group has compiled and published a public register of licensed auctioneers and estate agents. This register, which may be viewed on the authority's website, comprises a list of the auctioneers and estate agents licensed by the Revenue Commissioners under the Auctioneers and House Agents Acts 1947 to 1973. It also indicates those licensees who have voluntarily agreed to be bound by the code of practice.
In the area of consumer awareness, the implementation group has been working on a consumer information package to promote consumer awareness of the process involved in property transactions, and the nature and levels of service provided by property services providers. It is hoped this information package will be published shortly.
Another area being addressed by the implementation group is the development of a complaints handling and licensing database. The complaints handling database will facilitate the handling of complaints in accordance with the enforcement provisions of the code of practice. While the authority will have no licensing function prior to the commencement of the legislation, it is important that it be in place well in advance of the authority being established on a statutory basis so as to ensure a smooth transition to the new licensing regime.
The great value of the Law Reform Commission's consultation paper has been the overview it provides and the detailed consideration it gives to the problems associated with ownership of apartments and their service and management as a complex of various interests. The consultation paper stresses the cross-cutting nature of the issues arising in this regard and the need for the Government to address them in a comprehensive and joined-up manner. This already has been acknowledged by Members opposite. Clearly this will require action across a number of important policy areas, including the planning and development code, company law, consumer protection law and the development of regulatory structures.
For this reason, to coincide with publication of the consultation paper, the Government established a high level interdepartmental committee to assist in the development of a coherent and comprehensive Government programme of action on this matter. A key task of this committee will be to ensure that legislative and other actions are taken in response to the commission's reform recommendations and to determine a timescale for their implementation.
Action continues to be taken by Departments and State agencies since publication of the Law Reform Commission's consultation paper. The Department of the Environment, Heritage and Local Government has produced policy and guidance documents in the planning and housing areas with particular reference to sustainability aspects. These initiatives specifically target multi-unit living, while others address the broader issues of sustainability, well designed quality housing, as well as proper social, community and transport networks which, while relevant to all housing forms, also have particular relevance to apartment living. These initiatives address many of the draft recommendations set out in the Law Reform Commission's consultation paper.
Members will be aware that an aspect of multi-unit developments that has come in for much comment in recent years has been the taking in charge of estates by local authorities. Section 180 of the Planning and Development Act 2000 places a legal obligation on planning authorities to take in charge residential developments, finished or unfinished, where certain conditions have been met.
A new policy guidance regarding the issue of responsibility for the maintenance of common shared facilities in residential estates including small open spaces, car parking and playgrounds, as well as the issue of the completion of estates and the taking in charge process, was issued by way of a departmental circular to all planning authorities in February 2008. The new guidance document is based on the outcome of the deliberations of a working group established by that Department in August 2006. The group comprised representatives of the Department, local authorities, architects, planners, the Irish Home Builders Association, IHBA, and the National Consumer Agency, NCA, and its task was to consider issues pertaining to taking in charge and property management companies. This policy advice is based on the outcome of the deliberations of that group. All planning authorities are now required to develop or update, as appropriate, their policy on taking in charge by the end of June 2008 on the basis of the framework and the wider housing and planning policy guidance.
The core principles underpinning the framework for taking in charge, which must be reflected in each local authority policy on this matter, are — a statement of the facilities that will be taken in charge and the maintenance services that will be provided; the issue of taking in charge must be addressed at the pre-planning stage with the approved design facilitating the taking in charge of core facilities; the planning authority's construction and design standards for residential areas will be set out; developers will be required, through the development management process or permission, to complete residential developments to a standard that is in compliance with the planning permission granted; planning authorities must take all necessary measures in this regard in particular through securing adequate bonds, inspection of construction and enforcement action when necessary; and the procedures for taking in charge will begin promptly on foot of a request by the majority of the residents in the development or by the developer, as appropriate.
Protocols, including timeframes, must be set out by planning authorities to respond to requests for taking in charge. In the case of core facilities in existing residential developments that were approved by the planning authority on the basis they would remain private and be maintained by a management company, these must be taken in charge if the majority of residents request it. The guidance document makes it clear that planning authorities must not attach the establishment of property management companies as a condition of planning in respect of traditional housing estates, save in very exceptional circumstances, such as to maintain a specific facility in that estate which is for residents' use only, such as a private playground, or in the case of holiday homes. In addition, planning authorities should only attach planning conditions requiring management arrangements regarding certain shared facilities in the newer type of mixed residential development in limited circumstances. In respect of older estates, priority must continue to be placed on resolving those estates that have been left unfinished or not taken in charge for the longest period.
