Property Services (Regulation) (Amendment) (Management Company Regulation) Bill 2018: Second Stage [Private Members]

I move: "That the Bill be now read a Second Time."

I thank the Minister for Justice and Equality, Deputy Flanagan, for attending this debate. I will briefly address what this Bill is intended to do. I am introducing this Bill to support apartment and homeowners who live in estates managed by owner management companies. I refer in particular to those directors who ensure these developments are well run. The Bill will set up an ombudsman for owner management companies and that body will help train board members, assist in dispute resolution and make recommendations on the future development of the sector.

The ombudsman for owner management companies will be based within the Property Services Regulatory Authority, PSRA. We have costed the establishment of the ombudsman and the estimated running cost is €500,000 per annum. The Bill will bring owner management company law up to scratch and will make it much more effective in helping to improve quality of life in these developments. At the outset, I thank all the people who have contributed to this Bill and, in particular, the Apartment Owners Network which has appeared before the housing committee on a number of occasions. More than 500,000 people around the country, and I am one of them, live in estates and developments managed by owner management companies. That is a significant part of the population. These owner management companies run the developments and set the budgets, fees and priorities. All these owner management companies are run by volunteers who freely give of their time to improve the quality of life in their estates. Managing agents are retained to provide professional help with that.

This area has many issues, however. I have described it previously as a ticking time bomb in respect of sinking fund provisions but I will come to that issue later. The directors of these owner management companies carry out complicated duties. They are ruled by a dense thicket of company law and they fall between several stools at departmental level. Directors have significant obligations and little or no Government support in helping them carry out those duties. This Bill seeks to support volunteer directors by setting up an ombudsman to provide expert advice and resolve internal issues that may arise from time to time. The ombudsman would also make recommendations to the Government on owner management company regulation and help to enhance governance and standards in owner management companies.

This Fianna Fáil Bill forms part of a broader suite of policy measures I have brought forward on behalf of my party to assist people living in apartments and managed estates. Those other measures include the Management Fees (Local Property Tax) Relief Bill 2018 which has passed Second Stage and proposes that marginal relief be given on property tax to avoid double charging for services for principal private residences, reform of owner management company regulation, the strengthening of sinking fund requirements and the provision of a new deal for tenants and landlords.

I will go through some of the provisions of the Bill. A recent submission to the Oireachtas Joint Committee on Housing, Planning and Local Government from the Apartment Owners Network and the Society of Chartered Surveyors in Ireland estimated, as I mentioned earlier, that about 500,000 people live in these developments. Since 1 April 2011, the Multi-Unit Developments Act 2011, known to us all as the MUDs Act, regulates the ownership and management of the common areas of multi-unit developments and provides for the setting up of owner management companies to manage such areas. A multi-unit development is a development with at least five residential units where facilities for amenities and services are shared. The Act provides that owner management companies must be set up and the common areas of the development transferred to it by the developer who sells the units.

That Act and this Bill place a series of complex obligations on volunteer directors and leaves them straddling a couple of Departments under company law. My Bill aims to provide good governance within the owner management company sector, to provide information on the duties and responsibilities of owner management companies and to provide training to members of owner management companies. It also aims to make recommendations to the Minister for Business, Enterprise and Innovation on the regulation of owner management companies, including a recommendation that tenants living in multi-unit developments have representation, to assist in the reconciliation of disputes in owner management companies on a non-binding basis and to publish an annual report on the work of owner management companies. The Bill would also transfer responsibility for this sector from the Department of Justice and Equality to the much more relevant Department of Housing, Planning and Local Government.

I thank the Minister for the engagement I have had with his officials in recent days. This Bill is to provide assistance to many people who urgently need it. Many managed estates across this country are effectively insolvent and others are underfunded. About 90% of managed estates have sinking funds that are insufficient to meet any issues that may arise. There are also issues with management fee collection as well as many other similar issues, a large proportion of which eventually end up in the courts. I do not believe that needs to happen in many of those cases, particularly if we had an ombudsman for this sector providing the type of advice which may be needed. This type of ombudsman exists in Britain, our nearest neighbour, and that body is funded by a small levy on each management fee paid. In Ireland, the fee to provide this service would be about €1 per management fee paid. That would be good value to assist in trying to regulate this sector properly and improve the quality of life of people living in these managed estates.

