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

The meeting has been convened to resume consideration of the Multi-Unit Developments Bill 2009. Apologies have been received from Deputies Dinny McGinley and Noel Treacy. Deputy Terence Flanagan is attending in substitution for Deputy David Stanton. I welcome the Minister for Justice and Law Reform, Deputy Dermot Ahern, and his officials. I understand the Minister would like to make some brief opening remarks to clarify some issues raised at the last meeting which may be helpful to members. Are members in agreement with that? Agreed.

Arising from some of the comments on whether the Bill deals with existing or future developments, or both, as regards existing multi-unit developments, section 2(5) provides that except where otherwise provided, its provisions will, when enacted, apply to every multi-unit development. The rule, therefore, is that the Bill's provisions apply to existing developments unless otherwise specified. All of the sections, except sections 3 and 14, deal with existing multi-unit developments. Sections 3 and 14 are specifically targeted at future developments. Section 3 specifies what must be done in future before an apartment is sold in a new multi-unit development. For example an owner management company must be established by the developer; the relevant parts of the common areas must be conveyed to the owner management company; and a contract must be entered into between the developer and the owner management company.

Section 14 specifies the "one unit, one vote" rule. This rule cannot be applied retrospectively to existing developments. However, I propose in amendment No. 48 that the dispute resolution mechanism would cover voting structures in existing developments. It provides that where a court is satisfied that the structure of voting rights in an existing owner management company is not established on a fair and equitable basis, it may make an order altering the voting rights where it is satisfied that it is the in the interests of justice to do so.

In a nutshell, only sections 3 and 14 deal with future developments while the remainder of the Bill deals with existing and future developments.

For clarity purposes, the Minister's note is helpful.

The note is longer than what I read out but I can circulate it to members.

It can be fairly complex.

It raises an issue relating to the Schedule to the Bill which provides, for example, that multi-unit developments with traditional housing are excluded from many of the terms of the Bill. I have encountered that phenomenon in my own constituency. I do not know if the Minister appreciates what I am saying. I am talking about a kind of total development. Perhaps I can refer to it as traditional housing.

Single houses, yes. I have them in my own area too.

If the Minister examines Schedule 2 to the Bill, he will note that it excludes the application of the terms of the Bill to that kind of multi-unit development. That will be a considerable disappointment to people who find themselves in that situation. I would like to do two things. First, I ask the Minister to examine that point before we come to it today. If he cannot do so today, perhaps he can do so in advance of Report Stage. Second, I wish to signal to the Chairman that I intend to consider whether an amendment can be framed for Report Stage, if necessary. The Department may be in possession of a submission that spells out some of the difficulties in this area. If the Minister does not have it, I can let him have it. The document mentions some exclusions that are considered unreasonable. I do not want to go on about it other than to signal that an amendment may be necessary on Report Stage. I ask the Minister to respond.

The regime provided for in the Multi-Unit Development Bill 2009 will not apply to future traditional housing developments of the type referred to by the Deputy. It will not be capable of being applied to such housing because of guidelines that are being issued by the Department of the Environment, Heritage and Local Government. It will not happen in the future. Schedule 2 to the Bill deals with existing multi-unit developments.

Is the Minister saying that no revamp of Schedule 2 is possible——

No, I am not saying that.

——to apply some of the terms of this legislation to traditional housing in multi-unit developments?

Existing housing is something we could look at in advance of Report Stage. We were trying to apply the different sections to those multi-unit developments which comprise an apartment block and the traditional type of housing. That is what Schedule 2 refers to.

I welcome the Minister's clarification. Amendment No. 48 is extremely important because it provides for a "one member, one vote" system, which is what people want to see. There has to be some equity in the voting structure. Amendment No. 48 is to be welcomed. I would like to ask a question about owner management companies that become too big and need to be broken up. Are such companies mentioned in this legislation? This aspect of the matter needs to be clarified. There is a mixed development of houses and apartments in the Clongriffin area of my constituency of Dublin North-East. Until recently, the houses were subsidising the apartments in the sense that the owners of both types of property were being charged the same management or service fee, more or less, although that had changed in more recent times. There is an issue with arrears and outstanding moneys that are owed to the management company. Perhaps there should be separate management companies for the apartments and for the houses.

Section 21(4) states:

Notwithstanding the generality of subsection (3), an order under that subsection may include an order:

(b) in the case of a multi-unit development consisting of more than one structure, to provide that, where an issue relating to one structure only in the multi-unit development arises, only the unit owners in that structure shall have the right to be consulted and vote on the issue.

I think that would cater, in effect, for the issue being raised by the Deputy.

To what page of the Bill does the Minister refer?

The reference is on page 19 of the Bill, as passed by the Seanad. Section 21(4) continues:

(d) directing the establishment of an additional owners’ management company in respect of a multi-unit development where—

(i) there are separate blocks or buildings in the development,

(ii) there are units of a different character in the development,

or

(iii) there are units which are used for different purposes within the development;

That seems to cover the point. We will resume our consideration of the Bill on amendment No. 16. As amendments Nos. 19 and 47 are related, and amendment No. 20 is an alternative to amendment No. 19, they may be discussed with amendment No. 16.

NEW SECTION

I move amendment No. 16:

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

"4.—No person may sell a unit unless the purchaser has supplied his or her residential address to the owners' management company and has undertaken that if he or she resides elsewhere than at the unit he or she shall notify the company of any future changes in address until he or she disposes of any interest in the unit or resides in the unit.".

