Multi-Unit Developments Bill 2009: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I am pleased to take this opportunity to introduce the Multi-Unit Developments Bill 2009 in this House and I look forward to the discussion of its provisions.

I thank the Law Reform Commission for its work in this area and, in particular, for its report and reform recommendations. The National Consumer Agency has taken a keen interest in this area and has engaged with many of the relevant bodies with a view to improving consumer protection in advance of this legislation. The Office of the Director of Corporate Enforcement has also been active and has produced an excellent publication entitled "Company Law Handbook on Residential Property Owners' Management Companies".

The Long Title of the Bill captures precisely the Government's objective in bringing forward the draft legislation. It is described as "an Act to amend the law relating to the ownership and management of the common areas of multi-unit developments and to facilitate the fair, efficient and effective management of bodies responsible for the management of such common areas, and to provide for related matters".

The Bill forms the centrepiece of the Government's strategy to deal with multi-unit developments and management companies. Senators will no doubt recall that I introduced the Property Services (Regulation) Bill in this House last month to put the Property Services Regulatory Authority on a statutory footing and to introduce a comprehensive licensing system for property services providers, including property management agents. That Bill's provisions dealing with management agents will therefore complement the provisions of this Bill which deals with the owners' management companies for whom they provide property services.

In its report on multi-unit developments, the Law Reform Commission identified key issues to be addressed in new legislation. These include: when exactly the property management company is to be established, and by whom; the timing of the transfer of ownership of common areas from the developer to the company; the mechanics of taking control of the company by the company members, that is, the apartment owners; internal governance arrangements for owners' management companies; the basis on which the annual service charge should be calculated and apportioned among members; the issue of whether — and if so, when — to establish a sinking fund; the problems arising when property management companies are struck off the companies register because of non-compliance with company law provisions; and the lack of a mechanism for the resolution of disputes in the multi-unit development sector.

These issues, now addressed in the Bill, are very complex. In the preparation of the Bill it was necessary to engage in intensive discussions with several Departments, the Office of the Attorney General and relevant interests to ensure that all issues of concern in this area were being met.

The Bill creates a completely new framework for multi-unit developments. As far as possible, its provisions have been designed to apply both to new and existing multi-unit developments. Rather than entering into the detail of the Bill's provisions, I propose to give an overview of how the proposed new arrangements are intended to operate in practice.

Section 1 is a standard provision which contains essential definitions and I will mention a number of them specifically. A "multi-unit development" is defined as land on which there stands erected a building which, or a part of which, is divided into units of which not less than five are designed and intended for residential use. I am aware that there are multi-unit developments with fewer than five units and that provision must also be made for them. For that reason, section 1(3) provides that particular sections which are specified in the Schedule to the Bill will apply to developments with two, three or four apartments.

The "common areas" of a development are defined as areas such as access and side roads, architectural features, circulation areas, footpaths, internal common stairways, open spaces, parking areas, utility rooms and that portion of the roof or exterior of any building not intended to form or not forming part of an individual apartment. An "owners' management company" means a company established for the purposes of becoming the owner of the common areas of a multi-unit development and responsible for the management, maintenance and repair of such areas. Some existing management bodies are not companies under the Companies Acts, so I am providing in section 1(4) that a reference to an owners' management company shall be construed as including other bodies such as industrial and provident societies, partnerships, unincorporated bodies and so on.

Section 2 is a key provision. The intention is to ensure that the ownership of the common areas of a development are transferred to the owners’ management company before any apartments are sold. This will prevent situations arising where a developer retains control of the common areas long after they should have been transferred to the control of the apartment owners. The section provides that a unit in a new multi-unit development cannot be sold unless an owners’ management company has been established by the developer and ownership of relevant parts of the common areas have been transferred to it. Transfer of the common areas is subject to retention of the beneficial interest by the developer. The extinguishment of the retained beneficial interest upon completion of the development is provided for in section 9.

The Bill also deals with situations where some units in a development have been sold prior to enactment of the Bill but the development has not yet been completed, and also where a development has been completed but transfer of the common areas has not yet taken place.

Section 3 provides that in cases where some units in a development have already been sold prior to the coming into operation of this section, the developer must transfer ownership of the relevant parts of the common areas to the owners’ management company within six months. The transfer here is also subject to the retention by the developer of the beneficial interest, pending completion of the relevant common areas. In section 4, I have provided that in the case of completed developments the developer must transfer ownership of the common areas to the relevant owners’ management company within six months of the coming into operation of the legislation.

In framing the Bill, I was determined to ensure that the transfer of the common areas did not absolve a developer from obligations to complete a development. Therefore, section 5 makes it clear that the transfer of ownership of common areas does not relieve a developer of his or her responsibility for completing the development in compliance with the Planning and Development Acts and the Building Control Acts.

I have provided in section 6 that on the sale or assignment of an apartment, the vendor's membership of the owners' management company will transfer automatically to the purchaser. The company will be obliged to give the purchaser the share or membership certificate as soon as practicable following notification of the change of ownership. The company must also ensure that the register of members is updated and complies with other relevant requirements under the Companies Acts.

Following early transfer of the common areas, section 7 provides that the developer retains rights to pass and re-pass over these areas to complete the development. However, a developer must indemnify the owners’ management company against any claims made in respect of acts or omissions by the developer in the course of completion works. More generally, there will be an obligation on a developer to minimise inconvenience to residents, and to ensure that access is available to them at all reasonable times, and a reciprocal obligation on the owners’ management company not to obstruct the developer in exercising any rights to the development or to adjoining land.

It appears that in certain multi-unit developments, especially early developments, the ownership of certain parts of the common areas may have been allocated to individual unit owners. For example, owners of apartments on the top floor may also own the roof and be responsible for any repairs that might prove necessary. Section 8 provides that in such cases, the unit owners concerned and the company may agree to transfer the ownership of that interest, and responsibility for it, to the company. Where either party considers that consent to the transfer is being unreasonably withheld, they may make an application to the court under the dispute resolution mechanism in section 18.

The transfer of ownership of the common areas to the owners' management company is subject to retention of the beneficial interest in the property by the developer. Section 9 provides the mechanism by means of which the beneficial ownership of the common areas is reunited with legal title in the owners’ management company. When a development has been completed, the owner of the beneficial interest in the common areas must, as soon as is practicable, make a declaration that such interest stands extinguished for the benefit of the owners’ management company. The declaration must be made with the consent of any mortgagee or owner of a charge on the property, but that the consent may not be unreasonably withheld.

Section 10 provides for the extinguishment of beneficial interests where a development has not been completed. It provides that where 60% of the unit owners request the beneficial owner to make a statement that the beneficial interest stands extinguished, the owner must make that declaration unless “good and sufficient cause” is shown. For example, a good and sufficient cause might be that granting the request would interfere in some way with completion of the entire development. In the event of a dispute, an application to court under section 18 may be made.

Section 11 makes it clear that an owners’ management company shall have a right to carry out repairs or maintenance on a part of a multi-unit development which is not within its control where the repairs are reasonably necessary to ensure the safe and effective occupation or the peaceful enjoyment of occupation of any apartment. It also provides that the company may recover the costs of carrying out such repairs or maintenance from any person, including the developer, who had responsibility for doing so.

Section 12 applies to new multi-unit developments commenced after the coming into operation of the Act. It provides that one vote shall attach to each unit in a development, and that each vote shall be of equal value. To ease identification of such companies, the words "owners' management company" — which may be abbreviated to "OMC" — must be included in the name of any such owners' management company.