As for the monitoring and review of the process, a planning authority's policy on taking in charge is to be made available to the public and published on its website and should continue to be reported on to the elected members on a regular basis and at least once annually. As part of the overall review and update of the local government service indicators, a new indicator in respect of taking in charge is being introduced from 2008 onwards. This will provide benchmark data in 2009 for monitoring the taking in charge process and, in particular, the priority being accorded by individual authorities to the taking in charge of unfinished or legacy estates. This information will allow the Department to review the ongoing work of planning authorities in this regard and will help determine whether additional policy advice on this matter is required.
The Government acknowledges that the owners of units in multi-unit developments need to get clear information on their rights and responsibilities as members of property management companies. Improved awareness of their rights and an understanding of the corresponding duties and responsibilities of developers and builders will encourage apartment owners to assert their rights as company members become involved in the management of their company and combat abuses and sharp practices.
There have been developments in another area since the publication of the Law Reform Commission's consultation paper. The National Consumer Agency has published a report entitled, Management Fees and Service Charges Levied on Owners of Property in Multi-Unit Dwellings. The report examined the sector and made some recommendations on the regulation of the sector, service charges and sinking funds, management companies and management agents. Following the publication of this report, the NCA established a stakeholders' forum to examine the possibility of developing non-legislative voluntary processes, which would be of benefit to consumers. A number of outputs from the forum are expected.
The NCA has been working with the Irish Home Builders Association to agree a code of practice in respect of multi-unit developments. Its scope relates to the construction, completion, marketing and sale and purchase of such units and, in particular, to the management and maintenance of common areas and facilities, as well as to the provision of common services. This includes issues such as the calculation of service charges, transfer of the management company from the developer to the owners, agreements with management agents etc. As the NCA does not have a legislative or regulatory function in this regard, the code will operate on a voluntary basis. The NCA will, however, monitor the code of practice and revisit it as appropriate over time. I understand that a preliminary version of the code was approved by IHBA members in March 2008. A final version is before the IHBA at present and a definitive decision on its content and implementation is expected early this month.
The NCA, through the work of the multi-unit developments stakeholder forum, has developed a checklist of proposed standard headings to be considered for inclusion in written contracts between management companies and property management agents. This document has been approved by the forum and will form one of the outputs when the work of the forum is published this month.
The NCA also has been working on the development of education and training material to assist consumers to better understand multi-unit development living from both a legal and practical perspective. In particular, the NCA has furthered the development of an e-learning initiative for prospective apartment purchasers. The initiative will involve training and information on all aspects of the owner-occupiers role in property management companies, building on information previously provided in the NCA booklet, Property Management Companies and You. The NCA is working closely with Dublin City Council, which will be co-funding and piloting the e-learning initiative in early 2008 with its affordable housing purchasers.
The Office of the Director of Corporate Enforcement, ODCE, has published a draft guidance document on apartment owners' management companies. The intention of the document is to support directors and members in the effective running of their management company's affairs and in protecting the valuable assets which comprise most apartment developments. The document seeks to explain the separate roles of the management company, that is, as the owner of a complex's common areas and as the party responsible for its upkeep, and the management agent, who is contracted by the management company to provide the required building maintenance, insurance, security and other services.
Reference is made to the three phases of a management company life cycle, namely, the developer-only, developer and members and members-only phases. Following a period of consultation, it is expected the completed guidance document will be published this year. In 2007, the Government published a policy statement, Delivering Homes, Sustaining Communities, which emphasised the need to improve the quality of the built form and placed a focus on building sustainable communities. In the same year, the Department of the Environment, Heritage and Local Government published best practice housing guidelines to provide a practical and valuable tool for local authorities, housing associations and private sector clients when formulating the design requirements for housing. Last year, the Department published development plan guidelines which were designed to improve the quality and consistency of local authority development plans, strengthen their strategic content and improve the building of consensus in the preparation, implementation and review of such plans. Development management guidelines which address the processing of planning applications from pre-application consultation to the enforcement of planning decisions were also published.
The design standards for new apartments were issued in September 2007. The primary aim of the standards is to promote sustainable urban housing by ensuring that the overall design and layout of new apartments will provide satisfactory accommodation for a variety of household types and sizes, including families with children, over the medium to long term. Recommended minimum standards are set for, inter alia, floor areas, storage spaces, sizes of balconies and patios and room dimensions. The new draft planning guidelines on sustainable residential development in urban areas, which were published in February 2008, will act as a blueprint for future sustainable development of Irish cities, towns and villages. The guidelines, which are accompanied by a best practice urban design manual, focus on more suitable and better accommodation for families, higher quality urban design, high standards of environmental quality and energy efficiency and a focus on locations that capitalise on future transport plans. It is hoped that they will deliver more sustainable communities.
