Multi-Unit Developments Bill 2009 [Seanad]: Committee Stage

Apologies have been received from Deputies Naughten and Treacy. The meeting has been convened for the purposes of the consideration of the Multi-Unit Developments Bill 2009. A revised explanatory memorandum has been circulated to members, as has a grouping list of amendments. I welcome the Minister for Justice and Law Reform, Deputy Dermot Ahern, and his officials.

SECTION 1

Amendment No. 1 is in the name of Deputy Rabbitte. Amendments Nos. 2, 9, 12, 13, 18, 22, 23 and 53 are related, while amendment No. 10 is an alternative to amendment No. 9. Therefore, amendments Nos. 1, 2, 9, 10, 12, 13, 18, 22, 23 and 53 may be discussed together.

I move amendment No. 1:

In page 4, subsection (1), between lines 13 and 14, to insert the following:

" "complete" in relation to a development means complete to the agreed satisfaction of the developer and the owners' management company and the planning authority;".

As the Chairman is aware, the Bill originated in the Seanad where some improvements were made. We are agreed on this side of the House that it is a matter of some importance that the Bill be concluded as early as possible because of the difficulties being experienced. The Chairman has grouped amendment No. 1 with several others which address a core deficiency in the Bill in so far as we are advised by stakeholders.

The amendment would provide no more than a definition of the word "complete", given the ambiguity which has entered the discussion on the issue as it relates to beneficial and legal ownership in terms of the distinction between the two and the distinction between apartment blocks or multi-unit developments in place and those that will follow after the Bill is enacted. I will deal with the matter in the context of the proposed group of amendments because the amendment would no more than add to the definition and serve to give clarity to the meaning of the word "complete" with respect to a development. It would mean "complete" to the agreed satisfaction of the developer, the owners' management company and the planning authority. This is necessary in the view of my party, the Apartment Owners Network and the Royal Institute of the Architects of Ireland and in the context of the recommendation made by the Law Reform Commission that there be a 5% bond until completion to a standard that meets that of the bodies to which I have referred. The Minister will be familiar with the view of the commission which has set out why such a 5% bond is essential and the Royal Institute of the Architects of Ireland agrees, as do apartment owners. I am puzzled, therefore, why there is resistance to it on the part of the Minister. We realised this was an issue long before we had ever heard of multi-unit developments. Unfinished estates have always presented a difficulty in the planning system. However, unfinished apartment developments in the new set-up are causing serious grief for those who live in them. In the opinion of the commission, a modest 5% bond would provide an incentive to ensure work was up to standard.

I trust the Chairman has no wish for me to move the other grouped amendments and is probably keen for me to say a word about them.

Yes, please.

The next amendment in my name is amendment No. 10 which seeks to insert a new subsection to ensure "the purchaser has supplied his or her residential address to the owners' management company and has undertaken to notify the company of any future changes in address". This is no more than to be careful and precise and ensure the accurate address would be with the company in order that someone could not evade paying charges and levies simply because there was no up-to-date address available for him or her because he or she was an investor or not living in the apartment block.

Amendment No. 12 is also in my name. It relates to the core recommendation of the Law Reform Commission and would insert a new subsection which reads: "On closing of a unit sale prior to completion of the development, the developer shall pay 5% of the purchase price to the owners' management company which shall hold such sum in trust for the developer until development is completed". This is central to our objections to the Bill, although I accept there are many good things in it. I regret very much that it has taken so long to bring it before the House. However, this is a critical and central weakness and, to be truthful, I cannot anticipate what the Minister's arguments will be for resisting the amendment. Why ought there not be such a modest imposition on the developer? It would act as an incentive for him or her to finish the job to standard. We must circle the wagons behind this idea because the value of the Bill will be undermined significantly if it is not included.

Amendment No. 22 is also in my name. Essentially, its author is the Royal Institute of the Architects of Ireland with the assistance of the Law Reform Commission and other professional advice. It sets out procedures which would have to be taken on completion of a development or estate and a process which would have to be followed. The institute was at great pains to set it out in great detail. I do not propose, therefore, to go over it, unless the Minister wishes to come back to it on any point. It seems it is good advice and would provide for almost every step of the process that can be anticipated. The Bill would be the stronger for it.

Amendment No. 23 is an alternative and the work of my colleague in the Seanad, Senator Hannigan, who has sought, separately and distinctly, to deal with the procedure on transfer and address the point about the snag list being incorporated. Subsection (2) states: "If a developer fails to carry out the snag list within 3 months after the determination of the snag list then the developer shall pay to owners' management company a sum equal in value to the cost of completing the development to enable the snag list to be completed". Subsection (3) reads: "To ensure compliance with this section, any planning permission for a multi-unit development after the commencement of this section shall include as a condition that the developer enter into a bond sufficient to ensure such compliance".

I have a preference for my earlier amendments. Amendment No. 23 has been included to seek a belt and braces approach. I will leave it at that for now and urge the Minister to accept the centrepiece of this which is the bond. Otherwise, especially in the present fragile marketplace, developers will have the option to leave some of these developments unfinished, with all the difficulties that poses for people who have spent their life savings and mortgaged themselves to buy an apartment in these blocks. It is central and I ask the Minister to accede to it.

Deputy Terence Flangan is substituting for Deputy Stanton and has tabled amendment No. 18 in that grouping and he may wish to speak.

I thank the Minister for coming in to push through the Committee Stage of this extremely important Bill. There are 500,000 apartment owners who live with multiple problems in their complexes. They have nobody to whom they can turn to have those problems redressed. The passage of this Bill is welcome. It is long overdue and should have happened at least ten years ago when apartment building became the norm. However, there are many amendments before the committee which deserve due consideration by the Minister.

On completion, as Deputy Rabbitte said, there is an issue with developers and their definition of a complete development. Amendment No. 18 proposes that a snag list be prepared by an inspector of the relevant local authority to ensure the development is completed and becomes a finished development.

On the issue of satisfactory completion, it appears there is no definition of what is "satisfactory completion" of an apartment complex and there is no legal means of forcing a developer to ensure the development is complete. Clearly, developers have moved on from one phase to a second and a third phase and have left unfinished the first and second phases of various developments to the frustration of apartment owners. This situation must be rectified to ensure certain standards are achieved and that the development is completed in line with the planning permission. We intend to table an amendment on that on Report Stage.

We fully support the amendment which deals with the 5% retention until the development is completed. As Deputy Rabbitte said the amendment was proposed by the Law Reform Commission and the Royal Institute of the Architects of Ireland and the apartment owners agree with it. That money must be withheld to ensure satisfactory completion. It is an area that is open to too much interpretation. It is a cause of much frustration to apartment owners. It needs to be tightened up.

Like previous speakers I welcome the fact that we are taking this Bill. Deputy Flanagan is the Fine Gael spokesperson on housing and will lead for us on this Bill. It is Bill that we have known has been required for a long time. In so far as can we want to co-operate with the Minister in its swift passage into law in the best framework possible. I had an opportunity to consider the Minister's amendments within this group. There is nothing objectionable that I can identify. They will improve the Bill. I hope we can agree to those amendments.

The issues raised by the other Deputies are of importance. There is a difficulty in regard to completion of multi-storey developments. I agree with the proposal from Deputy Rabbitte on the 5% retention. I wish to slightly extend the discussion to get the Minister's response. While the Bill has been going through lengthy birth pangs, the economic climate has dramatically changed, construction has collapsed and legislation has been enacted to put NAMA in place. I am open to correction from the Minister but I think there are no specifically NAMA-related amendments tabled by the Minister.