Arrangements for the governance of owners' management companies constitute an important part of this Bill and they are set out in sections 13 to 17. In framing these provisions, I have been determined to ensure openness, transparency and accountability.

Section 13 deals with the holding of annual meetings and the content of annual reports of owners’ management companies. The annual reports of the company must include details of income and expenditure, and assets and liabilities; the annual service charges and sinking fund account; planned expenditure on maintenance and repair; insurance cover and contracts entered into by the company. Advance notice of the annual general meeting must be given to each member 21 days before the meeting and a copy of the annual report must be provided at least ten days beforehand. The annual general meeting must take place within reasonable proximity to the multi-unit development unless otherwise agreed by 75% of the members of the company. These specific obligations are in addition to any other obligation or duty on the company under any Act, statutory instrument or rule of law.

One of the major difficulties faced by apartment owners is the lack of transparency surrounding the annual service charge. In many cases, owners are unsure what services are provided for the payment or are dissatisfied with the service provided. To address this issue, section 14 specifies that the owners' management company must establish a scheme for annual service charges to fund expenditure on the maintenance, insurance and repair of common areas within its control and for the provision of common services, such as security, legal, accounting and so on. The annual charge must be approved by a general meeting of the members of the company. In any case in which more than 75% of the members do not approve the proposed charge, the existing charge shall remain in place until the adoption of a new charge. Where no service charge applies, the directors of the company may determine a scheme to operate for a period of four months. This section also places an obligation on apartment owners to pay the annual service charge. The annual service charge must be calculated and apportioned on a transparent and fair basis. Moreover, proper records of expenditure must be retained by the owners' management company.

Payment for "snagging" of the common areas has arisen as a problem for many developments. Section 14 provides that the service charge must not be used to cover costs which are the responsibility of a developer or builder, unless more than 90% of the members vote in favour of such use. In such cases, the owners’ management company may recover the cost from any person, including the developer.

A further issue of widespread concern at the moment is whether to establish a sinking fund. It appears that many developments have not established such a fund, or if established, it may not be adequate to meet the costs of any major repairs or renovations. This can become a very serious problem if, for example, the lift has to be replaced or the roof has to be repaired. Section 15 deals with this issue by providing that an owners' management company must establish a sinking fund for spending on refurbishment, improvement or maintenance of a non-recurring nature of the multi-unit development. Unit owners will be obliged to make contributions to it which will be calculated on the same basis as the annual service charge. All multi-unit developments should have some form of sinking fund and that is why I have provided that a minimum sinking fund contribution of €200 per unit per year will apply to all developments. A higher contribution may be set where members of the company agree.

The sinking fund must be established within three years of the transfer of ownership of a unit in the development or, in cases where a development is already in existence when this section comes into operation, within 18 months of that date. Contributions to the sinking fund must be held in a separate identified account. Any disputes about the sinking fund may be the subject of an application to court under the dispute resolution mechanism in section 18. Section 16 provides that the owners' management company may issue an aggregate request for payment under sections 14 and 15. Such a request must outline the basis for the calculation of each charge.

With a view to enhancing the quiet and peaceable occupation of units within multi-unit developments, section 17 permits owners of the management company to make house rules. Such rules must be consistent with the covenants contained in title deeds and must be agreed at a meeting of members of the company. Where an apartment is let, it shall be a term of the letting that it is subject to the observance of the rules by the tenants. The rules may provide for the recovery by the owners' management company from any person of the reasonable cost of remedying a breach of the rules.

Another problem to be addressed is the lack of an appropriate dispute resolution mechanism through which aggrieved unit owners may seek redress when disputes arise. Section 18 establishes a new court jurisdiction for the resolution of disputes in multi-unit developments where attempts at mediation have failed. An application shall state the circumstance giving rise to it and details of the order or orders requested. It must also state whether attempts at mediation have been made.

On hearing the application, if the court is satisfied that a right has been infringed or an obligation has not been discharged, it may make such order or orders as it deems appropriate. Such orders may relate to the legal documentation concerning the development, transfer of control issues, issues regarding sinking funds, and completion of the developments. In making an order, the court must be satisfied that all parties likely to be affected by the making of an order have received sufficient notice of the application. The court is also given the power to make such ancillary orders as it considers necessary to give effect to any order or orders made by it under the section.

Any person referred to in section 19 may apply to the court for an order to enforce any rights conferred or obligation imposed under the Act. Section 20 provides that the Circuit Court, concurrently with the High Court, will have jurisdiction to hear and determine an application under section 18.

Mediation should be used wherever possible to resolve disputes and that is why I have included sections 21 and 22 in the Bill. Section 21 provides that at the request of any party to an application under section 18, the court may, at any stage during the course of the proceedings, direct all parties concerned in the application to meet in a mediation conference. It further provides that where a mediation conference is directed by the court, all parties must comply with the direction. Other relevant provisions in the section relate to issues such as the time and place for the holding of a mediation conference, the appointment of a chair, confidentiality and the costs of the conference. Section 22 provides that the chairperson of a mediation conference must submit a report to the court on the outcome of the conference. A copy of the report must also be given to the parties to the application. Where the court is satisfied a party to the application did not comply with a direction to engage in the mediation process, it may make an order as to costs.

Section 23 is a saver provision which provides that nothing in the Act shall derogate from any power vested in any person or court, by statute or otherwise, and the powers conferred in the Act shall be in addition to and not in substitution for any such powers.

Another problem that has arisen with multi-unit developments has been the striking off of owners' management companies from the Companies Registration Office. This can have very serious consequences for apartment owners in the development. It means, for example, that an owner wishing to sell his or her apartment cannot do so until the company is restored to the register. At present, when a company is struck off, there is a one-year period during which the company can apply to the Companies Registration Office for restoration to the register. After one year, the company must apply to the courts for restoration. This is costly and cumbersome. Section 24 addresses this problem by extending to six years the period within which an owners' management company may be restored to the register without recourse to the courts.

Section 25 provides that the benefit of any guarantees or warranties relating to any materials used in the construction, repair or improvement of a multi-unit development shall stand transferred to the owners' management company on the transfer of the land. Section 26 places restrictions on owners' management companies entering into long-term contracts with providers of goods and services, for example, insurance contracts or broadband services. Such companies will not be permitted to enter into contracts for a period in excess of three years. In addition, any contract entered into by the company cannot include a clause imposing a penalty on the company if the contract is terminated after a three-year period.

Section 27 provides that the regulation-making powers conferred on the Minister for Justice, Equality and Law Reform in sections 14, 15 and 17 shall be exercised in consultation with the Minister for Enterprise, Trade and Employment and the Minister for the Environment, Heritage and Local Government. The Schedule to the Bill specifies provisions which apply to multi-unit developments comprising more than two units but fewer than five units. The relevant sections are sections 13, 14, 15, 17, 18, 19, 20, 21 and 22.

The provisions set out in this Bill will, when enacted, provide much improved consumer protection for the owners of apartments in multi-unit developments and will serve to assure the public that high standards will be applied and maintained in the sector. I commend the Bill to the House.

I thank the Minister for his comprehensive introduction of the Bill. This is welcome and is very much needed. In many ways, it is long overdue. Major problems existed for apartment owners when they could not get ownership of the development from the original developer. Unfair and often exorbitant service charges were imposed and, in many cases, owners were unaware of the basis by which service charges were calculated. The problems created were tolerated and there was a lack of transparency and awareness. The lack of regulation exacerbated this problem.

The Bill is designed to address a number of problems faced by apartment owners, such as how the complex is maintained and funded. It reflects a number of policy ideas proposed by Fine Gael in its policy document, A Fairer Deal for Modern Living, published in May 2008. In general the Bill is welcome and is well drafted in broad measure.