This amendment seeks to rectify a simple and straightforward omission in the Bill. I hope the Minister will take it on board. The purpose of the amendment is to deal with the sale of second-hand units, which is an issue that is not dealt with in the Bill. At our last meeting, we discussed the capacity of management companies to get people's addresses and correspond with them in relative certainty that they will receive the correspondence, understand its import and not dodge their responsibilities. The simple loophole that exists means a person who buys a second-hand apartment in a complex is not necessarily apprised of his or her responsibilities to the relevant management company. If the company in question does not know that such a person exists, the correspondence will go to the previous owner instead. Second-hand sales are not regulated in this legislation. It is a simple omission. We should correct this anomaly, which might mean that a purchaser is not aware of the obligations of membership of the owner management company.

Section 8(3) of the Bill already deals with this issue. In light of the issues that were raised in the Seanad, which have been raised again by Deputy Rabbitte at this forum, we have endeavoured in amendment No. 19 to expand on what is required. The amendment specifies that "a unit owner shall be under an obligation to furnish to the relevant owners' management company" his or her name and other particulars "and shall promptly notify the owners' management company of any change in such particulars". This proposal merely amplifies what was previously included in the Bill. I believe it caters for the point Deputy Rabbitte was making. Amendments Nos. 20 and 47, which have been tabled by the Deputy, concern the service of notices on unit owners. I have asked officials in my Department to examine whether a specific provision is required and, if so, to report back in that regard in advance of Report Stage. I suggest that the change of address issue has been taken care of.

I appreciate what the Minister has said about the latter two amendments. We will await the contents of the report of the departmental officials. I wonder if amendment No. 19 deals with the point I have tried to make about second-hand sales. I understand the onus is on the vendor to notify the management company of any changes. I wonder why vendors would want to do that. If they can sell the apartment, they move on. I do not think many people necessarily have the civic responsibility to ensure that before they hand back the key and take in the milk, they will write to the management company to tell it that they have sold the apartment to Deputy Shatter, who is the new owner. I do not think they would do that. Why do we not do it the other way, as set out in my amendment No. 16?

I would hazard a guess, in that it would be too onerous. As the Deputy has worded it: "No person may sell .......". In effect that is a prohibition on somebody selling a property, whereas we have placed the persons under "an obligation" to furnish.

The only inhibition is that a person is required to notify the company of a future change of address. If one does not pay the ground rent, that is a defect in title but that is not regarded as an impediment to somebody selling. My amendment is not an injunction against selling, it is an injunction to ensure the change of address is made available.

It states: "No person may sell...."

——unless the person notifies the future address.

Unless the purchaser has supplied his or her address to the owners' management company.

If the purchaser has supplied it, there will be no problem.

Perhaps Deputy Rabbitte's wording may need to be changed slightly. I think, however, he makes a very important point. One of the major issues is that the management company cannot contact owners of units, particularly when the tenants engage in anti-social behaviour. Unless there is an obligation at the point of sale, and the owner is under an obligation to provide his information to the management company, the company has no means of obtaining it unless the owner complies. The only real way of making the owner comply is at the point of sale. I agree that there should be an obligation at the point of sale. Deputy Rabbitte's wording may need to be changed slightly but as I live in one of these estates, he makes a valid point.

We can look at the amendment between now and Report Stage but I would hesitate to put such a restriction on somebody selling a property because there may be reasons they may not be able to get this information on time and it may hold things up.

That is the cause of a significant number of problems. They must notify their address to the land registry. A purchaser must notify his address to the land registry. It might not be easy for a management company to access that information. If there is an obligation there——

The amendment states, "and has undertaken that if he or she resides elsewhere than at the unit he or she shall notify the company of any future changes in address....".

That is similar to the Minister's amendment.

My amendment places an obligation, but it is not making the sale dependent on it.

I would, if I were the Minister, make the sale dependent on that, because I think it is crucial information. I do not want to disagree in public with my colleague.

I am not wedded to my particular wording if the Minister wants to come back to this issue later. The point of sale is the only hold we have. The chaos in the property market is due to a myriad of factors, this being one of them. There are factors, there are many tenants instead of owners, some of them have fallen on hard times and some of them cannot discharge their responsibilities. We have the opportunity to shut off a particular simple loophole.

We will have a look at the section.

How stands amendment No. 16?

I agree to withdraw the amendment, pending the Minister returning to it.

Amendment, by leave, withdrawn.
SECTION 4

I move amendment No. 17:

In page 7, lines 46 to 49 and in page 8, lines 1 and 2, to delete subsection (2) and substitute the following:

"(2) Subject to section 11(1), the transfer, in compliance with subsection (1), of the ownership of the relevant parts of the common areas of a multi-unit development and in the reversion relating to the units concerned may reserve the beneficial interest to the transferor if the reservation of such interest is necessary to enable the transferor to complete the development, and upon completion the developer shall transfer the unencumbered legal and beneficial interest free of any right in favour of a mortgagee or owner of a charge affecting such interest in accordance with section 11(1).”.

I think the Minister has already replied to the amendment, but he may wish to comment on it.

Section 4 is designed to cater for multi-unit developments which are partially completed where some residential units have been sold but the development is not substantially completed to a standard that would bring it up to section 5. In the circumstances we do not see the purpose of this amendment.

It goes back to the discussion we had the last day about the distinction between legal and beneficial interest — the requirement that the developer has to transfer legal title, but retains the beneficial interest. As I understand it the last day we probably had a meeting of minds on phased development, unfinished development and so on.