There are a number of developers whose borrowings have been transferred to NAMA while others are awaiting transfer in circumstances where multi-storey developments are partially occupied, where three or four apartment blocks were supposed to be built in an area where there will be only one for a long time. and that one may be fully occupied but none of the landscaping and other facilities will have been put in place. A new issue arises now. As matters stand, NAMA, so far as I am aware, has not formally taken any court proceedings whereby it has taken possession of a development which would be security for borrowings. The borrowings have been transferred to NAMA which has the same security as the banks and we have what could be best described as "zombie developers" who lack the funding. They have multi-storey developments in which people live that are incomplete. I do not know whether funding will be provided by NAMA to allow them be brought up to an appropriate standard. As matters stand, it would remain the developers' legal liability to comply with planning permission.

The next stage in the NAMA enterprise is court applications whereby developers who default on their payments and in circumstances where there is no agreed business plan that NAMA has accepted, will find that possession is taken of multi-storey buildings. What will happen under this Bill? What is the relevance of the Bill in circumstances where NAMA has essentially become the owner of unfinished multi-storey developments? Will they simply be left in limbo? Will there be an obligation on NAMA to complete them? What will happen with the transfer of common areas to a management company? What will be NAMA's obligations in respect of unsold units and funding the ongoing common expenditure on the block? These are all important issues for many young people who are entrapped in these unfinished developments. I am loath to raise an issue that could further delay the enactment of the Bill but we cannot ignore the fact that this adds an extra layer of complexity to the legislation. I would like to hear the Minister's views on that issue.

It seems that the amendment that has been essentially drafted by the Royal Institute of the Architects of Ireland has a great deal of merit. I would like to hear the Minister comment on that amendment which is one that should be adopted.

I thank Deputies for their comments and particularly their desire to get this Bill passed as soon as possible. There is common cause on the floor of the House that it is important to have this legislation on the Statute Book and available by the end of the year. We finished Second Stage in the Dáil to have Committee Stage taken during the summer before the Dáil resumed. If we can do this, it would be beneficial for everyone. Therefore, I welcome the sentiments expressed.

The amendments go to the core of the Bill. They deal with the paramount issues of compliance and completion — compliance with planning conditions under the planning Acts and the building control standards under the building control Acts and completion of common areas in a development. We discussed these issues at great length in the Seanad where, as Deputy Rabbitte said, much good work was done and amendments from both sides were accepted. We have been grappling in the Department with the significant number of practical difficulties regarding compliance. While we can deal with the issue in the Bill, it should be dealt with primarily in the planning and the building control Acts. As statutory certificates of compliance are not being issued under the Acts by the planning or building control authorities, there is no statutory provision which allows planning authorities to require performance bonds to be lodged by a developer to ensure adequate completion of snag lists in multi-unit developments. That is at the core of what we all want to ensure, but there is only so much we can do in this legislation.

Since the Seanad debate and the Second Stage debate in the Dáil we have been in contact with the Department of the Environment, Heritage and Local Government and I have had a number of meetings with the Minister, Deputy Gormley, to discuss the issue. The Department of the Environment, Heritage and Local Government is carrying out a review of enforcement procedures under both codes, namely, the planning Acts and the building control Acts, with the aim of ensuring improved enforcement of statutory requirements. It has a building review advisory board which advises the Minister. It has also established a working group to specifically examine the issue of building controls enforcement. I understand the group will report to the Minister shortly.

The Bill seeks to deal with the issue of completion in the following way, not the way the Deputies opposite or the Law Reform Commission are suggesting. Under section 3(1)(c), a developer will be required to enter into a written contract with the owners’ management company setting out the rights and obligations of each party. It will set out the commitments given by the developer regarding completion of the common areas in a development. If the terms of the contract are not honoured, under section 21 the owners’ management company may obtain a court order requiring completion.

One proposal to deal with the issue of completion would have involved the retention of 5% of the purchase price of each apartment in a special fund pending completion of common areas. I have sympathy for the principle behind it. My Department consulted stakeholders, but there was no consensus on the proposal. After the Law Reform Commission had reported, an interdepartmental committee was set up to examine the commission's proposals. As Deputies will be aware, the Bill is not along the lines of the Bill proposed by the commission because it was considered that its Bill — no disrespect to the commission — was not comprehensive enough in that it did not take into account other aspects, particularly those relating to planning and building control. That is the reason we had to bring in the Departments of the Environment, Heritage and Local Government and Enterprise, Trade and Innovation in regard to company law issues. They were both part of the interdepartmental examination of this issue in terms of how we would deal with this aspect, particularly in the aftermath of the commission's report. The initial reaction of some in the interdepartmental group to the proposal to retain 5% of the purchase price was that it would merely add another 5% to the purchase price of a property and have a negative effect on property prices. I understand the reason the Deputies opposite are particularly taken by the idea behind the proposal, but extreme practical difficulties remain in terms of the way the sum of 5% would be released and whether it would entail more expense on the owners of properties and the owners' management company. While some of the representative associations of engineers and architects may well be supportive, it would mean, in effect, much more work for them for which somebody would have to pay.

Amendment No. 1 in the name of Deputy Rabbitte would introduce to the Bill a new and unknown concept of completion. It would not be practical for a number of reasons. It seeks to allocate a new statutory duty to planning authorities. If they were to be given additional responsibilities, the planning and development Acts would need to be amended, as appropriate. It would not be appropriate, therefore, to give such additional responsibilities in this legislation. Moreover, any such change would only be contemplated following an assessment by the Department of the Environment, Heritage and Local Government of whether undertaking such a role would be appropriate for planning authorities and, if so, if they had the necessary resources to undertake that function. As the Deputy is aware, there was a time when planning authorities issued certificates of compliance, but that practice has fallen by the wayside in recent decades.

The purpose of amendment No. 2 in my name is to enlarge the definition of "development stage" to include a reference to the contract between the developer and the owners' management company under section 3(1)(c). In future developments the development stage will end only when the development has been completed in compliance with the planning Acts and the building control Acts and where the terms of the contract referred to in the section have been satisfied. I refer the Deputy to section 3(1)(c) which states: “A person to whom this section applies shall not ... transfer his or her interest in a unit in a multi-unit development to which this section applies unless ... (c) a contract in writing is entered into between the developer and the owners’ management company concerned prior to such transfer setting out the rights and obligations each of those persons has in relation to the other”. This will have the effect of grounding a dispute in a contract. Any issue regarding completion will have to be determined ultimately, if not by agreement, by a court. That will happen in individual cases to prevent costs being heaped onto the entire operation and, ultimately, the consumer. Amendment No. 9 in my name makes it clear that the contract between the developer and the owners’ management company must provide for the work to be carried out in accordance with all statutory requirements and include provisions for the completion of common areas.

I do not want to be too prescriptive in this legislation about the details of the contract. However, a number of meetings have taken place between the relevant stakeholders, including the Law Society, the Royal Institute of the Architects of Ireland, RIAI, the Irish Property and Facility Management Association, Engineers Ireland, the Association of Consulting Engineers of Ireland, consulting engineers, as well as the Apartment Owners Network, with a view to putting together a model contract that would be acceptable and agreed. My Department, as well as the Department of the Environment, Heritage and Local Government, has also been involved in the discussions. I thank all of the stakeholders for their support in that regard.

Amendment No. 12 tabled by Deputy Rabbitte would require retention of 5% of the purchase price pending satisfactory completion, but there is not universal stakeholder consensus on this. I mentioned that a contract must be drawn up in future between the developers and the owners' management company, which would deal with the issue of compliance with statutory requirements and completion of common areas. We are approaching it from an another direction and probably a more practical one. To prevent potential conflicts of interest, I believe the owners' management company should have separate legal representation in the conclusion of such contracts.

Amendment No. 13 states that the owners' management company shall have separate legal representation from a different firm of solicitors. This will, I believe, protect the future interests of the unit owners of the development.