More than 60% of new residential dwelling units built in Dublin are apartments. The nationwide figure is 25%. We should not have had to wait until there was such extensive apartment dwelling and ownership before introducing this legislation. There have been many calls for regulation of this sector and it is extraordinary it has taken so long for it to be introduced. More than 500,000 people live in multi-unit developments. Between 50,000 and 100,000 people live in traditional houses in mixed developments which are the subject of management charges in many cases. That is an issue not addressed in the Bill. Why is it not addressed? It could be accommodated in this legislation and it would be appropriate to do so. A total of 4,600 management companies are registered with the Companies Registration Office and 400 individuals or companies offer property management services. In many cases the latter are unlicensed and unregulated. Combined with the Bill recently introduced by the Minister, the Property Services (Regulation) Bill, and other legislation governing this complex area that involves planning law, land law, conveyancing law and landlord and tenant law, this Bill fits the complex of legislation and ties up many loose ends in property ownership. There are a multitude of problems and some have been outlined by the Minister. These include cases where the management company remains controlled by the developer, services are poor, fees are not paid, the title to common areas is not handed over to the management company, there is no sinking fund to ensure the long-term maintenance and management companies going into debt or being struck off the companies register, leaving the residential units unprotected, uninsured and difficult to sell in many cases. There is also the issue of mixed developments, which I have mentioned. Where there are gated communities, these problems tend not to arise but where there are mixed developments of apartments and normal residential dwellings, we must find an accommodation within this legislation for management companies.

A number of features of the Bill have been outlined by the Minister and they are welcome. These include the designation of owner management companies, the provision whereby apartments in new developments cannot be sold unless an owners' management company has been established at the expense of the developer, the obligation on the developer to transfer ownership of the common area and that the transfer of same does not relieve the developer of his responsibilities in the completion of the development. There is also the issue of voting rights at annual general meetings, the provision for service charges to be approved at general meetings and the basis upon which they are to be calculated, along with the services they cover. The provision for a sinking fund, house rules and so on are all very necessary and welcome.

There is a dispute resolution system proposed in the Bill, where there is recourse to the courts — particularly the Circuit Court — and this is a puzzling aspect. In the recent Property Services (Regulation) Bill, we have a different system to regulate that sector and it seems incongruous that in this case we do not have recourse to the national property services regulatory authority. That body could play a role in resolving many of the disputes that arise in the area and if there are concerns regarding title and so on, they would have to be adjudicated upon by the courts. It does not seem congruous to have a different system of dealing with issues and problems arising under the legislation as opposed to the Property Services (Regulation) Bill.

There is a provision for an extended period during which a company may be restored to the companies register and where the contract restrictions controlling owners and management companies entering into long-term contracts with providers of goods and services would not extend beyond three years. All those features are to be welcomed.

The questions I have relate to the mixed developments and why these cannot be accommodated within this legislation. With regard to the system of resolving disputes, why can the national property services regulatory authority not play a role? I know the Minister has been facilitated by the very comprehensive reports of the Law Reform Commission in this area, and particularly by the draft Bill from the commission. Many features of that draft Bill were very appropriate and I can see certain deviations from the draft in this legislation. I have a number of questions on that.

I do not want to go into the detail of the draft Bill from the Law Reform Commission. We are less than emphatic about the responsibilities in section 2, where there is reference to "a person to whom this section applies". The Law Reform Commission Bill expressly states the responsibilities of the developer and I do not understand why we go about identifying those responsibilities in this circuitous route. There is a definition of completion of a development in the Law Reform Commission Bill, which refers to certification by a professional person. There is no definition in this Bill of substantial completion and it is important that the term, as used in section 4, is defined.

The Law Reform Commission recommends the inclusion of several rules in the articles of association of owner management companies, which are not included in this Bill. The commission also recommends a proxy for owners at management committee meetings but this recommendation has not been followed. Why is that? The commission wanted the annual directors' report to include a declaration that the development is fully compliant with fire and safety legislation, and the Bill merely requires that the annual report include whether a fire safety certificate has been issued.

The Law Reform Commission report also recommends that units could not be sold in a development where a management committee had not filed returns to the previous 24 months. It would seem that this could be a welcome inclusion in the Bill and the commission's Bill excludes management agencies from carrying out the function of company secretary of an owners' management company. I do not see that reflected in the Bill. The commission also recommended that a unit owner needs to seek permission of the board of directors of the owners' management company before making any external or structural alteration to the unit owner's unit. This does not appear to be contained in the Bill.

These specific questions can be dealt with on Committee Stage and there may be a very good reason they are not included. I welcome the Bill, which will receive the support of this side of the House, although we will put down amendments. I compliment those bodies which have played a big role in researching this issue. The Law Reform Commission's consultation paper and report have been excellent. The National Consumer Agency produced a report on management fees and service charges levied on owners of property in multi-unit dwellings, which is very important in this regard. The Irish Property and Facility Management Association did a position paper in June 2008 and the Office of Director of Corporate Enforcement produced a property owners' guide to company law. There was also a report from the auctioneer and estate agent review group from 2005.

All these reports contributed to a very thorough examination of the entire area and grounded the basis for this Bill very well. I welcome the legislation and thank the Minister for attending the House.

I welcome the Minister to the House and this Bill, which is not before its time. As with Senator Regan, I compliment the Law Reform Commission for much work done in the background, the Minister and his staff. We are entering uncharted waters as 20 years ago this was unheard of. As a result of the Celtic tiger and the building and development boom, we have a substantial amount of multi-unit developments and not only in Dublin. We sometimes believe this is restricted to the capital but it also applies to developments in Cork, Galway and most towns and some villages around the country.

The Bill proposes to provide a statutory framework for several issues, including the obligatory establishment of an owners' management company and the transfer of common areas to same prior to the sale of any units, or within six months of the section coming into force in the case of existing completed or incomplete developments. What is important is that it applies not only to work in progress but also to existing developments.

The Bill provides for regulation of the internal governance of owner management companies, providing one vote of equal value per unit, the obligation to hold an annual general meeting and the furnishing of each member with an annual report which will include details of, among other things, the assets and liabilities of the company and statements on service charges, sinking funds and insurance details. That is very important because it means each owner in a 50-unit apartment block, whether student apartments or otherwise, has an equal vote. The Bill also provides for the sinking fund, which is very important. It also covers insurance and so on. There are many owner management companies working within the law and doing very good work but, unfortunately, there are many others which are not complying with the regulation which the Minister is putting on a statutory footing.

Service charges, sinking funds, insurance, etc. will be calculated on a fair and transparent basis. The sinking fund will be spent on maintenance or improvements of a non-recurring nature, which is important. I am aware of a block of apartments in which the developer was locked in, as it were, with the builder. In addition, 10% or more of the occupiers were friends or had family links with the developer and they took charge of the apartments with an iron fist. They were student apartments and in the first semester, the developer, through his agents and the so-called company which was not owner representative, collected the fees for the first part of the year but when there were problems in the summer, autumn and winter, there was no sinking fund. In this instance, there was severe flooding caused by a problem with drainage and most of the ground floor apartments were damaged. Some of the students left and there was chaos. However, at all times, the developer was in control of the agency and the so-called management company. As a gesture to placate people, he held emergency general meetings of the company, of which he gave three or four days' notice. For those with an investment apartment and who were living in Kerry or Donegal, the chances were that the meeting was over before they got to it.