Amendment, by leave, withdrawn.
Sections 4 to 6, inclusive, agreed to.
SECTION 7

Amendment No. 18 is in the name of Deputy Stanton and has already been discussed with amendment No. 1.

I move amendment No. 18:

In page 8, paragraph (b), line 26, to delete “2007.” and substitute the following:

"2007, and

(c) completing a snag list prepared by an inspector of the relevant Local Authority.".

Amendment put and declared lost.
Question proposed:"That section 7 stand part of the Bill".

It is necessary to have a local authority inspectorate to ensure the developer completes the development. My colleague Deputy Stanton's amendment addresses the responsibility for the completion of the development and places an obligation to ensure work on a snag list prepared by an inspector of the local authority is completed.

As I stated on a previous occasion, the Department of the Environment, Heritage and Local Government is in the final throes of a review on the enforcement of compliance with planning and building control. This is primarily a matter for that Department. This Bill should not go into such detail as a snag list.

The provision goes further than the amendment. Various planning authorities can give a snag list and it might not relate to all of the conditions of the planning. It is far better that they be asked to comply with the conditions of the planning permission rather than with a snag list produced by the local authority.

Question put and agreed to.
SECTION 8

Amendment No. 19 in the name of the Minister was already discussed with amendment No. 16.

I move amendment No. 19:

In page 9, lines 3 to 8, to delete subsection (3) and substitute the following:

"(3) A unit owner shall be under an obligation to furnish to the relevant owners' management company——

(a) particulars of his or her name,

(b) particulars of his or her address,

(c) particulars of the names of the tenants in the unit,

(d) particulars of any habitual occupiers of the unit other than tenants, and

(e) such other contact particulars as the owners' management company may reasonably request,

and shall promptly notify the owners' management company of any change in such particulars.".

Amendment agreed to.
Amendment No. 20 not moved.
Section 8, as amended, agreed to.
Sections 9 and 10 agreed to.
SECTION 11

Amendment No. 21 in the name of Deputy Rabbitte has already been discussed with amendment No. 8.

I move amendment No. 21:

In page 10, subsection (1), line 31, after "the" to insert "unencumbered".

How stands the amendment?

I will withdraw the amendment on the basis that it will be examined before Report Stage.

Amendment, by leave, withdrawn.
Section 11 agreed to.
NEW SECTIONS

Amendment No. 22 was already discussed with amendment No.1. How stands the amendment?

I move amendment No. 22:

In page 10, before section 12, to insert the following new section:

"12.—(1) When the developer has completed a development in accordance with its statutory and contractual duties including quality assurance provisions, the developer shall serve notice of completion on the owners' management company, on the planning authority, on the building control authority and on the other parties scheduled in section 21(1)(a), (b) and (c) stating that the development is complete. The notice when served shall be accompanied by the list of addressees on whom the notice is being served and, when served on the owners’ management company, shall be accompanied also by a copy of the documentation listed in Schedule 3. The notice of completion shall state the date on which the developer intends to complete transfer of the beneficial interest in the common areas to the owners’ management company. That intended transfer date shall be not less than five weeks after the date of service (or the latest of the dates of service) of the notice of completion.

(2) If a party listed in section 21(1)(a), (b) or (c) objects to completion of the transfer to the owners’ management company, and/or to payment by the owners’ management company to the developer of all of the sums held in trust for the developer, that party shall serve an objection notice on the developer within 16 days of the date of service of the notice of completion. Such objection notice shall set out the grounds for objection to the transfer, which shall be confined to grounds of—

(a) non-compliance with statutory and contractual requirements,

(b) incomplete or defective work in the common areas or in a unit,

(c) any defect in the Schedule 3 documentation,

(d) any grounds of good estate management; e.g. in the configuration or size of the common parts which the developer proposes to transfer,

(e) any notice or other evidence from a local authority or statutory undertaker of incomplete or defective work, or of a refusal to take in charge ducts and conduits, paved or landscaped areas, or

(f) any other matter, unforeseen when any agreement for lease or sale of a unit was signed, which inhibits good estate management.

(3) On receipt of an objection notice under the previous subsection, the developer shall consider the grounds set down therein and shall, within five weeks period from the date of service on him, serve a revised notice of completion on the owners' management company, on the planning authority, on the building control authority and on the other parties referred to in section 21(1)(a), (b) and (c) setting down:

(a) a revised date on which the developer intends to complete transfer of the beneficial interest in the common areas to the owners’ management company; which revised transfer date shall be not less than five weeks after the date of service (or the latest of the dates of service) of the revised notice of completion;

(b) a note on each of the grounds or elements of each objection notice which the developer intends to remedy, outlining the intended measures for compliance, completion, remedial works, rectification etc.; and

(c) a note on the remaining grounds or elements of each objection notice stating why the developer does not consider those grounds to be valid, fair or reasonable.

(4) A party listed in section 21(1)(a), (b) or (c) may serve a revised objection notice on the developer within 16 days of the date of service of the revised notice of completion; in accordance with subsection (2).