Amendment No. 22 proposes to introduce new procedures on completion of the development. It is a long and, to my mind, unnecessarily complex provision which involves parties serving notices on each other with regard to completion notices. I believe that the conditions to be included in future contracts between developers and owners' management companies together with the provisions in the Bill deal adequately with this matter. The issue of service of notice generally is dealt with elsewhere in the Bill. However, I accept Deputy Rabbitte is trying to be more prescriptive in regard to the service of notice and change of address aspects.

Regarding amendment No. 23, there is no provision under the Planning and Development Acts or Building Control Acts which would permit planning authorities to require performance bonds to ensure snagging of multi-unit developments. The proposal in subsection (3) is a matter for the Department of the Environment, Heritage and Local Government and it would need to consider that with the planning authorities in the context of any future reforms.

Section 21(4) already contains provisions for the court to make an order directing the developer to complete a development in compliance with planning permission, building control standards and the terms of any contract. There is a statutory requirement to have a contract under section 3(1)(c).

Deputy Shatter raised the issue of NAMA. We checked with the Attorney General's office on whether there was any requirement to change this legislation in the context of NAMA and the existing NAMA legislation and the office advised that as far as it was concerned no issues arose. In regard to the issue of rights and responsibilities of owners' management companies that are taken over by NAMA, if NAMA becomes, as Deputy Shatter says, in effect the owner, the rights and responsibilities under existing legislation and this legislation, when passed, would accrue to NAMA. If there are any existing owners, it would be to NAMA they would go in order to enforce their rights.

I am not sure if the Minister wants to refer to amendment No. 53 which is included in this grouping. I believe he did not refer to amendment No. 18 either.

Amendment No. 18 is the same as amendment No. 23, which deals with the snag list.

Amendment No. 53 is a follow on from amendment No. 2. Amendment No. 2 has necessitated amendment No. 53, which amends section 28(2).

I am afraid I could not be more disappointed with Minister's response. He is not his usual combative self other than his tone — that is all that is agreeable about what he has said. He has shot down everything that has been advanced.

I might surprise the Deputy.

I have been waiting for the Minister to surprise me since he got the job and he has not done so yet and with the way things are going this morning, it does not appear he will do so now. The business of unfinished developments is a very significant issue. Sometimes I think Ministers do not know anything about the real world.

Of course we do.

The Minister is the man who tried to solve tiger kidnapping by taxing the use of ATM machines. That is the kind of thing that causes one to throw one's hands up to heaven——

The Deputy should not listen to soundbites.

Deputy Rabbitte, that matter has nothing to do with this legislation.

The Chairman is right——

We cannot have a rational discussion anymore.

——and it has nothing to do with tiger kidnappings either.

We cannot have a rational discussion anymore on issues——

Let us have a rational discussion.

——particularly when people like the Deputy quote one as saying something one did not say.

The Minister is like a jack russell with a bone; he never lets anything go. He knows well he said that.

(Interruptions).

I ask that Members refrain from speaking about what was or was not said and that they stick to the Bill.

That is the problem now; we cannot have a rational discussion.

Let us stick to the Bill.

When experts, professionals working in this area and people who live in these apartment blocks are saying this is a very significant issue, how can we bring in legislation after waiting at least five years too long for it and then miss such a major point as this one? One must come to the conclusion that it is because it is about property. I did not hear the Minister denigrating any other professionals in debates on any other legislation during my time opposite him until it came to legislation dealing with property. Suddenly members of the Royal Institute of Architects are looking for work. That is the value of the considered submission it has made. To denigrate its considered submission in that way is appalling. During debates on Bill after Bill at this committee the Minister has adduced the Law Reform Commission in support of his position until it comes to legislation on property, and then he takes a completely different view. I would have thought that after the country being brought to the edge of ruin, his party and himself would finally begin to look at this question of property from a less biased perspective.

To say that the requirement on completion would put an imposition on the planning authority to ensure that there is compliance is almost unbelievable in 2010 having regard to what has happened. There were certificates of compliance in the past. We have now forfeited inspection for self-certification and that is why we are where we are. That is why there are apartment blocks in my constituency where one can put one's fist through the wall and where one can hear the people next door above one and around one. I cannot believe that the Minister is getting this kind of advice from his officials. Some of them must live in these apartments and some of them must know what the real world is like. The Minister is saying that he dismisses the requirement of completion to standard and verification because it would put an imposition on the planning authority. The Minister should not worry too much about putting an imposition on the planning authority because having regard to all that is being planned in this country at present, he would be giving them something to do.

I do not accept anything in the Minister's argument for dismissing these amendments. The protection that Fianna Fáil has afforded developers down through the years has brought our country to the edge of ruin. We have young educated people emigrating again. People are unable to pay their mortgages. I remember my colleague, Deputy Gilmore, introduced a Bill seven or eight years ago and Deputy Shatter may have introduced a Private Members' Bill separately to deal with the question of unfinished estates. Fianna Fáil will vote down such a Bill every time because it could not put the kind of imposition on developers that is in place in other countries whereby if a developer is to get planning permission for another development, the developer must finish the existing development to standard. However, that cannot be done here.

It is unfair that young people — these are mainly, although not exclusively, young people — have invested their life savings and repayments on a mortgage to live in these developments and now find themselves in half-finished developments with all of the resulting difficulties. We have the opportunity in this House, after waiting five, six or seven years, to address this issue, and we have the authority of the Law Reform Commission behind us, as well as the professional bodies that work in the area and those who live in the apartments, and the Minister states we cannot do it. I do not accept that. We have the opportunity. We are the legislators. We argue about the relevance of this House to what goes on outside. This is a classic example. Will we show ourselves aware of what is going on outside and take steps that make a difference in people's lives or will we take up the old defence of the developers and those who work with them, protect them above all and leave citizens in the stress in which they find themselves in so many of these developments?

I found particularly interesting a phrase the Minister used in dealing with the 5% retention issue to ensure multi-unit developments are probably completed. He started off by stating he had some sympathy for the proposal and at no point did he say that this was a bad idea or that the Government was opposed to it for some particular principle that he articulated. The reason the Minister gave was there was no universal stakeholder consent, in other words, the developers did not like it. The developers had vetoed the idea that there should be retention of 5% of the price of a new apartment because they would not get their hands on the money as rapidly as they wanted.

We then had the other exotic explanation that if the Minister imposed this for future developments, it could have a negative impact on the price of residential dwellings. This comes from a Minister in a Government that has presided over the greatest property collapse in the history of the State and one of the greatest property disasters in the residential area in global history. I do not know what happened in years BC. I doubt if it happened then, but in recorded history as we know it I cannot recall any biblical references in the old or new testaments to property bubbles and property collapses. On the basis that we have a fair idea of what has happened over the past 500 years, this Government has the unique record of presiding over one of the greatest property bubbles in global history and then watching residential property prices collapse by more than 40% in a period of less than three years. Despite this, the Minister is not agreeable to a retention of 5% of the price of an apartment because it could have a negative impact on the property market or because those acquiring apartments might have to pay an extra 5%. I have news for the Minister. Those acquiring apartments in six months' time will be paying less than the advertised price for apartments that are currently on sale. As an explanation it is mind-boggling.

Deputy Rabbitte has a better memory than I have. I might be wrong on the dates, but many moons ago, some time between 1988 and 1990, I was Fine Gael environment spokesperson. It would have been in 1989 that we produced a Private Members' Bill which would have allowed local authorities to refuse to grant planning permission to any developer who failed to properly complete a previous estate and to leave a planning application on hold until an estate was properly completed according to planning criteria, permissions granted and conditions imposed. Here we are 20 years later and the Minister is not agreeable to the form of amendments that have been tabled. I am long enough in the tooth to know that even if a Minister agrees to an amendment, he or she will always invent some reason it is not technically perfect and if it is a good idea, the Minister will introduce it himself or herself on Report Stage in the hope that someone might give him or her a pat on the back for his or her initiative.