The Department of the Environment, Heritage and Local Government is making progress with the developing areas initiative with the aim of seamlessly delivering infrastructure and services in a coherent manner. The initial focus of the initiative is on quickly growing areas within the national spatial strategy's gateways and hubs. The Department is working in consultation with local authorities to identify and resolve the blockages in respect of infrastructure and service delivery in each of the strategic locations.
The Government has approved the drafting of a companies consolidation and reform Bill along the lines of the general scheme prepared by the Company Law Review Group. The philosophy underpinning the proposals in the general scheme is to simplify company law for the benefit of all stakeholders in company law, including shareholders, members, small privately owned companies, business operators and company law practitioners. The Bill will enhance the competitiveness of the economy by streamlining and simplifying the companies code. Company law provides a choice of models by which companies in general, including property management companies, can be incorporated. This choice is not made by the purchasers of units in the development, but by the developer at an early stage of the development process. Property management companies own the freehold of the common areas and the freehold reversion in each unit acquired under a long lease by an individual owner. They have the responsibilities of landlords in enforcing covenants in the leases. They must manage the complex on an ongoing basis, usually by means of a contract with a separate property management agent.
The general scheme of the proposed Bill contains a number of provisions with the express intention of facilitating the use of the company structure by multi-unit developments. It is proposed that the membership limit of 99 which will ordinarily apply to the most common company type — the private company limited by shares — will not apply in the case of a residential management company. Membership of a residential management company will be deemed to transfer from the vendor to the purchaser upon the sale of the underlying property to which the membership relates.
It is important that proposals to change company law to refer specifically to property management companies reflect the voluntary nature of the role of the director in property management companies. Such proposals should also reflect the fact that owners of units in a multi-unit development who comprise the company, and from whose ranks directors are necessarily drawn, may have little or no experience of running a company or complying with the formal requirements of company law. This has to be taken into account also in developing any new company models for such entities and devising future reporting arrangements. The current strike-off provisions, which are designed to penalise commercial trading companies that do not comply with company law requirements, and which may lead to a company's dissolution and the vesting of its assets in the Minister for Finance, are ill-suited to the operation of property management companies. Having said that, I feel that if the strike-off provisions are discontinued for property management companies, they will need to be replaced with more suitable provisions. This is one of the aspects which needs to be addressed further in the ongoing company law reform process.
I acknowledge that there is a widespread lack of understanding about the calculation and payment of management fees and service charges. Owners of apartments need to be made aware of the purpose of such payments and their responsibilities with regard to the payment of such fees. They should be aware that the maintenance of the common areas and the fabric of the buildings helps to underpin the value of their property. The work of the National Consumer Agency's stakeholder forum on multi-unit developments in respect of education and training resources for prospective purchasers in multi-unit developments should prove particularly beneficial in this regard. The outputs of the stakeholder forum will include sample lists of the costs and services typically covered by a service charge or a sinking fund. This indicative list should help consumers to understand what is the responsibility of the management company and what falls within the remit of individual unit owners.
I am conscious that there appears to be a lack of knowledge among owners of units within multi-unit developments about sinking funds. Pending the final recommendations of the Law Reform Commission, I am leaning towards the view that there is an absolute need to make the establishment and maintenance of sinking funds by property management companies mandatory. Owners need to be aware that non-payment of service fees and the absence of a sinking fund will, over time, reduce the value of their property and investment.
As I said at the outset, the issue of multi-unit developments is a complex one. Those who have read the Law Reform Commission's consultation paper will acknowledge that this is a statement of fact rather than opinion. Issues pertaining to such developments relate to many aspects of legislation, including the planning and development code, company law and consumer protection. The complexity of these problems highlights the requirement for the Government to address them in a comprehensive and joined-up manner. This is the approach which the Government has adopted and will follow. It is not true to say, as was implied in the original motion, that the Government is complacent about this issue. I do not want the House to divide on this matter. The Government is not complacent.
I have outlined in detail the substantial amount of work that has been done in this regard by various Departments and State agencies. Further work will be taken on foot of the Law Reform Commission's recommendations. The commission has made progress with its final deliberations on the basis of intensive consultation and examination of the issues. The Government has never attempted to pre-empt that important process and I would like to think Fine Gael would not like us to do so. We will build on the actions the commission has already taken. We will take on board, as far as possible, the imminent recommendations of the Law Reform Commission. The Government will also take into account the views expressed by Deputies in the House today. While I commend the Government amendment to the House, I do not believe we should divide on it.