(5) In the event that the developer has not yet served notice of completion of common areas or of a particular part of common areas in accordance with subsection (2), and a party listed in section 21(1)(a), (b) or (c) considers that the developer has completed a development (or the particular part) and is unreasonably delaying transfer in accordance with its statutory and contractual duties including quality assurance provisions, that party may serve notice of completion (called an “owner’s notice of completion”) on the developer, the owners’ management company, on the planning authority, on the building control authority and on the other parties scheduled in section 21(1)(a), (b) and (c) stating that it considers that the development is complete. The owner’s notice of completion when served shall be accompanied by the list of addressees on whom the notice is being served and shall have the same effect as a notice of the developer under subsection (2), and the obligation to provide a copy of the documentation listed in Schedule 3 shall be on the developer who shall fulfil that obligation within five weeks of service. The owner’s notice of completion shall state the date on which it intends the developer to complete transfer of the beneficial interest in the common areas to the owners’ management company; and it may be accompanied by a list of measures required to be taken by the developer for compliance, completion, remedial works, rectification etc. as set down in subsection (2). The intended transfer date stated in the owner’s the latest of the dates of service) of the notice of completion.

(6) If the developer objects to the owners' notice of completion, and to completion of the transfer to the owners' management company, the developer shall serve an objection notice ("developer's objection notice") on all the parties scheduled in section 21(1)(a), (b) and (c) within 16 days of the date of service of the notice of completion. Such developer’s objection notice be accompanied by a copy of the Schedule 3 documentation and shall set out the grounds for objection to the notice, which shall be confined to grounds of—

(a) the provisions of any agreement for lease or sale of a unit,

(b) good estate management,

(c) the time reasonably required (which shall be stated) to achieve compliance with statutory and contractual requirements, to complete work (or rectify defective work) in the common areas or in a unit, or to deal with any notice or other evidence from a local authority or statutory undertaker, or with a refusal to take in charge ducts and conduits, paved or landscaped areas.

The developer's objection notice shall also state the date by which the developer intends to complete the transfer to the owners' management company of the common areas referred to in the owners' notice of completion.

(7) The owners' notice of completion and the developer's objection notice shall have the like effect as a notice of completion under subsection (1), and the procedure for a party listed in section 21(1)(a), (b) or (c) to set down grounds for objection shall mutatis mutandis be as provided for in this section.

(8) In the event of a dispute arising in relation to completion of the development, following issue of one or more of the notices referred to in this section, such dispute shall be resolved in accordance with dispute resolution provisions to be set down in Regulations to be made by the Minister.".

This is in limbo until the Minister comes back on the discussion we had on the 5% bond and on his preference, if he clears the hurdles set by the Attorney General, that it should be a contractual insertion. I am still attached to my amendment and will revive it, but if the Minister comes up with something neater that meets the same purpose, then I am happy with that.

We are still looking at that.

Amendment, by leave, withdrawn.
Amendment No. 23 not moved.
Question proposed: "That section 12 stand part of the Bill".

There is a link between section 12(1) and section 12(4). Section 12(1) includes the phrase "or unless good and sufficient cause is shown", while section 12(4) defines this phrase as including a particular matter. What else could constitute good and sufficient cause within the meaning of section 12(1)? What other possible circumstances were envisaged?

It applies to the issue of owners of 60% and how to determine the beneficial interest in common areas when the beneficial interest transfers. There are circumstances where lenders could be in some difficulty in knowing when the completion of the development takes place. Section 12(4) states that "good and sufficient cause includes the reason that to do so would interfere in a material manner with the completion of the entire multi-unit development and that the interference could not be removed, overcome or resolved in any other effective manner than by the beneficial interest in the development or relevant part of the development continuing to be retained by the developer."

Clearly it is envisaged that it will not be transferred if the proper completion of a development is prevented. That is one particular issue. However, in the majority of instances dealing with multi-storey developments, I do not see how that could be a problem. I am concerned as to what other circumstances might be envisaged. Developers who want to make life difficult may invent reasons. Who will adjudicate as to whether there is a good and sufficient reason? That particular phrase in section 12(1) could effectively make the section meaningless, because a developer may contend there is good and sufficient reason, but the owners of 60% say there is no such reason. I could see that defeating the purpose of what is intended here.

The whole idea behind this is to provide a safeguard whereby a developer could potentially get off the hook. There might be four different apartment blocks within an entire project, of which three have been completed. This is designed to protect a situation where a developer could claim that the project is complete and that he is not subject to the obligations under the legislation to look after the fourth block.

I am still concerned that it could have the exact opposite effect of what is intended, if the developer just wanted to be obstructive. I think the Minister should have another look at this. We have not formally tabled an amendment on it. I accept the Minister's intentions are to try to resolve the problem, but there is such a broad "out" from implementing anything under the section that it may achieve nothing of benefit for those who purchased apartments in multi-storey developments.

We can look at it again. The idea behind it is to prevent the beneficial interest from transferring until such time as the development is completed.

Yes, except it will only prevent it from transferring in circumstances where there could be a problem. Section 12(4) gives an example of something that would be a blindingly obvious problem if the transfer could prevent completion for some reason. However, it does not state that this is the only reason. If section 12(4) simply stated that "good and sufficient cause" was that it would interfere in a material manner and so on, then it might be alright, but it states that "good and sufficient cause" includes that reason, so there could be a whole variety of things that are not addressed in the Bill and which make it so general that it is like kicking the door open——

I get the point. We can look at that.

Question put and agreed to.
SECTION 13.

I move amendment No. 24:

In page 12, between lines 5 and 6, to insert the following subsection:

"(5) Functions exercised under this section shall be carried out in a manner that has fair regard to the interests of residents of different parts of a development.".

This amendment relates to section 13, which deals with the right of a management company to effect repairs in the circumstances detailed in that section. The motivation for the amendment comes from people who drew my attention to circumstances in which they felt they were discriminated against in a decision made by a management company to effect essential repairs. The decision pandered to a majority of residents, while those on the periphery were ignored. The purpose of the amendment is to ensure that there is fair regard to the needs of residents when such circumstances arise. Just because some residents are an afterthought to a development, they should not be left to swing if the management company decides to spend the available money elsewhere.