I do not care whose initiative it is. I am of the view that this legislation provides a good opportunity to ensure multi-unit developments are properly completed and those purchasers of properties, most of which will be apartments although we know there are also individual homes within such developments which the Bill is being extended to deal with, are entitled in the current disastrous state of the market to some greater assurance that if they purchase, there will be some incentive for completion. It is regrettable the Minister is not taking on board at least the principle of what is proposed.

On the other issue to which the Minister referred, I referred to NAMA. The Minister has referred in global terms to advice from the Attorney General's office that state that in the light of NAMA, this legislation does not need to be amended. That is a Minister stating that he is not taking personal responsibility for amending the legislation and if this goes pear shaped, he can blame the Attorney General because he got the advice from him. I want the Minister to give us chapter and verse on that advice because the definition section of the Bill states:

"developer" means the person who carries out or arranges for the development or construction of a multi-unit development;

and in this Bill, when it comes to imposing some obligations on the person responsible for the creation of a multi-unit development, the person on whom the obligations are imposed is the developer.

I was among Deputies, including Deputy Rabbitte, who waded in until 3 o'clock or 4 o'clock in the morning on the Committee Stage of the National Asset Management Agency Bill 2009. There are provisions in that Act which transfer certain responsibilities to NAMA when it takes possession of property, but I have some concerns about this in the context of this Bill and I would ask the Minister to extrapolate a little further on the substance of the advice received from the Attorney General's office. If the Attorney General was always right, the State would not with great regularity lose cases taken against it, in both the High Court and the Supreme Court, which presumably are defended on the advice of the Attorney General's office.

Like previous speakers, I am disappointed the Minister is not willing to accept some of these amendments. The 5% retention, as he will be aware, was forwarded by the Law Reform Commission and supported by the architects of Ireland and also the apartment owners. Clearly, if the Minister is on the side of the apartment owners, he would be willing to accept this amendment. It is only right. The issue, as outlined already, is the unsatisfactory completion of developments and that young people, who are already in negative equity and who are up to their eyes in debt, must live in unsatisfactory conditions. These amendments would ensure history does not repeat itself. The Minister should give them due consideration.

On the definitions, there is the Labour Party amendment on how "completion" should be defined. There is no definition of satisfactory completion in the definition section. As we will be aware, that term is open to interpretation and there is no legal means of enforcing satisfactory completion. Perhaps the Minister would comment further on that. It would be acceptable if each stage of a development was completed before the developer proceeded to the next stage. That would be in everyone's interest.

Naturally, I reject all the suggestions that my party or I are trying to protect developers in any way. What we are trying to protect are consumers. We want to be as practical as possible and not involve owners in such amounts of red tape as to make it impractical and impossible for them to get their due entitlement. Deputies on the other side should not twist my words. I have said, both here and in the Seanad, that I have sympathy for the issue of retention. As a practising solicitor for many years I understand the benefit of having retention of purchase money to ensure compliance. My practical experience would also suggest there have been occasions when this retention would languish because of disputes or because of the difficulty of getting agreement as to how the money can be released. The Law Reform Commission proposes this but does not give any practical suggestion as to how the 5% can be released. That is the difficulty we have. The interdepartmental committee looked at this. Apart from the danger, which it suggested, that it would possibly increase the purchase price, the committee also identified taxation difficulties from a VAT point of view in relation to the retention of the 5%. There is also the issue of who certifies and the practical difficulties, both from a planning authority and building control authority point of view. I do not denigrate the representative bodies of architects and engineers, despite what Deputy Rabbitte says, but the latest submission from Engineers Ireland asks that section 3(1)(c) would be more explicit and then refers to a number of issues which could be accommodated in the existing section.

Is the Minister referring to engineers or architects?

Engineers and architects. It is a joint submission from the RIAI, Engineers Ireland and the ACEI. It refers to the 5% retention later in the submission as a next step but not one to be taken in section 3(1)(c).

We all have the same desire, which is to ensure completion and that owners get their entitlements. I am not going to accept any suggestions that my party or I are trying to protect developers. We are not. This is to ensure fairness and practicality. Deputy Flanagan exhorted me again to look at this. We have been looking at the 5% retention and what we have come up with in section 3(1)(c) is a requirement for a contract. We have been looking at the possibility — and this is something to which I would like to come back on Report Stage — of putting a 5% retention as a mandatory requirement in the contract. I have to get the Attorney General’s advice with regard to that but we are looking at that possibility. We would be making it mandatory that there be a contract. We are also considering having a 5% retention as one of the conditions in the statutory contract. I am not going to hoodwink people. Deputy Rabbitte talks pejoratively about unfinished estates. We are all aware of them and we sympathise with the people who are involved in them. However, I am not going to suggest, as Deputy Rabbitte appears to, that including a 5% retention in this Bill will cure existing unfinished estates. It will not. This will only apply to future developments. While we all want to deal with this situation and learn from the mistakes of the past, any amendment relating to the 5% will only apply to future contracts and future developments.

Deputy Shatter referred to NAMA. I do not have the luxury of independent legal advice. As a Minister I must accept the advice of the Attorney General's office. His advice, which has been examined by his officials and mine, is that this legislation imposes no requirement to take into account any of the issues relating to NAMA. That is the advice I have got and that is the advice I will follow.

Before the House rose, I sought agreement on the floor of the House from the Taoiseach to roster the Bill. He sought a commitment from me that it would complete Second Stage if we agreed that. We agreed it and it completed Second Stage. The expectation was that we would get into Committee Stage earlier than we have done. That is because the Minister raised the point, which did not seem unreasonable to me, that time was needed to look at the amendments to be brought forward. Now the Minister says he is awaiting advice from the Attorney General concerning whether a condition may be put in contracts requiring retention of 5%. That is something that ought to have been cleared up before we came here today. I do not wish to imply that I do not believe what the Minister has said. I am not saying that at all. If the Minister says the Attorney General's office is seized of this issue I am not disputing that. However, I do not want to be put into a situation where we resile from the amendments we have put down because of some vague possibility that the Minister may get the nod from the Attorney General's office. This is such a fundamental issue that we deserve to be told the position with clarity.

The Minister says he is aware of the problem of unfinished estates and is very sympathetic. Then he says he will not do anything about it and will allow the phenomenon to continue to be a permanent part of the landscape of planning in Ireland. The Minister has meetings with the Minister for the Environment, Heritage and Local Government, Deputy Gormley, who resides on an even higher pedestal than Deputy Ahern when it comes to these issues. He continually lectures us on the phenomenally revolutionary change the Greens have brought about in converting Fianna Fáil to probity in planning. Does Deputy Gormley understand that the Law Reform Commission has put forward proposals that would address the issues that cause him to lose sleep at night and that we have the opportunity in this Bill to enact those proposals? Is the Minister saying the Minister for the Environment, Heritage and Local Government, Deputy Gormley, assented to his passing over this and not doing anything about it? I find that very difficult to believe. I do not know the Chairman's view but I cannot see the Minister, Deputy Gormley, passing over an opportunity such as this. That man is always on the watch for opportunities to enforce probity of planning in the Irish system. I hope we will have the opportunity, when the House reconvenes, to hear the views of the Minister, Deputy Gormley. In the meantime, I ask the Minister for Justice and Law Reform to be more explicit with the committee on the fundamental point, which is the bond. I am sure the Minister has had the opportunity——

Is the Deputy referring to the retention?

In the face of resistance to the notion of a bond, I am willing to consider a rose by any other name. However, I would like to hear more detail. I do not want to delay Committee Stage of the Bill. More than anybody, the Labour Party wants to see this Bill enacted. I do not want plá más about the possibility of an amendment from the Attorney General's office which might have been before us today if he so minded to be helpful in this regard.

Obviously I am not as privy to the sleeping habits of Deputy Gormley as is Deputy Rabbitte. Perhaps he will tell that story——

He was asleep on 29 September 2008.

