I move: "That the Bill be now read a Second Time."
I thank the Minister for Justice and Equality, Deputy Flanagan, for attending this debate. I will briefly address what this Bill is intended to do. I am introducing this Bill to support apartment and homeowners who live in estates managed by owner management companies. I refer in particular to those directors who ensure these developments are well run. The Bill will set up an ombudsman for owner management companies and that body will help train board members, assist in dispute resolution and make recommendations on the future development of the sector.
The ombudsman for owner management companies will be based within the Property Services Regulatory Authority, PSRA. We have costed the establishment of the ombudsman and the estimated running cost is €500,000 per annum. The Bill will bring owner management company law up to scratch and will make it much more effective in helping to improve quality of life in these developments. At the outset, I thank all the people who have contributed to this Bill and, in particular, the Apartment Owners Network which has appeared before the housing committee on a number of occasions. More than 500,000 people around the country, and I am one of them, live in estates and developments managed by owner management companies. That is a significant part of the population. These owner management companies run the developments and set the budgets, fees and priorities. All these owner management companies are run by volunteers who freely give of their time to improve the quality of life in their estates. Managing agents are retained to provide professional help with that.
This area has many issues, however. I have described it previously as a ticking time bomb in respect of sinking fund provisions but I will come to that issue later. The directors of these owner management companies carry out complicated duties. They are ruled by a dense thicket of company law and they fall between several stools at departmental level. Directors have significant obligations and little or no Government support in helping them carry out those duties. This Bill seeks to support volunteer directors by setting up an ombudsman to provide expert advice and resolve internal issues that may arise from time to time. The ombudsman would also make recommendations to the Government on owner management company regulation and help to enhance governance and standards in owner management companies.
This Fianna Fáil Bill forms part of a broader suite of policy measures I have brought forward on behalf of my party to assist people living in apartments and managed estates. Those other measures include the Management Fees (Local Property Tax) Relief Bill 2018 which has passed Second Stage and proposes that marginal relief be given on property tax to avoid double charging for services for principal private residences, reform of owner management company regulation, the strengthening of sinking fund requirements and the provision of a new deal for tenants and landlords.
I will go through some of the provisions of the Bill. A recent submission to the Oireachtas Joint Committee on Housing, Planning and Local Government from the Apartment Owners Network and the Society of Chartered Surveyors in Ireland estimated, as I mentioned earlier, that about 500,000 people live in these developments. Since 1 April 2011, the Multi-Unit Developments Act 2011, known to us all as the MUDs Act, regulates the ownership and management of the common areas of multi-unit developments and provides for the setting up of owner management companies to manage such areas. A multi-unit development is a development with at least five residential units where facilities for amenities and services are shared. The Act provides that owner management companies must be set up and the common areas of the development transferred to it by the developer who sells the units.
That Act and this Bill place a series of complex obligations on volunteer directors and leaves them straddling a couple of Departments under company law. My Bill aims to provide good governance within the owner management company sector, to provide information on the duties and responsibilities of owner management companies and to provide training to members of owner management companies. It also aims to make recommendations to the Minister for Business, Enterprise and Innovation on the regulation of owner management companies, including a recommendation that tenants living in multi-unit developments have representation, to assist in the reconciliation of disputes in owner management companies on a non-binding basis and to publish an annual report on the work of owner management companies. The Bill would also transfer responsibility for this sector from the Department of Justice and Equality to the much more relevant Department of Housing, Planning and Local Government.
I thank the Minister for the engagement I have had with his officials in recent days. This Bill is to provide assistance to many people who urgently need it. Many managed estates across this country are effectively insolvent and others are underfunded. About 90% of managed estates have sinking funds that are insufficient to meet any issues that may arise. There are also issues with management fee collection as well as many other similar issues, a large proportion of which eventually end up in the courts. I do not believe that needs to happen in many of those cases, particularly if we had an ombudsman for this sector providing the type of advice which may be needed. This type of ombudsman exists in Britain, our nearest neighbour, and that body is funded by a small levy on each management fee paid. In Ireland, the fee to provide this service would be about €1 per management fee paid. That would be good value to assist in trying to regulate this sector properly and improve the quality of life of people living in these managed estates.
All of us have experience - I do in Dublin Fingal and I am sure that is also the case in counties Laois and Offaly - of managed estates that have been run down and volunteers who do not have the time or the expertise to be able to manage the day-to-day affairs of the estates and who have given up. I have come across another and more worrying situation quite regularly. I refer to estates where block insurance is not in place because fees have not been paid and consequently there is no money to pay for insurance. That is why Fianna Fáil has proposed, and had passed on Second Stage, a small reduction for principal private residences in the local property tax of one third of the management fee or €300, whichever is lower. That is recognition that in many instances people are paying the local property tax and management fees and are paying on the double for some services. The reduction would only apply if people had paid their management fees in full.
One other provision is also urgent. I refer to the need for all management companies to report on their sinking funds separately and have separate accounts for those sinking funds. We should heighten the provision for sinking funds in managed estates. Provision should also be made regarding what assistance local authorities will give to managed estates. In some instances, local authorities have been able to take over underground services such as foul water, drainage, public lighting, roads and paths. We should be setting guidelines concerning how local authorities should interact in those cases. If we do not get a grip on this sector, where 500,000 people live, we are storing up further problems to be faced in the future. I thank the Minister sincerely for his interaction and engagement on this legislation. I believe it will make a real difference to a significant portion of our population.