I am not sure we can legislate to cure all the situations to which the Deputy might refer. The idea behind this is to allow repairs and maintenance that are "reasonably necessary to ensure the safe and effective occupation or the peaceful enjoyment of occupation of any unit or units in the development". If the company was to carry out repairs in one apartment block of a four block project, the Deputy's amendment would require the company to have fair regard to the interest and residents of the other apartment blocks. That would be unreasonable because the repairs and maintenance may not have anything to do with those other apartment blocks.

I accept that would be unreasonable. However, the test I seek to insert for the section is to ask what a reasonable person on the Tallaght bus would think. If something happened such as the Minister fears might happen, that would not pass the test. If moneys are used in a fashion that unfairly excludes a minority of residents, who may be a minority because of their juxtaposition to some feature of the development or because they are in an add-on block or whatever, there ought to be some recourse for them.

This provision is designed to effect emergency repairs that might be necessary on an estate but where the common areas are not in the control or ownership of the management company. Therefore, it is quite restrictive and the work must be done in order to allow the peaceful enjoyment or occupation of other units in the development. If we were to accept the Deputy's amendment, it could be interpreted as giving a significant imprimatur to others in the development to prevent the work from happening.

That is certainly not my intention. My intention is more that residents would be regarded equally in terms of their ambitions for the maintenance of their units. I will take another look at the issue between now and Report Stage.

Amendment, by leave, withdrawn.
Section 13 agreed to.
SECTION 14

Amendments Nos. 25, 26, 28 to 30 inclusive, and 48 are related and will be discussed together.

I move amendment No. 25:

In page 12, subsection (1), line 9, to delete "unit" where it firstly occurs and substitute the following:

"owner of a unit or units (and for this purpose, companies that are connected shall be considered a single owner)".

This is a core point, as people say on mature reflection. As the Bill stands, the provision is one vote, one unit, which sounds quintessentially democratic. We had some discussion previously on how to put some mechanism in the Bill to encourage engagement and participation on general issues. I have two particular concerns, one of which is the budget. We will come to that later. My second concern relates to a circumstance that occurs quite often, where the developer has retained a number of apartments. As the Minister knows, until now and until the enactment of this legislation, such developers were able to frustrate the management company. Of course, some developers have a large number of apartments on their hands now for other reasons. An investor too might buy half a dozen units or NAMA might buy half a dozen units. This could be an oppressive situation for the residents because the situation is no longer equal and their unit is not the same as these other units in terms of voting rights as the multiple unit owners can command a majority influence because they own a number of the apartments. The Minister needs to rethink this because if the section is left as it is, it leaves the developer with the whip hand. Where there is an agreeable developer — all the Fianna Fáil developers are agreeable — he or she will do business with the residents, but the situation might be a lot more difficult in the case of a Fine Gael developer. I urge the Minister to rethink the view that one unit, one owner is a fair measurement.

This is pretty much at the heart of the Bill. Can the Minister show me a development where there is not multi-ownership? I do not know of any such development and there are many developments in my constituency and all across west Dublin. I know of none where there is not multi-ownership. That may be because of the developer holding onto units ab initio or because in the heyday of the Celtic tiger investors went in with a barrel load of money from a bank and bought up a number of apartments. These guys can now frustrate the Minister’s legislation by commanding the whip hand in this fashion. I urge the Minister to rethink the matter.

Does the Deputy wish to comment on any of the other amendments in the group?

The other amendments in the group are amendments Nos. 26, 28, 29, 30 and 48.

Amendment No. 26 is an interesting amendment. Joking aside about Fianna Fáil developers, the situation affects them. People have come to me about this particular situation. The amendment seeks to insert a new clause where an owner has agreed with the management company to pay charges by standing order or direct debit. I would have thought that where a responsible owner paid by direct debit this would seem like all one's Christmases were coming together. However, this can be used to frustrate the legislation, unless we make express provision to ensure that such a person does not forfeit his or her voting rights. As the legislation stands, the voting rights are dependent on one having paid up.

The Deputy's amendment No. 30 is also in the same group.

This is also an important amendment. I have a concern with regard to the note the Minister presented at the outset of the meeting. This amendment relates to how the legislation applies to existing management companies. The Minister claimed previously, and in the Seanad, that he could not possibly retrospectively amend the memorandum and articles of association of existing management companies, but I think he now proposes an amendment to address this. We must bring these management companies into kilter with the legislation and that is what my amendment seeks to do. The amendment would give them two years to bring their memorandum and articles of association into kilter with the legislation. Otherwise, they are excluded from the brunt of the legislation. A great many people out there do not want that situation.

Amendment No. 28 in the name of Deputy Stanton is similar to Deputy Rabbitte's amendment. Perhaps Deputy Flanagan might like to make a comment on that before we go to the Minister.

Amendment No. 28 basically states that developers who retain ownership of multiple units should only be entitled to one vote. If there are 100 units in an apartment block and 50 remain unsold, then the developer will control the management company and the owners will not have any say at all. We need clarity from the Minister on how he intends to help apartment owners who live under developer-dominated management companies at the moment.

If amendment No. 25 was accepted, it would have two effects. First, every unit owner, including joint owners, would have a vote. It could therefore be possible for a unit to have two or more votes, depending on the ownership of that unit. Second, the amendment seeks to provide that where units are owned by connected companies, but not by connected individuals, there should be only one vote, irrespective of the number of units involved. There is no definition of what is meant by "connected".