Perhaps the Deputy will reveal his insights into that on a later occasion. The proposed amendment relating to section 3(1)(c)isgrounded on the contract. There would be a contractual obligation between the parties that a contract in writing is entered into between the developer and the owner management company concerned prior to such transfer, setting out the rights and obligations of each of those persons relating to completion of the development and which includes — this is the additional piece we propose but we are in discussions with the Attorney General’s office on the possibility of including a specific reference in the contract to 5% retention — particulars of the arrangements relating to (1) confirmation of compliance with all relevant statutory requirements and (2) completion of the work on the common areas concerned. It is in this regard that we are considering the possibility of including a statutory requirement relating to 5% retention. It is not as simple as declaring there should be 5% retention; it would also be a requirement to include how that retention is to be released. This practical issue and issues to do with VAT and the payment of VAT on this retention, must be thrashed out with the relevant Departments and the Office of the Attorney General.

I accept that we need to complete this Bill. I was prepared to come here last week to deal with this Bill — that may not have cured this problem — but the Opposition asked for an adjournment until this week. However, there is a desire to have this Bill completed. I believe a meeting was being held in Galway or Roscommon but that was not our meeting.

Will the Minister explain the use of the word "retention".

That is the wording.

It is proposed that the purchaser would retain 5% of the purchase price and transfer it to the owner management company.

I will explain. The commission has concluded that it is appropriate that 5% of the purchase money for each unit be paid by the purchaser to the owner management company on the instructions of the developer, to be held in trust for the developer pending certification of completion and snag list. The owner management company is obliged to transfer the 5% to the developer. Given that the developer is the person legally entitled to the funds, the developer will also be entitled to interest earned on the 5% while it is being held in trust by the owner management company.

Is that reference on page 106?

It is on page 107. The developer is entitled to the money because it is part of the purchase money but the longer this goes on, the more interest would have to be paid on the money. If a dispute arose relating to completion, the developer would gain the interest on the money. I suppose this would be the case anyway if the total purchase price had already been paid over to the developer. In my experience, the issue of retention of moneys in the case of purchases is fraught with difficulty because of the fine details such as the issues arising on a snag list. In my experience as a solicitor, the issue of retention in contracts for one-off houses between a builder and purchaser building on a site was always fraught with difficulty. However, I am well aware of the difficulty associated with completion of common areas in multi-unit developments and if at all possible, I would like to include a specific proposal in this respect but I hesitate because of the practical issues that have been highlighted by the interdepartmental committee and by the lack of consensus. There is also the possibility this may mean an extra charge on the parties involved. If a dispute arises in this regard, it would be preferable to deal with it on a case by case basis, based on a contract in existence.

Am I to understand the Minister will make regulations to set down the referee at the end of this process? Why would an owner management company be minded to unreasonably withhold the transfer of the moneys to the developer? The purchaser has paid 100% and 5% is vested in the owner management company in the interim. The owner management company represents the purchasers. Why would the owner management company unreasonably obstruct the transfer of the moneys to the developer?

I ask for clarification on why the Minister said he hesitates. Does he mean he has personal doubts about the wisdom of this course or is he saying that a proposition has been put to the Attorney General's office and the Minister is awaiting legal clearance?

We are looking at how best to frame a proposal that would allow retention but make it practically possible and not complicate the release of the retention. It is not envisaged that regulation would be required because this would ultimately be a matter to be determined on the basis of a dispute arising regarding the contract between the parties. This is our proposal, that this is a contractual relationship between the developer and the owners.

Is there an argument for some kind of arbitrator at the end of the process?

That could be considered. We are trying to ensure there is arbitration and mediation available rather than court-based solutions. I have already included this provision in existing legislation and it could be taken into account in this respect. It may well be part of the deliberations between my officials and the Attorney General's office.

The purpose is not to bog down moneys due to a developer in an endless dispute but given the nature of the management company and its composition, I cannot see how the residents will want to unreasonably sequester funds.

A management company might try to retain the money as long as possible. It could be part of their sinking fund for other issues. Unnecessary withholding of the money is possible.

The Minister can legislatively prescribe that it cannot form part of the sinking fund and that it is held in a separate account that accumulates interest for the benefit of the developer. This is nothing complex.

I accept that. This comes back to my point that it is not a simple issue of inserting a provision that there shall be a retention of 5%. We must consider all of these aspects to be fair to people. Deputies referred to arbitration, which is provided for in section 24, which refers to mediation conferences for disputes based on issues arising from section 21, dispute resolution and rehabilitation of multi-unit developments. We have already built in provision for arbitration.

Where is that?

Sections 21 and 24.

On the question of the future and the past, where there is a multi-unit development in which 40 units are occupied and 43 are lying unfinished and certainly unoccupied, in the event that the Minister gets clearance from the Office of the Attorney General and causes something like this to be contracted, where stands the developments that are half-empty?

In those circumstances it would only apply to new developments, as opposed to existing unfinished developments where there may be people in some of the apartments and others are occupied and yet to be sold. This deals with common areas.

It is an important point and I want to clarify it.

I can understand that being an issue of particular difficulty in the context of existing developments that are partly sold. In teasing this out, the Minister's complaint is that it is not clear how Deputy Rabbitte's current proposal will be implemented. The Minister makes the same complaint about the report of the Law Reform Commission, with which I am familiar. There is an easy solution to this. Section 30 allows the Minister to make regulations and provides for making regulations in respect of particular sections. If the amendment Deputy Rabbitte proposes, which we support in respect of the 5% figure, was accepted there is no reason an amendment cannot be made to section 5 to provide that the structure for implementing the proposal be contained in regulations to be made. Section 30 can be duly amended to link into that. For all issues raised by the Minister, including the issue of the moneys retained by the management company, the regulations can prescribe the accounting arrangements to ensure those moneys are not utilised for other purposes, do not become part of the sinking funds or are not wrongly utilised to meet current expenditure in a particular year for the management of a block of apartments. A mechanism is available to us, by amending section 30, to allow the Minister, if he adopted the proposal in principle, to prescribe the detail for implementing it in regulations.

Given that we are making it mandatory that there be a contract and that we are considering some provision in respect of retention as a statutory requirement in the contract, and given that the discussions are ongoing between the stakeholders on a model contract, our view is that it would be better dealt with in the contract than by regulation. Each dispute will be dealt with based on the individual contract that pertains to it. If a model contract is developed — a standard contract as used by solicitors around the country for normal purchases — this contract will include all of these issues, including the use of this retention money or its not being used in other areas.

The Minister referred to who would certify completion of the development. Did he examine the possibility of the planning sections of local authorities certifying this? This will apply to new developments; there will be very few apartment blocks built in the future. There is a lack of work for planning staff in local authorities and there should be more inspections of apartment blocks to ensure they are built in accordance with the building regulations. Many of the problems that transpired are linked to this. We must learn from history and what happened to this country in the past ten years. There have been problems with apartment blocks and a lack of proper regulation. The wrong materials have been used in certain cases and it gives rise to sound issues and related problems in car parks. This is because inspections by local authorities did not take place. Has the Minister considered the possibility of local authorities being the arbiter?

The Minister for the Environment, Heritage and Local Government, Deputy Gormley, has a working group examining better enforcement of planning controls and building controls. That will report to him on better compliance and inspections, with which we all agree. That is the aspect to which Deputy Flanagan refers. It cannot be dealt with in this legislation because it is a wider issue.

It is incorrect to say apartments will never be built again. We must legislate for the future, when apartments will be built. We must learn from the mistakes of the past. We are legislating ad infinitum. We cannot say we are legislating for the next two or three years. I want to introduce legislation that is workable and practical and learn from mistakes on issues such as common areas, which had not been dealt with over the years. I accept that.

Why can the local authority not certify that the apartment block is complete or incomplete?