That is the type of thing which has been going on. That is why this legislation is critical to regularise this area. It was like travelling down the Zambezi River in a canoe in that one did not know where one was going to. This area had to be properly regulated and what the Minister is doing here is of critical importance to the future management and the legal transfer and ownership of such apartments.

Senator Regan said 4,600 owner management companies are registered in Ireland, which is a phenomenal number. A decade ago, there were probably not even 50 such companies. That indicates where we are.

An important plank of this legislation is the making of house rules by agreement of the members of the owners' management company in furtherance of the effective operation, maintenance and enjoyment of the development. Some of these work very well. Nearly 20 years ago a colleague of mine in Cork was involved with a small development in the city. The owners managed and regulated rent collection, services, maintenance and so on and they met twice a year. It worked out relatively well and if there were hiccups, there were ways to get over them.

Another important part of the legislation is that there is a court-based system of dispute resolution which promotes mediation as a means of resolving disputes. It is important that is being placed on a statutory footing. One can look at different models throughout the world, although I know the Law Reform Commission looked at the situation in New South Wales in Australia. Traditionally, in countries such as Holland and Belgium tenants lived in apartments and the notion of owner occupancy and long leases, which we have in Ireland, was not very prevalent.

The legislation provides an extended period from one to six years in which the owners' management company struck off the companies register for the non-filing of annual reports can be restored to the register. That is significant.

One might believe we are falling behind what is happening elsewhere but I recently came across a complaint from constituents about an investment in holiday apartments in the south of France. These were very well-off people who had a few bob to invest. Rogue companies were set up at the end of November with the plan of letting the holiday apartments. In February or March, when the companies had received the deposits, they vanished with them. The owners had neither agents nor deposits and were left with a mess. These holiday apartments cannot be fully let now with the decline in tourism. Apparently, this happens quite frequently because I contacted the French embassy for advice and guidance for my constituents. Problems are not unique to Ireland; there are problems in other parts of Europe as well. The Minister is doing a wonderful job in putting this on a statutory footing.

The Bill will transform the regulatory environment of management companies, impose new obligations on developers and empower apartment owners in various ways, for example, in regard to voting and the resolution of disputes. For at least ten or 12 years, some developers have made much money from developments. They had all sorts of means of fleecing owners, many of whom were once-off investors. They used the service charge as a sinking fund or to complete snag lists, maintenance or whatever. Local authorities required service charges to be imposed for very good reasons, including providing parking, footpaths, lighting and ducting for various services. Many developers made significant profits but they were not happy with that and tried to skim off some of the money intended for other purposes.

This is significant legislation which, once and for all, will ensure an arms-length relationship between developers, the issues of common ownership of parts of properties and owners. As soon as a development is complete or part complete, the owners will take charge of the development and free themselves from the bonds and shackles of the developer who will probably want to complete the development and make as much money as quickly as possible. It was a sinister follow-on in those cases where developers wanted to have their cake and eat it when it came to agency fees, collecting deposits and so on. In the apartment block I referred to earlier, one building was used as a commercial laundry, owned by the developer. After several years it was discovered electricity for the launderette and other buildings owned by the developer was being sourced from the apartment block. It shows what people will do when they can manipulate the system.

I thank the Minister for introducing this legislation and wish it a speedy passage.

I wish to share time with Senator Mullen.

Is that agreed? Agreed.

This is a technical Bill which was, to a certain extent, reflected in the Minister's delivery of his speech. Although clear and articulate, he did go through the matter at considerable speed. It is an important Bill and the careful consideration which the Minister's advisers gave to the speech indicates he understands and respects this.

The legislation is important because it goes to the very heart of people's enjoyment of their homes. There have been considerable problems with management companies in the past. I raised them many times only to find it difficult to get any interest, precisely because it is such a technical area. Senator O'Donovan did the House a service by putting clear case histories on the record and which are very much in accord with the abuses of which I am aware. It is a growing problem because up to 5,000 management companies exist. Until the passage of this Bill, they will remain very largely unregulated.

Like Senator Regan, I pay tribute to the Law Reform Commission on its work in this area. In its report it has identified four particular facets in the functions of a management company. The management company usually enjoys a substantial legal interest in the property. First, there is the freehold interest in the common areas of the complex, such as stairwells, entrances and exits, lifts and gardens; and second, the management company is usually the holder of the reversionary interest in the lease of each individual unit.

The second key aspect is that its members, usually the owners of each unit within the complex, have two different types of ownership rights in respect of the property — the leasehold interest in their own individual units and ownership of the freehold interest in the common areas in the complex through the company. The third factor is that management companies should be subject to company law under which this Bill brings them.

Service charges and sinking funds were identified as the fourth aspect. This is an area where there have been many problems, as indicated by Senator O'Donovan. Technical devices have been used, such as the non-transfer of property in which the developer held on to one apartment, allowing him the stranglehold of not having to vest in the management company. Senator O'Donovan spoke about this as a random bohemian approach but some times it was much more cynical, done deliberately as a profit-making exercise. Also, instead of accepting their responsibility as residual owners, the developers spread the charges among the other owners thus inflating their charges. I am glad this is addressed in section 14(9). Other examples of these devices include inappropriate companies appointed to do phantom work which is never done while the unfortunate property-owners are bludgeoned into meeting these requirements.

Many purchasers are unaware of the management company charge which can be quite substantial. They may ask themselves for what are they paying €2,000. I am glad section 14(3) requires an estimated breakdown of every service charge. People are entitled to know what they are paying for and to decide whether it is a fair charge. I also welcome the transparency that will entail.

The Law Reform Commission has also identified the problems associated with developers' failure to vest the freehold title of a development in the management company, which has resulted in unit owners unable to sell their apartments. It is a serious problem where a person buys an apartment, but because of a technical failure by the developer, is unable to sell it on. I welcome the Minister tackling this problem in the Bill.

While I welcome the provisions for resale and transfer of the common areas, I want to get a reading on a specific matter of interest to myself, a situation in which many people find themselves. Some years ago I acquired a car parking space which is freehold. I enjoyed this car park for quite a number of years having paid for the key. In the past two years, I have received demands for service charges from a management company. I was never given any information about it with no notice of meetings or accounts. I have refused to pay for it because it is on a freehold and I do not have an apartment to which the garage is related. I consider myself within my rights not to pay, particularly without a detailed breakdown. It is a personal matter but many others are in a similar situation. What are my rights? Am I entitled to refuse because I bought it leasehold?

Cuirim fáilte roimh an Aire. I welcome the Multi-Unit Developments Bill to the Seanad. Unfortunately, it is long overdue for many young people who had to suffer the exorbitant costs of apartments over the past six years and who also had to suffer further at the hands of certain unscrupulous developers even after they bought them.

Buying a unit in a multi-unit development raises complex legal issues given that the developments feature common areas essential for the enjoyment of the development by all unit owners, especially young children. This gives rise to the need for a body to take responsibility for these areas of common usage. Such a body, known as the management company, owns the entire development. While unit owners enjoy a leasehold estate on the apartment they purchased, they cannot hold the freehold. This contrasts with buying a house, so beloved of Irish people, where the property is owned outright.

The expansion of the number of multi-unit developments has been a major feature of the property market, especially in the Dublin region. There has been a dramatic trend towards apartment living, with more than half the new housing units built in Dublin in 2005 being apartments. In 2006, apartment building made up 59% of all housing units built in the Dublin region when it only comprised 21% nationally.

With this expansion of multi-unit developments has come numerous problems. Great credit is due to the Law Reform Commission for carrying out a review of multi-unit developments in two stages comprising a consultation paper and report.