We received submissions on the potential unfairness of this. An elderly person might own one apartment and have one vote, while a family next door might consist of three siblings as owners, all of whom would have separate votes, so they would have more voting power than the elderly person. That would be the effect of the amendment as tabled.

If that injustice exists, then we should deal with it.

No it does not exist. The original Bill as drafted stated that one vote shall attach to each unit owner. We amended that in the Seanad to state that one vote shall attach to each unit.

The Minister was wrong to agree to that. If he feels that the old lady in the apartment is oppressed by the three elderly sisters next door, she is ten times more oppressed by the developer who owns 30 units in the place. He is more likely to put the heel of his shoe on her neck than the three aged sisters who have joint ownership next door. I am a bit sceptical about the frequency of three persons owning one of these apartments.

There are joint owners involved in many places.

There would be joint owners between husband and wife I suppose. That is a single vote.

No, they would have two votes under the Deputy's amendment.

If my amendment is imperfect in that sense, I leave it to the Minister and his enlightened officials to correct it. However, that is a very minor, putative injustice when compared to the developer who has retained a number of units. Surely the logic of that is apparent to officials shaking their heads.

It would be very difficult to draft a Bill like that. Ultimately, people have constitutional rights of ownership and so on. We are endeavouring to make one unit owner——

The Minister drafted such a Bill. It was in the original Bill and I am saying he was right. How come it is possible for him to do it, but it is not possible for me to do it? The Seanad is wrong.

It was pointed out that this was vague as a "unit owner" could mean one person or a number of people.

Why do we not put in a little section stating that notwithstanding anything above, this means one vote for the ownership of that particular unit?

That is effectively what we have. It would not take care of the situation the Deputy is trying to address.

There is an obvious problem here. There should not be more than one vote for each individual unit. If an apartment is owned by two people in their joint names — normally a husband and wife — they should not be in a position where they have two votes while the widow next door has one vote. However, Deputy Rabbitte is trying to address a different problem. There are apartment blocks all over the country where it was the norm, before the property collapse, for developers to hold on to four or five apartments because they were under the illusion that they would automatically increase in value and they could make a killing at a later stage. That worked very well between 2000 and 2006 and then it all went down the toilet after that. Some of the apartments were the so called penthouses that developers thought would profit them the most. The number of penthouses, or apartments so described, in the same block amazes me. Apparently, any apartment on top of the block is a penthouse, regardless of the standard of construction. The problem is that there are developers now renting four or five apartments in one block, and there are developers who sold several apartments and retained them to rent and who can determine what happens within a block for many years.

We need to limit the number of votes an owner can have in any development. It may be that if we adopt one vote per unit to address the issue of joint ownership, then consideration should be given on Report Stage to the situation where somebody owns five or more units so that such a person shall not have more than five votes. I know of apartment blocks in which 70% of apartments were sold by the developer, who retained the remaining 30% and so will have the largest vote for many years. There would have to be recognition that if people own more than one unit, they should get some additional votes based on that ownership, but there should be an upper limit. If the Minister gave some consideration to this issue, it might facilitate addressing the problem.

What are the implications to voting rights under the rental accommodation scheme? In some cases, the landlord could be a developer who decided to retain the ownership of those properties. The new long-term leasing scheme allows houses to be leased to the local authority for a 20 year period. Does the developer hold on to those voting rights under the Bill as it is proposed?

If they were renting out the apartment, then it is the person who owns the apartment who holds the voting rights.

I can understand the points made by Deputies Rabbitte and Shatter. We would be of the same view if it was legally possible to do it. However, I suspect that it is not legally possible. I am not sure if a value judgment can be made that owner A is entitled to more rights than owner B, just because owner B owns several apartments. I would hazard a guess that given the constitutional right to private property, legislation that provides that because Deputy Rabbitte owns five of them, he should not have five votes, and Deputy Shatter who only owns one, is only entitled to one vote, would not be constitutionally sound. We will examine this but I am not sure any amendment would be constitutionally sound.

What motivated the Minister to put this in the Bill?

I did not insert this; I inserted, "One vote shall attach to each unit owner".

But the Minister said he amended this in the Seanad from "owner".

We used "to each unit".

Yes, but why did the Minister write it the original way if there was a constitutional problem? His original wording was "owner".

A valid point was raised that an owner could mean two or three people in joint tenancies.

But that is not the point. The valid point was not raised until the legislation went into the Seanad. Why did the Minister write it this way before it went into the Seanad? If there was a constitutional impediment why did the Minister publish a Bill with the word "owner" in it?

The feeling was that what we were talking about was one unit would have a vote.

Is the Minister telling me the combined genius of himself and his officials never heard of multi-ownership in these development blocks? He told me he was familiar with them. He is making up this constitutional malarkey. He would not have written "owner" in the original Bill unless it had cleared the offices of the Attorney General and the Parliamentary Counsel. It is possible for us to revert——

The point of having discussion both in the Seanad and at committee is to tease issues out. I am not saying——

Deputy Naughten and I know how amenable the Minister has been down the years to making changes and I am very impressed at his amenability in the Seanad but he chose the wrong provision to be amenable on. Deputy Shatter may be correct that developers were punting that the apartments would be worth more down the road but the reason they retained them was to frustrate the management company if need be and some of them own multi-units. That is a phenomenon in my part of Dublin. Where one unit equals one vote, they will have multiple votes and that will frustrate the many good provisions the Minister has included in the Bill.