That issue is primarily the responsibility of the Minister for the Environment, Heritage and Local Government. We have had discussions on it but it will generate considerable additional work for local authorities. The Minister's working group is examining this.

Is that not the solution to the retention problem?

It may be, but it involves going back to a system that has not been in situ for many decades. The State got out of certification of completion and has left it up to the professions. The State put the onus and the cost on them. This has not happened overnight, it was the system when I started practising. One could get a certificate of compliance from the local authority but one cannot get it any more in respect of building controls. I do not know if the practice was stopped through legislation but it does not happen any more. We have become more sophisticated in respect of performance bonds and the homebuilders guarantee schemes. All of those schemes are in place to take the onus off local authorities, which could not get the business done in those years. While it seems a simple solution, from a practical point of view we must rely on the existing system. I would not characterise it as self-certification, as Deputy Rabbitte did, because that suggests the individual architect is giving a certificate to assist his client and that is not the case. The existing system will be continued, with some better involvement from local authorities.

Very briefly——

We have been on this amendment for nearly one and a half hours. I know it is an important part of the Bill.

The Minister has been clear that, in respect of the particular matter we are discussing, there is no relief for residents of unfinished apartment blocks. Can the Minister say the relief this Bill will give, other than on this particular point, to such residents?

Section 21 gives existing people and future people the right to enforce rights. Mediation is also available to them. Some of these sections apply to existing situations and others do not because of the circumstances as to what we try to do in each section. Section 21(4)(l) states that an order can be made by a court:

directing the developer of a multi-unit development to complete the multi-unit development in accordance with—

(i) the terms of any contract,

(ii) the conditions of a relevant planning permission under the Planning and Development Acts 2000 to 2009, or

(iii) the Building Control Acts 1990 and 2007;

That refers to existing multi-unit developments and can be referred to mediation under section 24.

Section 21(4)(l) refers to “directing a unit owner or a minority of unit owners to cooperate with decisions made by a majority of the unit owners in the development”.

I should have referred to section 21(4)(k). I am reading from the text as it will be if we accept the amendment.

That refers to a contract that precedes the Bill. The Bill is incomplete without the definition provided for in this amendment. I invite the Minister to improve on mine but there is a need for a definition.

Amendment put and declared lost.

I move amendment No. 2:

In page 4, subsection (1), to delete lines 19 to 22 and substitute the following:

"common areas), for the multi-unit development have been completed in accordance with—

(a) all relevant planning permissions under the Planning and Development Acts 2000 to 2009,

(b) the requirements arising under the Building Control Acts 1990 and 2007, and

(c) in a case where section 3 applies, the contract referred to in section 3(1)(c);”.

Amendment agreed to.

I move amendment No. 3:

In page 4, subsection (1), line 24, to delete "Minister for Justice, Equality and Law Reform" and substitute "Minister for Justice and Law Reform".

This is a technical amendment to take account of changes in departmental responsibilities.

Amendment agreed to.

I move amendment No. 4:

In page 4, subsection (1), line 29, to delete "comprising units" and substitute "comprising a unit or units".

This is a minor adjustment to the definition of multi-unit developments and is intended to clarify that a multi-unit development may contain a building or buildings containing a number of units, for example, typically an apartment block or a single unit such as a house separate from, but which forms part of, the development.

Amendment agreed to.
Chairman: Amendment No. 6 is an alternative to amendment No. 5. Amendment No. 45 is also related and amendments Nos. 5, 6 and 45 may be discussed together.

I move amendment No. 5:

In page 4, subsection (1), to delete lines 40 to 46 and substitute the following:

" "relevant parts" means, in relation to a unit, those parts of the common areas of a multi-unit development necessary for the enjoyment of quiet and peaceful occupation of such unit;".

This substitutes a new revised amendment to the term "relevant parts" in the context of the Bill. It states that relevant parts are those parts of the common areas necessary for the quiet enjoyment and peaceful occupation of residential units. This definition is essential because many developments are completed and launched in phases and only those parts of the common areas that serve the units being made available for sale are to be transferred to the owners' management company before the first such unit is sold. For these reasons, I cannot accept amendment No. 6 in the name of Deputy Rabbitte, which seeks to delete the definition of relevant parts from the Bill.

I am conscious that disagreements may arise between the developer and the owners' management company with regard to the extent of the relevant parts to be transferred. Naturally I hope such disputes are settled without recourse to the courts but it cannot be ruled out that the matter may not be resolved in this way. Therefore, I am tabling amendment No. 45, which extends the scope of the dispute resolution mechanism provided for in section 21, in order to deal with such cases. Where all else fails, the Circuit Court will have jurisdiction to make an order determining the extent of the relevant parts of the common areas.

I sought the excision of the paragraph concerned. The use of the term "relevant parts" narrows what might be encompassed by the common areas. The developer ought to be required to specify or indicate what is intended to be the common areas. The purchaser should not be in dispute from brochures or planning applications. There should not be room for the developer to suddenly change his mind about what is for the common enjoyment of the residents and what is considered his property over which he still has a beneficial interest. The Minister inserts the definition of relevant parts and the definition attaching to it refers to common areas as those necessary for the enjoyment of quiet and peaceful occupation of such units. The residents of a significant multi-unit developments may think there is an open space for the common enjoyment of the owners. When the two or three years of further recession referred to by the Minister pass and we start building again, could the developer decide to build another block in the open space? Under the provisions suggested by the Minister, it seems he could and it is a matter of dispute. Could he take over some of the car park spaces and build something else? These are real issues affecting real people. While I welcome the fact that an attempt has been made to define "relevant parts", the proposal to excise it would be more beneficial to the residents and owners.

Deputy Rabbitte's amendment could potentially give rise to a situation whereby once the first phase of a multi-phase development is launched and occupied the common areas have to be transferred and completed. It would be impossible or impractical for a developer to subsequently build elsewhere because the common areas would already be completed. We tried to provide for the legislation to kick in as relevant parts come on stream. All the rights and responsibilities of the developer will apply to parts that are occupied at that time.

In regard to any future development or taking over of common areas, these issues would be subject to planning requirements. Obviously, a developer could not start building on an area identified in a previous application as a common area without new planning permission. I accept, however, there is a potential for disputes in this area but a dispute resolution mechanism has been built into the legislation which provides for mediation, arbitration and, if all else fails, the courts. From a practical point of view, if only one quarter of a site is occupied, under the Deputy's proposal all the common areas would have to be developed and left lying idle. This would be the case even if the builder came back to complete the development, which is what the original purchasers would want. The result would be impractical in that common areas which were completed at substantial expense would probably go to rack and ruin.

Again, this illustrates the difficulty of trying to prescribe in legislation for issues which are completely different on the ground. This is why, in regard to our original proposal on the retention issue, it is better to make these matters part of a contract rather than attempt to provide for them on a universal basis. They can thereby become matters of dispute in each individual conflict rather than being universally addressed by regulation.

I will investigate the respective measures before Report Stage.

Amendment agreed to.
Amendment No. 6 not moved.
Chairman: Amendment Nos. 7 and 27 are related and can be taken together.

I move amendment No. 7:

In page 5, between lines 32 and 33, to insert the following subsection:

"(5) For the purposes of this Act a member of an owners' management company shall be considered—

(a) as being present at a meeting of members where he or she has validly appointed a proxy to attend and that proxy has attended the meeting,

(b) as having voted at a meeting of members where the member has validly appointed a proxy to vote at the meeting and the proxy (but not the member) has voted at the meeting,

where the appointment of proxies by members is permitted under the articles of association or other document which regulates the operation of the owners' management company concerned.".

The purpose of amendment No. 7 is to make it clear that any provision regarding proxy voting contained in the articles of association of an owner management company will apply to meetings held by the company under this Act.