It is worth noting the provisional recommendations made by the Law Reform Commission in December 2006 as well as its final report published in June 2008 and to recall the problems it identified. These included the general and widespread lack of transparency and a deficit in understanding regarding the appropriate roles of those involved in apartment developments, including developers, unit owners as members of owners' management companies, and property management agencies. Moreover, it observed that developers sometimes held on to effective control of apartment owners' management companies, even after virtually all apartments had been sold. I have dealt with people in a legal capacity on this issue. A further problem was that property management agencies sometimes had too much administrative control over some owners' management companies, which caused confusion over their different functions. Moreover, annual general meetings of owners' management companies sometimes were organised at short notice and at inconvenient times and locations. In addition, increases in annual service charges were sometimes not properly explained which therefore led to unit owners not paying them and consequently to the running down of some apartment complexes. Another problem was the absence of a long-term building investment fund, sometimes referred to as the sinking fund, for some apartment complexes. Some appointment developments were not taken in charge by local authorities and there could be a lack of clear arrangements for rescuing apartment complexes that were in trouble.

The consultation paper recognised the difficulties relating to multi-unit living as arising from two main factors, namely, poor governance, including the retention by some developers of inappropriate control over the developments, and a deficit in understanding among apartment purchasers, who seem to be unaware of the consequences of buying an apartment in such a development. The reason this Bill is needed is abundantly clear.

As other Members have done, I welcome the various provisions of this Bill and, in particular, section 14 and its provisions on service charges. The current injustices will be tackled by compulsory vesting of common areas, automatic ownership of owners' management companies, the clear presentation of the rights and duties of the owners' management companies, proper control over service charges as well as fairness regarding sinking funds. Regulation in this area is long overdue and this constitutes a disappointing example of how Government policy has failed to keep track of unjust profiteering. This failure has placed a heavy burden on young people in general and on young families in particular.

While this Bill is welcome, its impact will be diluted greatly unless the Government commits itself to ensuring the housing market becomes less developer-centred and more family-centred. The cost of housing over the past ten years has greatly undermined family life as both parents have been obliged to work extensively to pay off exorbitant mortgages. Consequently, children have missed out on family life because the Government has failed to regulate adequately the avarice of developers and banks.

I wish to highlight an element of the Bill that is missing. An old ethical adage states that two wrongs do not make a right. It would constitute a further injustice were management fees which were reasonable and which were owed not paid at all. I question whether this Bill addresses adequately this issue and whether the appropriate mechanism exists to extract outstanding fees from unit owners. Perhaps clarification is available in this regard. I will examine the Bill more closely and while Members have Committee Stage to look forward to, they should not lose sight of this issue.

I wish to share two minutes with Senator O'Toole.

Is that agreed?

I have no objections, assuming I will be allowed to contribute. It means three Independent Members will have spoken before the Labour Party. I agree, so long as I am allowed to contribute.

The Senator is scheduled to speak thereafter.

I thank the Cathaoirleach. I simply wished to make that point.

I ask the Cathaoirleach to let me know when one minute remains.

I will but the Senator's time is moving on.

I welcome the Multi-Unit Developments Bill, which introduces regulation in an area in which it is much needed. There have been examples in the recent past of fairly acute problems in this regard, although many of the problems associated with apartment living have arisen from poor design, bad planning and, in particular, a failure to ensure units of adequate size with appropriate open areas and so on. While this issue remains to be attended to, it probably is outside the scope of both this Bill and the Department promoting it.

Nevertheless, the provisions of the Bill are to be welcomed. It places responsibilities on the owners of apartments in that they will be obliged to pay service charges, make a contribution to a sinking fund and to observe certain house rules. This is fundamental to enhancing the quality of life of those with whom they share such residential developments. It also sets out clearly the responsibilities of developers to establish owners' management companies in advance of selling any units, which is a worthwhile provision. It also places an obligation to transfer common areas at that point or, if they are in the course of construction, within six months of their completion.

I wish to pose a few questions to the Minister of State. First, there is an obligation under section 5 for the developer to complete the development. However, in the current economic downturn many developers will not be in a position to so do because they have become insolvent. Has any thought been given to the establishment of a bond? That was a method of dealing with such issues in the past when a contractual arrangement existed between a principal and a developer. I am uncertain whether this is the case in this regard.

I also wish to raise the issue of voting rights within the management companies. I note there is provision that each unit owner will have one vote, regardless of the size of the cost of the unit. While I may be wrong, I understand this to be at variance with the recommendations of the Law Reform Commission. Perhaps the reason this provision applies should be spelt out. Why is there not a weighted provision in such a company's shareholding that is proportionate to the amount people actually have paid?

I certainly welcome the provisions in section 14, which spell out clearly the areas for which the service charge is applied. This must be transparent and it is important for each owner to be aware of the costs under each of those headings. I fully accept a sinking fund is highly desirable in respect of a building that will require ongoing maintenance. However, I query it in respect of residential units, houses and so on, where one may not incur similar costs. On reading the definitions, I am unclear whether the Bill covers this area.

I welcome the change in respect of strike-off provisions whereby one can apply to have a company that has been struck off by the Companies Registration Office restored within six years. In general however, and this also applies to other companies, this area of striking off companies is highly questionable. The Minister of State should comment on the possibility that in the event of a serious accident resulting in the incurring of a huge public liability settlement, it might have the effect of exposing unit owners, who may be unaware of the strike-off provision, to costs for which they might not be in a position to provide.

I thank Senator Walsh sincerely for the two minutes and promise Senator Hannigan that I will not eat into his time. I welcome the Minister of State to the House and have a number of queries I wish to raise. While I have raised them with the Minister's office, which is working on them, I wish to put them on the record because I will deal with them on Committee Stage.

I welcome the Bill, which is very positive and does things as they should be done. However, although the same issues apply to estates, this Bill only applies to apartment buildings. The definition states: ""multi-unit development" means land on which there stands erected a building which, or a part of which ... is divided into units". Consequently, houses in housing estates would not be covered by this Bill. This has been brought to my attention by a number of people who believe that situation also should be covered. I acknowledge the Minister's office is working on this issue and I would appreciate a response from the Minister of State in this regard.

The other issue I wish to raise concerns the rules for the management committee and the basis on which they are set up. Are those rules and regulations, or their articles of association or whatever we might call them, lodged in any particular way? That is crucial.

I would also like to ask about the process used to establish the fee. The budgeting system is done very well. It is important that it is done in the way that is outlined. I have some experience in this area. I have a property in France. I am a member of a co-proprietorship of eight houses. All the things provided for in this legislation are done as part of that. They have additional powers as well. I will bring them into the discussion on Committee Stage. I would like to get some clarification on whether this legislation can be extended to cover ordinary detached or semi-detached houses in housing estates as opposed to apartments in apartment blocks.

I welcome the Minister. I welcome the general principle of this legislation. It bears testimony to the good work done by agencies such as the Law Reform Commission and the National Consumer Agency. This Bill has been a long time coming. I am glad we are reaching the end of the process of sorting out the mess in our management agencies and companies. It is fair to say that there are many good management companies. That must be recognised. I do not want to tar every company with the same brush. However, it is clear the lack of regulation and legislation in the system allows some bad apples to cause a great deal of trouble for many apartment dwellers and home owners.

I refer to a few specific aspects of the Bill. I am glad sinking funds are provided for in the legislation. The figure mentioned in the Bill is €200 per annum per apartment. That will go some way to ensuring sufficient reserves are in place for when things break down. I am aware of apartment blocks in County Meath where the lack of a sinking fund is making it difficult to repair things such as lifts. I know of an apartment block in which the lift has been left unfixed for almost a year, which is intolerable for the many residents who have to pay these charges on an ongoing basis. I am glad sinking funds have been provided for because they are needed.