All of us have experience - I do in Dublin Fingal and I am sure that is also the case in counties Laois and Offaly - of managed estates that have been run down and volunteers who do not have the time or the expertise to be able to manage the day-to-day affairs of the estates and who have given up. I have come across another and more worrying situation quite regularly. I refer to estates where block insurance is not in place because fees have not been paid and consequently there is no money to pay for insurance. That is why Fianna Fáil has proposed, and had passed on Second Stage, a small reduction for principal private residences in the local property tax of one third of the management fee or €300, whichever is lower. That is recognition that in many instances people are paying the local property tax and management fees and are paying on the double for some services. The reduction would only apply if people had paid their management fees in full.

One other provision is also urgent. I refer to the need for all management companies to report on their sinking funds separately and have separate accounts for those sinking funds. We should heighten the provision for sinking funds in managed estates. Provision should also be made regarding what assistance local authorities will give to managed estates. In some instances, local authorities have been able take over underground services such as foul water, drainage, public lighting, roads and paths. We should be setting guidelines concerning how local authorities should interact in those cases. If we do not get a grip on this sector, where 500,000 people live, we are storing up further problems to be faced in the future. I thank the Minister sincerely for his interaction and engagement on this legislation. I believe it will make a real difference to a significant portion of our population.

I am supposed to call the Minister now but I wonder, however, since so few of us are here, if we might hear from Deputy Ó Snodaigh first and then from the Minister.

Gabhaim buíochas don Aire agus don Teachta Darragh O'Brien as an mBille seo a chur os comhair an Tí agus as an deis a thabhairt dúinn an cheist chuibheasach simplí seo a phlé. Tá mé sásta go bhfuil an méid atá le rá ag mo pháirtí ag tacú go hiomlán leis an mBille. My understanding is that the Bill seeks to establish an ombudsman for owner management companies outlined by Deputy Darragh O'Brien. It is intended to set up a body to train board members of owner management companies and to assist them in dispute resolution and in making recommendations on the future development and management of the sector.

Any of us in this city and throughout the country who have dealt with management companies and-or been affected by them have seen how disparate is people's application to their responsibilities. We have seen how simple issues escalate that could have been resolved quickly.

One of the important aspects of the Bill is that it aims to assist in dispute resolution. The owner of each residential unit is entitled to membership of the owners' management company and is generally entitled to one vote. Where alternative arrangements are already in operation, they may be continued provided that they are just and equitable. That is the key. There have been different models over the years and the sooner we get to a single, standard model that can be used for management companies generally, the better. A great deal of work has been done. Management companies were not a major issue prior to the commencement of the current century. It was not an issue of which I was aware before that. Once the Celtic tiger took off and people started to live more and more in apartment blocks, issues started to emerge and the matter came to occupy its current place of importance. It is taking up much more of our time and that of the Government than it should as we have tried to catch up with the need to legislate in this area. That is why I am enthusiastic in my support for the legislation.

Owners' management companies are involved in the conveyancing procedure for individual units. If a unit is subsequently sold or transferred to another person, membership of the management company should transfer automatically to the new owner. It should not be necessary to execute the transfer formally or to have it approved by the directors of the company. Again, that is a logical step but sometimes logic must be set down in law. Owners' management companies must comply with company law as well as with the specific obligations imposed by the Multi-Unit Developments Act 2011. All directors are limited to a term of three years. The main obligations of an owners' management company are extensive and include annual reporting, collection of service charges and dispute resolution. However, they are no more onerous than the obligations imposed in many other areas of company law and the like. As outlined by Deputy Darragh O'Brien, the Apartment Owners Network and the Society of Chartered Surveyors Ireland made a submission recently to the Joint Committee on Housing, Planning and Local Government. In that submission, they estimated that nearly 500,000 people lived in multi-unit developments in Ireland, the majority of which are run by owners' management companies. It is a substantial number of people who are dependent on such accommodation. It demonstrates the scale of the matter. I do not have the figure from 20 years ago but I can guarantee that it was a great deal smaller.

I understand that membership of the boards of owners' management companies is voluntary in nature and comes with a significant responsibility to the residents they represent. I have no doubt that there are significant complexities and challenges involved in trying to please everyone at all times. The role is similar to those of trustees in charitable companies and the members of other voluntary boards. In the past, such roles were not as onerous but now there is a greater responsibility on foot some of the issues that have emerged. Management company boards are no different. As such, education must be made available along with the necessary supports for those acting on boards in a voluntary capacity. They must not be left in the lurch and expected to accept blame when they have not had the training required to address any issues which arise. While owners' management companies are rightly governed by company law, board members are generally unfamiliar with its intricacies. The key is to ensure they have that education.