The policy objective of amendment No. 27, which also refers to proxy voting, is addressed in amendment No. 7 and for that reason I do not propose to accept it.

The Minister's amendment takes precedence and I am merely seeking to establish whether it meets the concerns that have been expressed to me.

We are curing the same problem. We are allowing for the inclusion of proxy votes.

The concern is that the residents of a particular area of a development may have interests which are conceivably injurious to the wider body of residents. Alternatively, a small number of people may make decisions that are not in the interests of the residents in their entirety. Given the normal attendance rates at meetings, the question of how one can encourage maximum participation lies behind the idea of the proxy. The Minister's amendment is facilitating the proxy vote but a quorum is not required. Is that not the difference between the two amendments?

We have made provision on that issue elsewhere in the Bill. The Deputy and I differ somewhat in that my amendment deals with specific areas. Section 16 states: "The annual service charge in respect of a multi-unit development relating to a particular period shall not be levied unless it has been considered by a general meeting of the members concerned...and the meeting shall take place within reasonable proximity to the multi-unit development and at a reasonable time (unless 40 otherwise agreed in writing by a 75 per cent majority vote of the members)." Our amendment deals with the issue of voting by proxy. Section 16 also states: "Where the service charge proposed to the general meeting is disapproved by not less than 75 per cent of the persons attending and entitled to vote, the proposed service charge shall not take effect". Section 15(5) states: "The meeting shall take place within reasonable proximity to the multi-unit development and at a reasonable time (unless otherwise agreed in writing by a 75 per cent 20 majority vote of the members)." The legislation is replete with references to the 75% threshold.

Will the 75% figure apply only in the case of new multi-unit developments or will it also cover existing ones?

It will apply to existing developments.

The figure pertains to 75% of the people who turn up at the meeting.

No, it pertains to where a meeting is requested by 75% of the residents.

I am not sure about AGMs. I will examine the position of AGMs before Report Stage. As I noted, section 16 states: "the meeting shall take place within reasonable proximity to the multi-unit development and at a reasonable time (unless 40 otherwise agreed in writing by a 75 per cent majority vote of the members)." The memorandum and articles of association of the management company will dictate what the voting requirement is. I suspect they would be reasonably standard. We have not prescribed it in the legislation. What we have tried to do is to make sure that any changes being made — for instance in annual service charges — require a majority vote of 75% in favour.

Do the articles of association state how many members must attend for a quorum at a meeting?

That would be normal. The articles of association would determine all those things.

Does the legislation not describe certain standard articles of association, which could then be amended by members?

We have not made any provision for that in this Bill. That would be going into too much detail.

It is very difficult to provide against a perverse result. Democracy is democracy, but one can see certain circumstances in which there may be a problem. For example, people who are strapped for cash at a particular stage of their existence may not want to provide prudently for a sinking fund for the future. Some residents may have a direct interest in maintaining a lift shaft, alternative exit or similar, while others may be less concerned. It is a difficult question to provide for, because if people are given the opportunity to argue their case at a meeting, it is hard to argue with it.

Amendment agreed to.
Section 1, as amended, agreed to.
Section 2 agreed to.
SECTION 3

Amendments Nos. 8 and 21 are related and may be discussed together by agreement.

I move amendment No. 8:

In page 6, subsection (1)(b), line 36, before “ownership” to insert “the unencumbered beneficial and legal”.

It seems the Minister has created a certain ambiguity in terms of what is to be transferred to the management company. I was under the assumption that both legal and beneficial interest in the common areas and the reversions must be transferred to the management company; that is clearly not the case. I do not know whether the Minister is explaining that in terms of fees for development or otherwise.

The Bill provides, in section 4(2), that the developer can retain the beneficial interest in any development before the enactment of this Bill. In litigation, does beneficial interest not take precedence in circumstances in which there are disputes, as the Minister agrees there very well might be? This makes it all the more important that the beneficial interest in developments built after the Act is transferred, not just the legal interest. The amendment we are advancing would also ensure that the developer is not entitled to transfer the reversions or common areas subject to a mortgage or a charge, thereby frustrating the purpose of the Bill.

By preceding the word "ownership" with "the unencumbered beneficial and legal", I am seeking to anticipate a certain situation. For example, if the developer has a mortgage or contract with a finance company or bank, the owners' management company, OMC, would not necessarily want to take that on board, and the developer could therefore use it as a reason not to transfer. In the absence of both the beneficial and legal interest transferring, that doubt is left there.

I cannot accept amendment No. 8, which seeks to amend section 3(1)(b). This will run completely counter to subsection (6) of the same section, which specifically provides that while legal ownership of the relevant part of common areas is to be transferred to the OMC, the beneficial ownership is to be retained by the developer pending completion of the development stage. Amendment No. 8 also runs counter to the provisions of sections 11 and 12 which provide for the transfer of beneficial ownership to the OMC when the development stage has ended.

Deputy Rabbitte previously used the Law Reform Commission report against me, but this is a recommendation of the Law Reform Commission. To ensure the completion of developments, we have provided in the Bill for a device whereby the legal ownership is transferred to the OMC as the development is completed, while the beneficial ownership is retained by the developer until completion of what is called the development stage. The Law Reform Commission's proposal for section 3 of the Bill——

What page are we on?

Page 197. It states:

"Where required in accordance with section 4, the developer shall—— [...]

(b) vest the legal title of that multi-unit development in the owners’ management company”.

I emphasise that it states "the legal title". It also states: "During the development stage, the owners' management company shall hold the legal title to the multi-unit development in trust for the developer or his or her nominee". It is along those lines that we have proposed this.

I am worried about a situation in which the transfer is subject to a mortgage or a charge and the possibility that the purpose of the Bill could be frustrated because an OMC would not want to take that on board.

Amendment No. 21, to a certain extent, deals with this. We are willing to consider whether it would be appropriate to insert the word "unencumbered" in section 11 before Report Stage. If this were appropriate, the same might apply to section 12, in which the transfer of beneficial ownership is also referred to.

I welcome the fact that the Minister has taken advice on that. I am happy to accept it.

Amendment, by leave, withdrawn.

I move amendment No. 9:

In page 6, subsection (1)(c), lines 43 and 44, to delete all words from and including “each” in line 43 down to and including “other.” in line 44 and substitute the following:

"of each of those persons relating to the completion of the development and which includes particulars of the arrangements relating to——

(i) confirmation of compliance with all relevant statutory requirements, and

(ii) completion of the work on the common areas concerned.".

Amendment agreed to.
Amendment No. 10 not moved.

At what time will we finish?

I am in your hands.

I must finish at 1 p.m.

With regard to the lack of clarity in pinning down the person liable for the charges and the address and so on, is the Minister saying that——

I am sorry, Deputy; I will allow you to discuss it on the section.

We will deal with that in a later amendment.

We will come to that in a moment. Amendments Nos. 11 and 42 are related and may be discussed together by agreement.

I move amendment No. 11:

In page 6, between lines 44 and 45, to insert the following subsection:

"(2) An interest in a unit shall not be transferred subject to any conditions or covenant unless in the formulation of such condition or covenant, due regard has been had to environmental considerations.".

This relates to the right to dry. The Minister will note it is enshrined in the UN Universal Declaration on Human Rights and I am sure he will take it on board here. The amendment would insert a new paragraph such that an interest in a unit shall not be transferred subject to any conditions or covenant unless, in the formulation of such conditions or covenant, due regard has been had to environmental considerations.

My understanding is that this matter arose during the Seanad debate in which a discussion took place on whether there should be a covenant prohibiting the air-drying of clothes and the related environmental implications. I suppose there are other implications as well, including aesthetic implications and so on. However, it has been urged on me as desirable to enshrine it in the primary legislation.

I am unsure enshrining the display of Deputy Rabbitte's undergarments on a balcony would be appropriate. I held this debate with Senator Bacik regarding the presence of her undergarments on her balcony. It is best left outside the legislation.