I am pleased a section of the Bill aims to ensure fees are justified rather than excessive and are applied in a manner that is transparent to apartment owners. There have been instances of developers and management companies charging, or seeking to charge, excessive fees with no real justification or explanation of why they are needed.

I am glad the Bill proposes to change the existing regime of voting rights. That will go a long way to ensuring people have the ability to run their own apartment blocks as they see fit.

I have a query about section 17 which deals with house rules. While I am in favour of house rules, in principle, I have some concerns. Will some kind of appeals process be provided for? Will best practice be followed when decisions are made on what the house rules should cover? It is possible that some over-zealous residents could try to impose house rules that are a little over the top. We need to be cautious in this respect. I would like to see some mechanism for ensuring house rules are measured and cannot be deemed excessive.

I signal that the Labour Party may table amendments at a later stage to modify some aspects of this legislation. The first area of concern is the question of voting rights for the residents of apartment complexes that have been completed. I would like some clarification in this respect. Developers sometimes put an unjustly weighted voting system in place before they transfer ownership to residents. I refer specifically to completed apartment blocks. I ask the Minister to address this issue.

I would like to pick up on a point about housing estates made by Senators O'Toole and Mullen. Are traditional housing estates covered by this legislation? It appears to me it relates solely to apartment blocks and not to housing estates. Local authorities in many parts of the country have imposed management companies on new housing estates of the traditional kind. There are approximately 1,000 traditional three-bedroom, four-bedroom and five-bedroom houses in the Grange Rath estate outside Drogheda. Everyone who owns a house in the estate has to form part of the estate's management company. That approach was probably adopted because the local county council does not have a parks department. The local authority may have been keen to ensure the common areas are maintained and a system is put in place to take care of the upkeep of the estate. While many housing estates, including Grange Rath, have excellent management companies, I am aware of problems in other estates caused by a lack of regulation. It would be interesting to ascertain whether this legislation covers traditional housing estates. If not, when can we expect to see legislation in this area? I am signalling that we may table some amendments on Committee Stage.

We welcome this Bill, in principle. We compliment the Minister and his staff on the work they have done on this complex matter. We look forward to seeing the legislation become law.

Like other Members of the House, I welcome the opportunity to debate this appropriate legislation. Some Senators have said it is long overdue. There has certainly been a crying need for it. The legislation sets out to regulate new and existing multi-unit developments. That might sound like gobbledygook to most people but it refers generally to apartment living. We all recognise that apartment living has some special features. There is a need for a certain amount of interdependency. Reliable funding streams are needed to provide for the ongoing upkeep and management of common areas. Apartment owners need to participate in appropriate arrangements.

Other Senators have referred to the number of apartment units that have been created over recent years. In 2006, apartment building accounted for 56% of all housing units built in the Dublin area, and 21% nationally. In 2007, apartment building accounted for 62% of all dwellings completed in the Dublin area, which is a phenomenal number, and 24% nationally. In 2008, apartment building represented 66% of all housing completions in the Dublin area, and almost 25% nationally. It is obvious, therefore, that this legislation is badly needed.

The purpose of this Bill is to regulate the entire property management sector and to protect the owners of units in new and existing multi-unit developments. The Law Reform Commission has said that the current system of licensing property service providers is outdated, inappropriate and inadequate. In its 2008 report on multi-unit developments, the commission published a series of valuable recommendations. The National Consumer Agency is also to be congratulated on the work it has done in this area, which has contributed hugely to the quality of the legislation we are debating at the moment.

The statutory framework that is proposed within the Multi-Unit Developments Bill 2009 provides for the obligatory establishment of an owners' management company and the transfer of common areas to that company prior to the sale of any units, or within six months of the section coming into force in the case of existing completed or uncompleted developments. This legislation also provides for regulation of the internal governance of the owners' management company. It provides for one vote of equal value per unit. It also obliges each company to hold an annual general meeting and to furnish each member of the company with an annual report which will include details of,inter alia, the assets and liabilities of the company, the statements relating to service charges, sinking funds and insurance details. The legislation also contains an obligation to establish and maintain a scheme of annual service charges, to be calculated on a fair and transparent basis, along with a scheme of sinking funds for spending on maintenance or improvements of a non-recurring nature. It also provides for the making of house rules by agreement of the members of the owners’ management company and in furtherance of the effective operation, maintenance and enjoyment of the development. It provides for a court-based system of dispute resolution which promotes mediation. That is a welcome measure in the Bill as a means of resolving disputes. The Bill also provides an extended period from one to six years during which an owners’ management company can be struck off the companies register for the non-filing of annual reports.

The Bill addresses a major problem which has existed and has been described by the Law Reform Commission as a defective state of the law. The problems associated with conveying the freehold ownership of individual units was insurmountable as the law stood. The standard approach was to confine ownership of such a unit in multi-unit developments to a leasehold interest with the freehold of the entire building, including both units and common areas, being vested in a landlord, who was usually the developer, and subsequently often being transferred to a management body. In that way positive obligations could be enforced against successors in title.

Other problems that existed were the disparate legal relationships and obligations that arose from ownership and management of multi-unit developments which meant that many different areas of law were applicable. They included areas of law such as the Companies Act, the Taxes Consolidation Act, various Waste Management Acts, the Litter Pollution Act, the Occupiers' Liability Act, the Fire Services Act, the Local Government Acts, the Roads Acts, the Data Protection Acts, the Residential Tenancies Act and so on. There was no statutory regulation of property management companiesper se with the exception of provisions contained in the Residential Tenancies Act 2004.

Many practical problems arose for people who purchased units in these multi-unit developments and the Law Reform Commission defined those very succinctly, one being the general and widespread lack of transparency and a comprehension deficit about the appropriate roles of those involved in apartment developments, especially of developers but also of unit owners as members of owners' management companies and of property management agents. It was clear that many of those who were purchasing apartments in these developments were unaware of the consequences, particularly the financial consequences, of buying apartments in such developments.

Other problems that arose were that developers sometimes held on to effective control of apartment owners' management companies even after virtually all the apartments had been sold; property management agents had too much administrative control over some owners' management companies, which caused confusion about their different functions; the annual general meeting of owners' management companies, to which others have referred, were organised at short notice or at inconvenient times and locations; increasing annual service charges, an important point, not being properly explained and therefore not paid by unit owners which led to the running down of some apartment complexes; no long-term building investment fund or sinking fund for some apartment complexes; some apartment complexes not being taken in charge by local authorities; and a lack of clear arrangements for rescuing apartment complexes in trouble.

Other contributors have spoken about the role of the developer. We are aware that some developers attempted to keep control of the property management companies even after the development had been completed and there was no time limit as to when the development was to be handed over to residents. The developer, on many occasions, chose to keep the title to the lands because they hoped to get planning permission for more houses or apartments. This point was made by the National Consumer Agency.

The Law Reform Commission also identified problems related to the developer's failure to vest the freehold title of a development in the management company. That resulted in unit owners being unable to sell their apartments, which was a serious problem.

Developers were also accused of trying to maintain control through voting procedures at the annual general meeting and the National Consumer Agency emphasised the importance of the wording of the memorandum and articles of association on how AGM votes were distributed, especially in cases where people were buying or considering buying off the plans. The issue of voting rights is important and determines how the management company would operate and be controlled and what rights the members would have.