With respect, the Deputy's amendment will not make it better.

Perhaps not and perhaps it is the wrong amendment or it is not perfectly drafted, although why should I concede such an outlandish proposition? What is wrong with "to replace unit with owner of a unit or units"?

The Deputy refers to companies that are connected. What does he mean by "connected"?

The Minister raised the issue of dealing with the connected problem he set out at the beginning of the discussion on this amendment because there could be, as he said, connected companies or parties.

The Deputy should refer to companies.

When investors had money, they used to go in and buy half a dozen units. I deal with them every week. The Minister is frustrating some of the merit of his own Bill.

I am not. I understand the point the Deputy is making. We will examine his amendment between now and Report Stage but I hazard a guess that it will not pass examination by the Attorney General's office and, ultimately, if we insert a provision, it will not pass the scrutiny of the courts because in the voting rights that attach to a unit, the legislation would discriminate between classes of owner.

Why did the Minister switch horses in the Seanad? Why was it considered that "owner" could be the measurement in the original Bill?

Because the valid point was made that the use of the word "owner" could be interpreted as having different classes.

Why did the reference pass muster when it was stamped in the Parliamentary Counsel's office?

The intention always was that it would attach equally to one unit but the way it was phrased was not good and that was accepted by us.

Where 50 units out of 100 units in a development remain unsold and the developer retains control, will the owners of the 50 occupied units have an opportunity to go to court to amend the voting structure as a result of amendment No. 48?

This relates to existing developments and it extends the court jurisdiction in mediation to voting rights in owner management companies. It means that where a court is satisfied that the voting rights have been allocated in an unfair manner, it can alter them if it is necessary.

It could, therefore, be fair if more than 50% of the units in a development are unsold——-

That would not be a reason to consider it to be unfair under the amendment. That is a reality.

That is a reality but the developer will remain in control of the management company and the owners will not have a say.

Voting rights will attach to a unit. There may well be circumstances where the developer will retain, for whatever reason, whether on purpose or because of circumstance, ownership of a substantial number of units and will have a substantial voting input. I will consider any reasonable Opposition suggestion in this respect but Deputy Rabbitte's amendment is not the correct formula and it is not acceptable.

There are a number of amendments in the grouping and the Minister might address the others.

The same applies to amendment No. 28 in Deputy Stanton's name. We are not sure of the soundness of amendment No. 26, which proposes the forfeiture of rights. The legislation does not state voting rights will be forfeited if service charges are in arrears.

With regard to amendment No. 29, I propose again to clarify whether the one unit one vote rule will apply to any developments in which a unit has not been sold prior to the enactment of the legislation. This will replace the existing provision which applied the new rule to developments in respect of which development works commenced after the commencement of the legislation.

In amendment No. 30, Deputy Rabbitte proposes that the new rule on voting rights should be applied within 24 months to existing developments. The difficulty is that many existing owner management companies have detailed provisions regarding voting rights within their constitutions and it would not be possible to modify these arrangements in the manner proposed by the amendment. I am, however, conscious that in some cases voting rights are allocated in an unfair and inequitable manner and, hence, I have proposed amendment No. 48.

Will the Minister clarify for people in this position how his amendment corrects what he admits is an existing defect?

Is the Deputy referring to his amendment No. 30?

My amendment would tend to bring it into line over 24 months but he said his amendment will deal with this scenario.

The Deputy is trying to rewrite the constitution or memorandum and articles of association already agreed.

That is what my amendment is seeking to do.

Yes, and that is not possible.

How does the Minister propose to handle this?

My amendment No. 48 relates to the unfairness and I am extending the right to mediation or alternative dispute resolutions to those circumstances.

Is that practicable? People might have to go to court to——

It would have to be done on a case-by-case basis, rather than being universal. That is the view of my officials and the view of the Office of the Attorney General.

It seems to me to be too much of a hurdle to expect people to go to court.

We are extending the mediation section to that so that it can be done without going to court.

We need to get amendment No. 26 out of the way. The Minister has not said anything that refutes amendment No. 26. Why can we not make it plain that where somebody is on a debit arrangement that is——

There is nothing in the legislation——

I have had a particular case where the developer used this to disenfranchise people and to put him into the situation——

That was because they had not paid their service charges. Perhaps we can phrase it another way. We will look at it between now and Report Stage. I get the point the Deputy is making.

The Minister said earlier that it does not state anywhere in the Bill that voting rights are attached to not having arrears.

It is silent on that, but it could be a cause of——

What kind of a management company would give voting rights to escapees? It would defeat the entire purpose. If I do not have to pay my service charges and I still have a vote, I would undermine the entire concept.

I accept it would be an encouragement to people to have their arrears and service charges paid.

I am very familiar with difficulties that are caused within multi-unit developments by individuals who do not pay their service charges. We all come across this and it can have a particularly detrimental effect on residents who are managing their own block and who are trying to maintain a sinking fund. They only need to have around five owners and it is usually investor owners who do not make payments and effectively sabotage the sinking fund. I am very firmly of the view that anyone is in arrears for six months on their service charges should not have a vote. There should be no exception to that. People have to be given some leeway and we cannot exclude people from voting because they are a week late. There would probably have to be an amendment whereby there is no agreed arrangement and the person is six months in arrears.