My purpose here is not to wash our dirty linen in public. Where stands the issue in the absence of us providing for it?

The terms and conditions and covenants in a letting agreement or lease would provide for it. In effect, no house rules subsequently brought forward could change what was already in place. If there were a provision to the effect that something can be done or should not be done, the house rules cannot second-guess those. The best way to deal with this matter is when developments are at the planning stage. It is best to provide for adequate drying facilities when a complex is being designed, whether mechanical or natural drying facilities, and to provide for common areas for natural drying. The point Senator Bacik made was that she believed apartment owners should be able to hang their dirty linen out on the balcony. I am unsure whether others would hold the same view.

I refer to the requirement to provide for environmental concerns or considerations. My advice is that it would be extremely vague and potentially disruptive to put this into legislation. For example, let us consider the case of a purchaser. Could the title to his or her apartment be challenged at a later stage on the grounds that environmental considerations were not adequately considered? Who decides whether a title deed relating to a property would pass this test? While I understand the principle, it is impractical from a legislative point of view.

How stands the amendment?

I have mixed views on it. I will reflect further on the matter.

Amendment, by leave, withdrawn.
Chairman: Amendment No. 12 has already been discussed with amendment No. 1.

I move amendment No. 12:

In page 6, between lines 44 and 45, to insert the following subsection:

"(2) On closing of a unit sale prior to completion of the development, the developer shall pay 5 per cent of the purchase price to the owners' management company which shall hold such sum in trust for the developer until the development is completed.".

I am committed to this, it is critical and I must press it.

Amendment put.
The Committee divided: Tá, 3; Níl, 7.

  • Flanagan, Terence.
  • O’Shea, Brian.
  • Rabbitte, Pat.

Níl

  • Ahern, Dermot.
  • Andrews, Chris.
  • Brady, Cyprian.
  • Byrne, Thomas.
  • Kenneally, Brendan.
  • O’Brien, Darragh.
  • O’Connor, Charlie.
Amendment declared lost.

I move amendment No. 13:

In page 7, between lines 28 and 29, to insert the following subsection:

"(6) As respects the negotiation of and entering into the contract referred to in subsection (1)(c) and the transfer of the common areas concerned, the owners’ management company shall have legal representation and shall not be represented by the same solicitor or firm of solicitors as the developer or other person who is the owner of the common areas, and the reasonable costs of such representation shall be discharged by the developer or other person who is the owner of the common areas concerned.”.

Amendment agreed to.

I move amendment No. 14:

In page 7, subsection (6), line 29, to delete "The" and substitute the following:

"Except where the multi-unit development has been completed, the".

Based on the discussion about beneficial and legal ownership, I will withdraw the amendment. The purpose was to make it a one-stage process to transfer both legal and beneficial ownership. There appeared to be an incompatibility between sections 3(6) and 11(1), but having listened to the arguments made, I withdraw the amendment.

Amendment, by leave, withdrawn.
Question proposed: "That section 3, as amended, stand part of the Bill."

I appreciate that amendment No. 13 seeks to prevent conflicts of interest in the future, but was there abuse in the past? What happened and what problems were encountered that necessitated the introduction of the amendment?

We devised the amendment to ensure fairness. There are no contracts between developers and owners' management companies. To ensure owners' management companies will be seen to be independent, the amendment requires that they be separately legally represented and stipulates that reasonable costs of representation shall be discharged by the developer or whoever owns the common areas.

Question put and agreed to.
NEW SECTION
Chairman: Amendments Nos. 15, 31 to 33, inclusive, and 36 are related and may be discussed together.

I move amendment No. 15:

In page 7, before section 4, to insert the following new section:

4.—Where a developer retains any unit or units on completion of the development, each unit so retained shall be subject, on such completion, to a common liability for charges as if it had been disposed of by the developer.".

The amendment deals with the retention of units without payment of service charges. It is to deal with the situation where a developer retains units to avoid any liability for service charges. This can and does happen deliberately for a variety of reasons, advantageous to the developer. I merely seek to put beyond doubt that a developer, where he or she decides to retain a unit on completion, would be liable for the service charges applicable to any other owner.

We have the same objective and have already provided for this in section 16(10) which is being amended by amendment No. 33. I am proposing drafting changes to sections 16(10) and 17(4) to clarify the liability of a developer for service charges and sinking fund contributions on unsold units. We are ad idem with the Deputy in that we want to make it clear that the developer is the owner of unsold units and liable for charges.

I elaborate further in amendment No. 31 to make it plain that a developer should be liable to pay any charge under this section or section 15, within 30 days of receipt of the invoice, for any unsold units. The Apartment Owners' Network has urged this amendment on me. It argues that the obligation to pay service charges should begin on the date the first unit is sold. This would mean the developer would have to pay service charges on all unsold units from that date.

While I understand the Deputy's point, my advice is that if we were to require the developer to pay within 30 days, we would also have to require other owners to pay within the same period; otherwise, we would be open to a charge of discrimination as between the developer and owners.

I support amendment No. 15. One of the reasons owners are not paying their management fees is developers who have unsold completed units are not paying theirs. That brings down the management company because home owners are not willing to pay if there is not fairness across the board. This matter must be dealt with in regard to legacy apartment blocks where fees have not been paid, particularly by developers who now find themselves bankrupt and thus not in a position to pay the fees. There are multiple problems in that regard which will have to be addressed at a later date. I support the amendment which seeks to avoid a repeat of what is happening, but it demotivates apartment owners when developers do not pay.

I refer to amendment No. 32 also. The purpose is to permit the owners' management company to set an initial service charge before any residential units are sold. It also provides that in setting an initial service charge the owners' management company must have regard to the methodology and items of expenditure listed in section 16(3).

On a slightly different but related matter, what happens in circumstances where the owners' manager has an arrangement to pay by instalments? Is there any impediment to this in the Bill?

No. It is a matter for the owners' management company.

If the Minister says the 30 day requirement to be met by the developer has to be applied across the board, would that pose a problem?

That is my advice, yes.

The Minister's advice is that in law he or she would have to be treated as equal to other owners.

I welcome the provision in respect of the annual service charge proposed in amendment No. 32. It is important for owners to know that it will be calculated in a transparent manner and that there will be accountability.

Regarding owners' management companies and the regulator inspecting books to ensure all books and records are being kept and that the system is operating in a correct manner, is it being left to auditors or will the regulator become active in this area?

The management company will have auditors who will file accounts with the Companies Registration Office. This is the normal requirement under company law.

However, random checks will not be made by the regulator to ensure owners' management companies are operating in a correct manner.

There is no such provision included in this legislation.

Is that something the Minister will examine?

It is for the registrar of companies to decide. There is no regulator as such.

Is there not a remit to examine the matter under the Property Services (Regulation) Bill which I realise relates to management agents?

I can examine the matter, but it would be adding another layer to the system. That legislation is particularly prescriptive in regard to certain items. While it is part of a suite of legislation to try to address related issues, it is not specific to this type of issue.

How stands the amendment?

Amendment No. 33 achieves the main purpose of amendment No. 15 in my name. I will have to examine the question of notice and so on before Report Stage.

Amendment, by leave, withdrawn.
Chairman: Rather than move on to a new grouping and as it is almost 1 p.m., do we wish to adjourn? Does the Minister have a preference as to when he wants to reconvene——

I am not sure.

——or will I let the clerk to the committee consult him?

Yes. The clerk might talk to my officials. If we can do it relatively quickly with a view to having Report Stage completely, it would be better. The retention issue is the only one we are still examining.

Is there any chance the Minister might have it back by the time we next meet?

We could have it back by then, yes. It depends on how much progress is made on what should be included in the section as regards retention.

Progress reported; Committee to sit again.
The select committee adjourned at 12.55 p.m. sine die.