I agree with Deputy Darragh O'Brien that the Property Services Regulatory Authority has the capacity and is best placed to assist those who run these companies for the greater good of those who dwell in multi-unit developments. It is proposed in section 2 of the Bill to extend the remit of the authority by including an advisory role which is key to provide the information and training required by board members. As a result, the issue of the resourcing of this additional role arises. While the proposed role would not be hugely onerous, it is important to be aware that when one extends the remit of any body, a small cost is generally involved. Perhaps the Minister will encourage his colleague, the Minister for Finance, to put the necessary funding in place to help the authority to develop this aspect of its remit as extensively and as quickly as possible. That would be in keeping with the intention to deliver this legislation as quickly as possible and without any delay. It cannot be delivered quickly if the resources are not in place.

I acknowledge the importance of the Bill and the interest that Deputy Darragh O'Brien has taken in this matter over a long number of years. I thank him for tabling this Private Members' Bill which provides the House with the opportunity to discuss matters connected with the operation of owners' management companies, or OMCs, in multi-unit developments. We have seen a significant increase in the number of multi-unit developments in recent times and this trend is set to continue. Large numbers of people are now living in apartments in multi-unit developments in cities and towns all over Ireland. It is essential, therefore, that our legislation provides a supportive and sustainable framework for apartment living and that it is kept up to date and relevant to the needs of those who, whether as owner occupiers or tenants, live in apartments. This includes the company laws that underpin OMCs and their activities. Particularly welcome is the emphasis in the Bill on the promotion of good governance in the management of OMCs, the provision of information and training services and the resolution of disputes by means of mediation rather than through costly and possibly lengthy, legal proceedings.

I assure Deputy Darragh O'Brien that the Government is supportive of the aims and objectives of the Bill. However, which is not a word I like to use as it is a bit like inserting a "but"-----

Is this the amendment coming?

Let me rephrase. I strongly support the Bill and am very keen to work with Deputy Darragh O'Brien to improve it. As drafted, the Bill requires a fair degree of analysis to ensure that it can be effective in achieving its aims. In this context, the policy experts in my Department have identified a number of legal and practical difficulties that will necessitate detailed consultation with the Office of the Attorney General and the Office of the Parliamentary Counsel. In particular, I am anxious to reduce as far as possible the risk of legal challenge to the imposition of functions on the Property Services Regulatory Authority that are unrelated to its current licensing function and the operation of its redress mechanisms. For that reason, I propose a six-month delay to permit my officials and me to engage with Deputy Darragh O'Brien on the detail of the Bill's provisions. The delay is for no other reason than that. I acknowledge the Deputy's goodwill regarding my suggestion. He and I enjoyed a previous working relationship in our respective roles in respect of the foreign affairs and trade portfolio and I am confident that we can work together to achieve a positive outcome.

The House will recall that statutory provisions relating to multi-unit developments are set out in the Multi-Unit Developments Act 2011. The 2011 contains provisions relating to the ownership and management of the common areas of such developments as well as a number of supplementary measures relating to management structures and dispute resolution.

This Act imposes an obligation on developers to establish an OMC in respect of a multi-unit development prior to the sale of the first residential unit in the development. It means that the purchaser of an apartment in such a development acquires a long lease on the residential unit and, in addition, he or she becomes a member of the OMC which owns the common areas of the development. On the sale of an apartment, membership of the OMC transfers automatically to the purchaser of the unit concerned.

The OMC model of ownership of common areas of a multi-unit development is based on the recommendations of a Law Reform Commission report published in 2008 titled "Multi-Unit Developments". Publication of the Law Reform Commission recommendations was based on a lengthy consultation process during which all relevant stakeholders had the opportunity to make submissions. At that time, the Law Reform Commission did not recommend a specific oversight and enforcement mechanism for OMCs because such companies are subject to company law provisions, including their own memorandum of association, and are subject to oversight by the Company Registration Office and the Office of the Director of Corporate Enforcement.