I welcome the Bill. It has dealt with the important areas, the compulsory vesting of common areas and the role of the developer, the rights and obligations of the owners' management company, the issue of service charges and sinking funds, the resolution of disputes and the application of the Bill to smaller developments. I join other speakers in asking whether the intention is to allow this legislation also to cover small residential estates or residential developments that are not apartment developments or multi-unit developments. It seems the legislation would apply equally well to them.

Cuirim fáilte roimh an tAire Stáit. Picking up on Senator de Búrca's final comment, the legislation should apply in that respect as well as to all residential dwellings in multi-unit developments. Our conventional type of dwelling has changed. It would be a welcome addition to the Bill if that change could be made on Committee Stage.

I give the Bill a broad welcome. It is imperative and important we protect home owners, which I hope is the focus of the central thrust of the Bill. Undoubtedly, the legislation has been a long time coming. Apartment dwellings now dot the landscape not only of our two major cities but of all our cities and many of our rural towns. A fundamental issue in regard to residential developments is that the taking in charge of housing estates needs to be more aggressively pursued. I hope the Minister will ensure this is addressed. I believe, as Senator O'Toole said, that this provision should be covered in the Bill. For too long we have had a great deal of obfuscation and developers being let get away with A, B and C in taking charge of estates.

What is the legal standing of a management company under the legislation? It is important there is proper regulation and greater transparency in the operation of management companies. The issue of voting rights is important, as it is imperative that home owners or apartment dwellers would be allowed self-determination and self-governance under the provisions of this Bill.

My party published A Fairer Deal for Modern Living in May 2008. I compliment our environment spokesperson, Deputy Hogan, and our housing spokesperson, Deputy Terence Flanagan, in that respect. I also pay tribute to the Law Reform Commission for the immense work it did which assisted the preparation of this Bill.

Apartment living, as the Minister of State will know from Dún Laoghaire in his constituency, is a relatively new phenomenon on the Irish landscape. Many issues are faced by apartment owners in terms of the maintenance costs they incur, the upkeep of the common area and the ownership of the development. Thankfully, the rights of the apartment dweller have been recognised. The regulation and law in this area must be adhered to. The explanatory memorandum to the Bill refers to the weaknesses to which people have been exposed up to now. The Law Reform Commission addressed the issues and problems in this area. I compliment it on the work it has done. The Minister referred to the issues identified by the Law Reform Commission. I compliment the Minister on introducing this legislation.

According to the 2002 Census, 210,000 people lived in 110,000 apartments and, in the most recent census, it is estimated that approximately 500,000 people will live in multi-unit developments. That is a considerable number of people. It is imperative and important we educate people on the different roles and functions of a management company, the developers and the responsibilities of apartment owners.

I welcome the fact that under the legislation obligations will be imposed on developers and the rights of apartment owners will be strengthened. I hope that in time we will examine the planning issue and the location of apartment complexes. In my area of Bishopstown in Cork a blight of apartment complexes has spoiled neighbourhoods. They have not added to the public realm and they have not in any way addressed the real housing needs of the area. I hope universities and other third level institutions take note of the legislation because there is a need for on-site campus accommodation. In addition, there is a major issue, especially in Cork city, with apartment complexes in the areas surrounding these institutions.

My one concern in respect of apartment living is that we may be creating new communities which are becoming wastelands. While I have no wish to ghettoise anyone, some apartment complexes are lying empty while others are beset with different problems and issues. I hope we can address the latter problem, perhaps by means of the type of house rules to which Senators de Búrca and Hannigan referred.

Another issue about which I am concerned relates to the fact, as Senator Regan stated, that many mortgage holders find themselves in negative equity. People have been forced to pay exorbitant service charges or apartment management fees. There is a major need for transparency with regard to the amounts people pay in fees, who is responsible for setting such fees and what can be expected in return for paying them.

I welcome the fact that management companies will be obliged to establish sinking funds. As everyone who has visited an apartment complex is aware, there is a need to set aside money to pay for the upkeep of common areas and the upgrading or maintenance of the electricity and gas supplies, etc.

How will those who do not pay fees be dealt with? The process which the Private Residential Tenancies Board, PRTB, obliges landlords to undergo to try to obtain fees, rent, etc. from tenants who do not pay is quite lengthy. What will be the position with those who do not pay the fees required by their management companies? I agree that fees must be just and fair and that there is a need for greater transparency.

I recently dealt with an issue in Cork city in respect of which there was a lack of clarity regarding a common area. I hope the Bill will bring finality to this matter. Will developers who built apartment complexes prior to this legislation coming into effect be actively pursued in respect of the upkeep of common areas?

We must be careful with the concept of multi-unit development, particularly in view of the fact that urbanisation has changed the way in which people live. The Bill goes a long way towards attempting to bring about greater clarity and uniformity in this regard. I hope the fundamental problems apartment owners and dwellers encounter and the issue of how complexes are managed and funded will be addressed. I commend the Bill to the House.

I welcome the Minister of State and I appreciate the opportunity to contribute to the debate on the Multi-Unit Developments Bill 2009. As previous speakers indicated, the level of apartment and multi-unit development living has increased significantly in recent years, especially in Dublin and other areas. The Central Statistics Office estimates that more than 500,000 people — 10% of the total population — live in apartments. It is quite surprising that this number of citizens live in such accommodation. The Bill is timely, therefore, and it will address the concerns that are being raised by property owners and property management companies.

In the constituency in which I live, Dublin South, there are more than 41,000 private households occupied by almost 116,000 residents. According to the research carried out by the Oireachtas Library and Research Service, which was published in December 2008, people in Dublin South are more likely to live in apartments and 12% of them do.

A significant proportion of the queries I, as a public representative, receive from people who live in multi-unit developments relate to issues they have in respect of the management of their complexes or which have arisen with regard to their property management companies. I am fortunate that this year I have the assistance of an intern who is on placement from the Master's course in DIT. With her help, I have been in a position to undertake qualitative and quantitative research among the residents of multi-unit developments in Dublin South. Some of the matters on which this research focuses include people's level of knowledge and awareness with regard to sinking funds, how much they pay in service charges and their levels of satisfaction with their property management companies. The issues that arose subsequently mainly revolved around the general upkeep of the grounds of particular developments, in addition to frustration regarding the level of influence developers had over multi-unit developments.

The concerns residents in Dublin South have raised echo the statements highlighted in the Law Reform Commission's reports on such developments which were published in 2006 and 2008, respectively. It is interesting that almost one third of the respondents indicated that they had very little or a poor understanding of property management companies and the way in which they operate. Almost 40% of these people, even those who live in one bedroom apartments, indicated that they pay more than €1,500 per year in management fees. In light of the fact that this is a considerable sum of money, the respondents expressed frustration and anger in circumstances where they felt the level of maintenance carried out was unsatisfactory. While I accept that service charges are calculated on the basis of a number of key factors, I am of the view that they must be justified in accordance with the type of amenities available at a development. Information relating to the latter should be published in an annual report to be published by property management agents. I therefore welcome the fact that the Bill recognises these important issues and the fact that the cost of service charges must be calculated on a fair basis.

Section 14 states that if 75% of the members of a development do not approve of a proposed service charge, then existing charges shall remain in place until the adoption of a new charge. This is a move which will be welcomed by owners. However, I suggest that it may be useful to set down criteria which must be satisfied to determine what is a valid charge. While it is positive that 75% of the members will be required to approve of a proposed service charge, it is essential that such charges must be realistic in nature. In the best interests of all of the property owners, there are certain costs which must be covered by the service charge. I am of the view, therefore, that it would be useful to outline criteria the charge must satisfy in order that it might be determined to be valid. For example, insurance and basic maintenance costs come into play in this regard. There are certain charges which, if they are not paid, will impact adversely on the overall value of a complex. As a result, those property owners who take a particular interest would be detrimentally affected. This matter has given rise to concern, especially in circumstances where developers maintain ownership of units.