I have intervened on behalf of a constituent who had particular personal difficulties and who was a resident in a unit. It was agreed that instead of making one payment, if the resident paid over six months in a series of instalments, then the management company was happy with that. Such a person should not be excluded from voting. There is a sophisticated provision to address that circumstance that could be included in the Bill. I wanted to tease it out with the Minister on Committee Stage and I am glad Deputy Rabbitte raised it. This is particularly important because management companies are incurring unnecessary expense at the moment in trying to recoup payments, so this is one area of dealing with it.

The other side to the story is that investors in multistorey units often do not go to annual general meetings because they do not care whether they have a vote. I do not want to broaden the discussion because I want the Bill to progress, but it does not yet deal effectively with the recalcitrant unit owner who is not making annual payments. More often than not, the recalcitrant unit owner is an investor rather than a resident. We need more specific provisions to assist management companies in doing their business in a cost effective way for the sake of other residents.

I support the amendment. The six month period is a reasonable length of time before owners should be penalised. It provides an incentive to owners to pay their fees, otherwise they do not have a vote at the annual general meeting. This should be added into the Bill.

The detail of voting rights is normally contained in the memorandum and articles of association, but I see the logic in what committee members are saying. We can phrase something that will make it a little bit more emphatic so that somebody who constantly refuses to pay service charges does not get a vote. We will look at it and see what we can do. Maybe we can find a variation of what Deputy Rabbitte is trying to say. I would hazard a guess that this would normally be dealt with in the memorandum and articles of association in any event. I suspect that somebody would be refused the right to vote if he or she did not comply with a certain number of conditions, which would include not being in arrears.

We have given some time to this group of amendments? How does amendment No. 25 stand?

The Minister has acknowledged that there is a problem, but he thinks my solution is the wrong one. I regard this as very important and I do not want to be put into the position that in order to get past Committee Stage, the Minister states that he may or may not come back with something on it. It is not fair if developers can go into a meeting with 30 votes in their pockets and the entire votes of the residents come to 25.

I have said that we will come back with an alternative for all amendments proposed except for one. The amendment that attaches one vote to one unit might be a difficulty, but I get the principle of the change that is desired. I am just not sure if we can have watertight language that would pass muster.

I do not want to divide the committee on this. I hope the Minister can work out something with the parliamentary draftsman, because it would not be right for a Bill, that should have been enacted five years ago, to allow people to be oppressed by the superior voting power of investors or developers. We really need to come up with a solution to it. There is no point in enacting legislation that does not have any impact. I have practical experience of how the developers have used the existing situation to frustrate the management company. As times are tougher now, some of these developers will not raid the fund they have squirrelled away in Switzerland to repair Mrs. Murphy's lift shaft.

This business has somewhat exotic connotations.

How stands the amendment?

Gone up in the lift, Chairman. I hope the Minister can come back with something on Report Stage and, on that basis, I will withdraw it and table it again on that Stage.

Amendment, by leave, withdrawn.

I move amendment No. 26:

In page 12, between lines 11 and 12, to insert the following subsection:

"(2) Where an owner has agreed with the OMC to pay charges by standing order or direct debit, and is not in default of that arrangement, he or she shall not forfeit voting rights under this section, but otherwise an owner in default will not be considered to have voting rights.".

I hope the Minister will be able to meet the essence of the amendment. On that basis, I will withdraw it pending Report Stage.

Amendment, by leave, withdrawn.
Amendment No. 27 not moved.

I move amendment No. 28:

In page 12, between lines 11 and 12, to insert the following subsection:

"(2) For the avoidance of doubt, for the purpose of subsection (1), developers who retain ownership of multiple units shall only be entitled to one vote.”.

We will withdraw this amendment and table another amendment at a later date.

Amendment, by leave, withdrawn.

I move amendment No. 29:

In page 12, lines 16 to 18, to delete subsection (4) and substitute the following:

"(4) This section applies to multi-unit developments in respect of which no contract for the sale of a unit has been entered into prior to the enactment of this Act.".

Did the Minister put his note on amendment No. 29 on the record?

Amendment agreed to.
Amendment No. 30 not moved.
Question proposed: "That section 14, as amended, stand part of the Bill."

With regard to developer controlled management companies, rather than owner management companies, there are situations where huge arrears are owing and are not being paid by the developers. Is that catered for in the Bill?

What is owing?

They have not paid service fees over numerous years. They control the management company and are not paying the fees for the unoccupied or unsold units. There is no contribution towards the running of the management company.

They are the owners?

Unsold units are owned by the developer. Is this factored into the Bill?

It is elsewhere in the Bill. Section 16(10) provides that for the purposes of the section the developer or building contractor, as the case may be, shall be considered to be the owner of a unit in a multi-unit development upon completion of the sale of the first unit in the development. It goes on to state how the annual service charge shall be calculated. There is an onus on them to pay the service charge.

They have not paid it over numerous years.

If an amendment is put into the Bill about the arrears, it will cover that.

Can we table an amendment?

The Minister has suggested he will come back with an amendment relating to the arrears period. A six-month period has been suggested. That will cover it.

Chairman, there is important business elsewhere and some members of the committee are involved in it. We agreed with the Minister to sit until 4 p.m. When we dispose of this section we will move on to a new area concerning annual meetings and so forth. It would be best to adjourn before that.

Question put and agreed to.

Does the Deputy wish to return later to finish the Bill or will I arrange another date for it?

I cannot return today. There is not much left. I am willing to return to it whenever the Minister wishes to deal with it. However, there is business to be dealt with elsewhere in the House today.

Okay. We will adjourn the meeting sine die.

Progress reported; Committee to sit again.
The select committee adjourned at 3.55 p.m. sine die.