The Law Reform Commission also pointed out that the then Consumer Protection Authority, now incorporated into the Competition and Consumer Protection Commission, had an important role to play in providing information and advice to intending purchasers of residential units in multi-unit developments. This is a real issue and I listened closely to what Deputy Darragh O'Brien said on the practical problems and challenges that arise on a day-to-day basis. I see these in my constituency office, for example, and saw them during the roll-out of many of these schemes. It is fair to say that they were organically rolled out in the context of Celtic tiger development. I engaged as a solicitor on some conveyancing issues and I acknowledge that there are still some practical issues to be resolved. Many of these arise from a lack of information and understanding and perhaps even a lack of appropriate training. It is extremely important in the context of further developments that we work on many of the problems identified by Deputy Darragh O'Brien. They are not unique and particular to the Dublin Bay North constituency and are very much evident in Kildare, as they are in my constituency of Laois-Offaly.

The 2011 Act acknowledges the risk of disputes arising in the enforcement of rights and the performance of obligations imposed by its provisions and makes provision for the resolution of such disputes in sections 24 to 28 of the Act. While the Act does not contain specific provisions in relation to mediation, it clearly encourages and supports the resolution of disputes by means of mediation by requiring any party intending to launch legal proceedings to state whether mediation or another dispute resolution process has been attempted in order to resolve the dispute. This is required under section 24(2), while section 27 provides that the court may, of its own motion or at the request of one of the parties, direct the parties to engage in a mediation conference in order to resolve their dispute. The Mediation Act 2017, which entered into force on 1 January 2018, has supplemented these specific mediation promoting provisions in the Multi-Unit Developments Act 2011. This Act seeks to promote and facilitate the settlement of disputes by mediation as an alternative to potentially costly and possibly lengthy legal proceedings.

For all of these reasons, I very much welcome the proposals made by Deputy Darragh O’Brien in his Bill, which seek to promote mediation as a means of resolving disputes relating to OMCs. The proposals in the Bill are entirely in line with the general approach of successive Governments to dealing with this issue.

At this point, I will briefly turn to some of the legal and practical issues that arise in the Bill as drafted, which will require detailed consultations with the Office of the Attorney General. I pledge to keep in close contact with Deputy O'Brien as matters develop. The role of the Property Services Regulatory Authority is to operate a licensing system for auctioneers, estate agents and property management agents, and to investigate complaints in the provision by them of property services. It does not have a role in relation to OMCs. Where complaints are upheld by the authority, it may impose appropriate sanctions, which range from revocation or suspension of licences in the case of serious infringements to the issuing of cautions or reprimands in the case of less serious breaches. It does not operate a mediation service in respect of any of the property services that it controls and supervises. The authority comprises of not more than 11 members who hold office on a part-time basis.

Section 19 of the Property Services (Regulation) Act 2011, which was enacted in the same year as the Multi-Unit Developments Act, provides for the appointment of a chief executive to implement the policies and decisions of the authority and to manage and control the authority’s staff, administration and business. In other words, there is a clear distinction drawn between the role of the part-time authority members and the functions of the professional staff, including the chief executive officer. This is the standard structure for public authorities of this kind.

At the heart of Deputy O'Brien’s Bill is the proposal in section 3 to establish a new statutory office of ombudsman for management owner companies and to locate that office in the Property Services Regulatory Authority. This raises a number of questions. Apart from the appointment of such a person as an authority member, it is unclear how the appointee would function within the authority structure or whether staff, including the chief executive, would have any role in discharging the proposed ombudsman's functions. This will need to be teased out. A further issue arises regarding the authority’s self-funding model based on licence fee income. Under section 25 of the Act, the authority is required to recover fees for the performance of functions and the provision of its services. This means that the ombudsman would be required to charge fees for his or her services. Otherwise, there would be a risk that the allocation of funding derived from licence fees towards the provision of services unrelated to the control and supervision of property services could result in legal challenges by licensees. Both of these matters, namely, the proposed role of the ombudsman within the authority and future funding arrangements, will necessitate, therefore, detailed consultations with the Office of the Attorney General. I will be happy to discuss these issues further with the Deputy once I have received these advices.

Insofar as specific functions of an ombudsman are concerned, it will also be important to avoid, as far as possible, overlap with or, more seriously, conflict with the functions of and services provided by other statutory bodies. For example, the Office of the Director of Corporate Enforcement has an important statutory duty to promote compliance with the Companies Acts and to bring those who flout company law provisions firmly to account. In like manner, the Competition and Consumer Protection Commission, in the exercise of its important consumer protection function, provides important information and guidance on OMCs on its website, including useful materials on service charges, sinking fund and the role of the developer, property management agents and house rules, all of which are subject to some challenge at present in respect of information, role, function and, more important, as Deputy O'Brien correctly stated, action to provide solutions.