Previous speakers inquired what will happen when certain owners do not pay service charges. It would be useful, perhaps, to have a less cumbersome process in place to be undertaken initially to try to collect payments. One of the issues owners are concerned about is where developers have maintained ownership of units and are experiencing cash flow difficulties. Where such owners of units do not make the service charge payments, there is a consequent knock-on effect for complexes and people want to know what will happen in such situations and how those charges will be recovered.

Section 14(2) addresses the issue of the general meeting. It would be useful to have a minimum quorum present for it to be a valid general meeting.

The establishment of an owners' management company is very useful but sometimes there is not the correct level of awareness of the responsibility entailed in becoming a member of such a company. It would be useful where people give voluntarily of their time to become directors that a mechanism be put in place to ensure they receive some level of education or information about such roles, because there are considerable legal responsibilities attached. One thing to emerge from feedback on the survey was that people tended to see the board of property management companies as being more or less in tandem with residents' associations, and of course that is not the case. There are completely different legal responsibilities involved.

There are a number of other issues I would like to have raised. However, the Cathaoirleach is indicating that there is no time. Perhaps I can take them up with the Minister of State outside the House.

I welcome the Minister of State to the House and I am glad of the opportunity to say a few words about the proposed legislation, which I welcome as it is long overdue.

When we consider the number of apartment blocks built throughout the country over the past ten or 12 years, it is right and fitting that legislation such as this should be put in place as quickly as possible. Many people have experienced unbelievable problems with apartment living over recent years. Apartment living will be expensive for people when these management companies are put in place. Those who take charge of such companies will have many rights bestowed upon them, not alone by the legislation but at annual general meetings and so forth.

Senator Corrigan mentioned there should be a quorum at such meetings and I agree with that. I believe proxy voting should be used as well. Many countries have similar types of systems to that being proposed in this legislation and have seen that they have worked to great effect. People probably do not realise what the full effect of the legislation will be because it is likely to mean a fairly hefty annual charge for some apartment owners, regardless of whether they are living in Dublin, Galway or wherever. There will be administrative charges imposed by management companies and legal wrangles where people do not pay their dues. In the event, management companies ultimately will have to take such people to court, as provided for in the legislation. In some cases, no doubt, the management company will get a charge on the property.

In the event of court proceedings, in some cases there will be a charge on the property from the bank. What is the position of the management company which goes to court to seek money it is owed for the upkeep of the apartment block? Will it only get a second charge if there is a prior charge from a bank or building society? I cannot see where this is spelt out in the legislation, as proposed. However, this will cause problems. Ultimately, perhaps, the property can be sold and the various institutions paid off, but this is something people will have to address, as has happened in other countries where people have defaulted on management charges. In such cases the management companies take legal action and put a charge on the property.

None the less, I welcome this legislation. While everyone knew a vast number of apartments were being built throughout the country, it was not appreciated fully how many people would be living in them, as has been spelt out in the debate. I wish the Minister of State luck with the Bill. I know he has detailed those areas to which service charges will apply. The Bill is well thought-out, providing as it does for a sinking fund as well as the many other aspects that we can go into in more detail on Committee Stage.

On behalf of the Minister, I thank Senators for their contributions to the debate and their broad welcome for the provisions and objectives of the Bill. A number of specific and general issues were raised and I hope, in the time available, to go through a number of them. There will, obviously, be an opportunity on Committee Stage to go through them in greater detail.

Many Senators expressed a concern that there should be transparency in the calculation of annual service charges, and that is guaranteed by the Bill and in the Government's approach which requires that there should be an annual service charge scheme. The Bill provides the opportunity to go through a non-exhaustive list of categories of matters that can be the subject to an annual service charge. That will provide some comfort to many owners in multi-unit developments regarding whether they are being charged fairly. Snagging is excluded from that potential list and that will give some comfort. There is also an obligation on unit owners to pay management charges.

Many Senators welcomed the provision on sinking funds. Most multi-unit developments have management companies that have sinking funds. Responsible directors should ensure there are sinking funds, but this puts matters on a statutory footing for the first time. Obviously there are developments that do not have sinking funds, so this is most welcome. It also applies to existing developments, so it will have a more comprehensive reach than might have first appeared, with a minimum contribution of €200 per unit per annum. Many Senators indicated there were many circumstances in which much higher charges are in place. In my experience, wherever owners take control of a management company the charges tend to be lower and one also finds there is a sinking fund and a more responsible approach.

On ownership and the issue of who controls the common area, the Government has taken the view that such areas should be transferred to owners' management companies at the earliest possible opportunity. The issue of units sold in a development that has not been completed prior to the Bill being enacted is dealt with in the legislation.

On dispute resolution, the Minister said we are now dealing with a court-based jurisdiction, which gives more impact. That will apply where mediation fails and there is an enormous appetite now for alternative dispute resolution methods to be employed. That is stitched into this Bill and requires parties to engage to the greatest extent possible.

In response to the point raised by Senator Regan, mixed developments involving apartment buildings and houses are covered by the Bill, but not traditional housing estates. One wonders whether things such as house rules would be useful in traditional housing estates, but that is something to be debated on Committee Stage. The property services regulatory authority is a licensing body and has no role in the companies which will have been incorporated under company law and are already subject to the Companies Registration Office and the Office of the Director of Corporate Enforcement.

On the problems Senator O'Donovan raised, the Bill will ensure an arm's-length relationship between the developer and the management agent and will ensure service charges cannot be used to complete developments or for snagging.

Senator Walsh raised the question of section 5. There is an obligation in that section to complete a development. The Law Reform Commission recommends the use of the bond mechanism by the planning authorities. That is specifically referred to in section 5 and is a matter for the Department of the Environment, Heritage and Local Government.

On Senator O'Toole's question, some similar issues may apply to ordinary housing estates but this applies only to mixed developments and specific apartments. I have lived in an apartment and the distinction between this and ordinary housing estates is that one does not know anyone else and there is no sense of community that one might have in an ordinary estate. This is why everyone welcomes this Bill as putting in place a mechanism to ensure these areas affecting them in common are dealt with properly. Some difficulties in extending the Bill to housing estates are the existence of different kinds of estates, such as holiday, retirement, gated and the more traditional developments. The Departments of Justice, Equality and Law Reform and the Environment, Heritage and Local Government are discussing common problems on this.

Senator Hannigan raised house rules and section 17(10) gives the Minister regulation-making powers. These may specify the matters which would be the subject of house rules.

To answer Senator Buttimer, section 3 applies to developments in which some units have been sold but the development is not complete, while section 4 applies to completed developments. Those sections will ensure the Bill will apply to both these categories and not just to new developments.

Senator Corrigan raised the issue of quora. I do not have an answer to that but it is a welcome proposal that one would have a minimum quorum. I am not sure of the position on that. Regarding the responsibilities of members of management companies, the Office of the Director of Corporate Enforcement has issued very useful guidelines that would be a good follow-up to Senator Corrigan's very successful survey among her constituents.

I hope that answers some of the questions and I thank the Senators for their contributions and their broad welcome for the provisions in the Bill.

Question put and agreed to.

When is it proposed to take Committee Stage?

Committee Stage ordered for Tuesday, 30 June 2009.

When is it proposed to sit again?

Ag 10.30 maidin amárach.