I know Deputy O’Brien will be familiar with positive changes by the Residential Tenancies Board which now operates as a fast-track dispute resolution service based on telephone mediation. This is a free service designed to resolve disputes between tenants and landlords who have an issue with their tenancy. The process is not based on examining evidence or determining who is right or wrong but, rather, focuses on how parties can resolve their dispute by engaging together.

Section 1 seeks to make provision for proxy voting in OMCs. However, I understand that section 183 of the Companies Act 2014 may already deal with that matter. Section 183(1) of the 2014 Act provides that any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person, whether a member or not, as his or her proxy to attend and vote instead of him or her. In that context, there would not appear to be a need for this provision.

Before concluding, I again thank Deputy O’Brien for tabling this Bill. It is very important that the House consider these issues. I also listened closely to what Deputy Ó Snodaigh had to say and I welcome his contribution. I will be happy to deal with some of the issues raised by the Deputy and I will continue to so do in the context of the progression of this legislation.

As I indicated, I am broadly supportive of the aims and objectives of the Bill, especially its focus on promoting the resolution of disputes by means of mediation. However, as the Deputy will understand and appreciate, certain proposals in the Bill require deeper analysis and consideration, in particular the positioning of the ombudsman function within the membership of the Property Services Regulatory Authority as well as the future funding needs. For this reason, I have tabled a motion today to delay Second Stage of the Bill for a period of six months. This will allow me and officials in my Department to consult Deputy O’Brien to find a way forward. This timeframe will also allow necessary consultations with the Office of the Attorney General to take place. My office has already been in touch with Deputy O’Brien and I acknowledge what he said in that regard. It is my intention that we will be in a position to make early progress on these issues.

It only remains for me to move amendment No. 1.

I move amendment No. 1:

To delete all words after “That” and substitute the following:

“Dáil Éireann resolves that the Bill be deemed to be read a second time this day six months, to allow the Deputy to address shortcomings in the Bill including:

(a) further examination required as to whether the proposed establishment of an office of “Ombudsman for Management Companies” in the Property Services Regulatory Authority is the appropriate approach given existing legislation on Owners’ Management Companies contained in the Multi-Unit Developments Act 2011;

(b) clarification that, if an Ombudsman is to be appointed, the proposed Bill does not impose functions on the Property Services Regulatory Authority that conflict with its existing statutory functions;

(c) clarification that, if an Ombudsman is to be appointed, concerning the relationship between the “Ombudsman for Management Companies” and the Property Services Regulatory Authority, as well as the Chief Executive and staff of the Property Services Regulatory Authority;

(d) clarification, if an Ombudsman is to be appointed, of the manner in which the Ombudsman function is to be funded;

(e) concerns regarding the proposal that the Ombudsman, if appointed, should assist in reaching resolutions of disputes in multi-unit developments, which would appear to conflict with the existing dispute resolution mechanism in the Multi-Unit Developments Act 2011 and the provisions of the Mediation Act 2017;

(f) consideration, if an Ombudsman is to be appointed, that the role of the Ombudsman does not conflict with the statutory functions of other bodies such as the Office of the Director of Corporate Enforcement.”.

I thank the Minister for his positive response. Work on the Bill is doubtless needed, particularly in view of the fact that it was drafted some time ago and selected by lottery. Nevertheless, and as we have all acknowledged, it is important. I also thank Deputy Ó Snodaigh and Sinn Féin for their support.

This issue applies throughout the country. We need to pass not only the Bill before the House but also a wider package of legislation to provide supports. The Bill will be a start in that regard. If an ombudsman for the sector is established, everything else will be able to flow from that one point of contact. Much work is required within the sector. Many residents in estates, particularly where management companies are bordering on insolvency and are not operating as they should, feel helpless and fall between the stools of local authorities and the Government. The type of office for which the Bill would make provision would, therefore, be of great assistance.

I will support the Minister's amendment. It makes sense to try to get the legislation right. The Minister's office has indicated that our first meeting with officials to tease out the Bill will be held the week after next. I welcome that we are not putting the matter on the long finger and I accept the bona fides of the Minister and his officials in the Department in the context of their engagement. I look forward to working with the Minister and Deputy Ó Snodaigh to ensure that what is provided for in the Bill becomes a reality.

Amendment agreed to.
Motion, as amended, agreed to.
The Dáil adjourned at 3.50 p.m. until 2 p.m. on Tuesday, 21 May 2019.