Wednesday, 21 November 2007
Seanad Eireann Debate
Senator Dominic Hannigan: I welcome the Minister to the House. His presence is an indication of the importance of the subject of unregulated management companies. I understand a high level interdepartmental group is expected to deliver recommendations on this issue in the new year. While I recognise and welcome the fact that some form of resolution is in sight, residents affected by this legislative black hole deserve and expect some form of clarification in terms of the measures that will be put in place.
In my own area estates like Glasheen and
Kilbreck in Stamullen, Northlands, Woodside and Grangerath in the east Meath area, and Dunboyne Castle estate are all being run by management companies. While all the companies in the estates I mentioned are well run, competent and efficient, an unregulated system and management model is in nobody’s interest. Many residents who have ended up as members or directors of those companies did not envisage they would have to take on that commitment and the hard work when they bought a house in their estate. It is vital that a well-thought out, comprehensive regulatory framework is put in place in the interests of all parties.
In July 2006, the then Minister for the Environment, Heritage and Local Government, Deputy Dick Roche, issued a directive to local authorities that no more management companies be put in place for traditional housing estates. He recognised that some sort of management company might be necessary for multi-unit apartment blocks but only for the corridors that are shared and private car park areas. He indicated also that all essential public services should be taken in charge as soon as possible by the local authority upon completion of the estate. That directive was of no practical benefit to those people tied in to management estates throughout the country. Why should residents in Meath, Louth and beyond have to pay for essential services when an estate across the road from them gets those same essential services for free?
The establishment of management companies was included in the planning conditions of many of these developments. In a number of cases the necessity to sign up for that management company was hidden in the small print of the contract and many people were unaware they were signing up for it, and many of their solicitors did not tell them, until they got the bills a year later. I will not make an issue of that but it is essential something is done about it.
The problem for these residents does not end there. If a developer refuses to hand over control of the company, residents are often powerless to make decisions that affect their own estates. It is essential, therefore, that any new legislation clarifies and defines the handover process from the original management company to the residents.
Cases have arisen in Dublin where management companies have not held annual general meetings and are failing to make the relevant declarations and returns on behalf of the companies. That can give rise to significant financial and legal difficulties for residents. I emphasise that many of those management companies are extremely well run. People give up their leisure time to ensure their estates are run well. That is not the issue. The issue is that residents should not have been put in this position in the first instance. It is important we take the opportunity now to put in place proper legislative regulations to put those companies on a sound basis. I appreciate the Minister coming into the House to respond.
Minister for Justice, Equality and Law Reform (Deputy Brian Lenihan): I thank Senator Hannigan. The issue of the regulation of management companies is a topical one and I welcome the opportunity to inform Seanad Éireann of ongoing developments in this area.
One of the most striking features of the property market in Ireland in recent years has been the growth in the number of multi-unit developments. These may comprise blocks of apartments, some of which may contain commercial elements, or mixed developments of multi-unit blocks and stand-alone housing. The majority of these developments involve the establishment of a property management company to take ownership of the common areas and to hold the freehold interest in the individual units. As Senator Hannigan fairly pointed out, many of these management companies have been required by conditions imposed by the planning authority.
Essentially, a property management company comprises owners of units within the development. The main role of the property management company is to retain ownership of the common areas in the development, both internal and external, and the task of the directors, who comprise those from among the owners who are prepared to undertake the responsibility, is to manage the complex for the benefit of all the residents and owners. I agree with Senator Hannigan. The question of when the apartment or house owner gets the transition to exercising effectively his or her rights in this management company is an important issue which requires to be addressed.
As part of its second programme of law reform, the Law Reform Commission undertook to examine the issues pertaining to the multi-unit development sector. In including this area in its programme, the Law Reform Commission was conscious that the growth of the sector had been unprecedented and that the law surrounding multi-unit developments was unclear and required examination.
I am sure Senator Hannigan is aware that in December 2006, the commission published its consultation paper which drew attention to a broad range of issues arising in regard to the governance and operation of such developments. The issues included, first, the manner in which company law applies to property management companies; second, the role of developers and planning authorities in the proper functioning of the law surrounding multi-unit developments; third, the unclear distinction between managing agents and management companies; and, fourth, consumer protection issues, including the calculation of service charges, sinking funds and dispute resolution. The paper also dealt with the possible introduction of a regulator for this sector.
It is important to stress that, as with all such papers published by the commission, the consultation paper is the basis for discussion and that any recommendations, conclusions and suggestions contained in it are provisional. As usual on the publication of a consultation paper, the commission has invited submissions on the subject matter and on the provisional recommendations contained in the paper. Following the period of consultation and further reflection the Law Reform Commission will publish, in due course, its final report and recommendations on the subject of multi-unit developments. I share Senator Hannigan’s anxiety that we hear from the Law Reform Commission on this subject as quickly as possible because a final report from the commission is essential to allow me prepare legislation in this area.
It is clear to anyone reading the consultation paper that the subject matter of multi-unit developments is very complex. The Government is acutely aware that measures to address difficulties in the multi-unit development section may require initiatives over several policy fields such as planning and development law, company law, consumer protection law and the development of regulatory structures.
For that reason, following the publication of the consultation paper, the Government established the high level, interdepartmental committee referred to by the Senator in his contribution. That committee must assist in the development of a coherent and comprehensive response to the broad range of issues arising in regard to multi-unit developments and the operation of property management companies.
The committee has met on seven occasions to date and is examining the issues raised by the commission in the consultation paper. A key task of the committee is to identify the legislative and administrative actions to be taken in response to recommendations for legislative reforms which will be set out in the forthcoming report.
It is important also to distinguish between the property management company and the property management agent. The company is made up of the owners in the multi-unit development whereas the agent undertakes property related services under contract for the property management company.
Legislation to establish the Property Services Regulatory Authority, which will regulate both auctioneers and property management agents, is being drafted and I intend to publish it as early as possible in the new year. An implementation group has been established to assist and advise on practical matters relating to the establishment of the new authority and to prepare for the new licensing system. The authority will be located in Navan in County Meath. I had the honour of opening its offices last Friday. The reason the authority has been established on a provisional basis pending the enactment of the legislation is to ensure that once the legislation is enacted, we can proceed to implementation as quickly as possible.
The group has published a code of practice for auctioneers and estate agents. This is voluntary in character until the legislation is adopted. The group is preparing a similar code for property management agents which it will introduce early in the new year. Again, that will be voluntary in character until the legislation comes into operation.
The implementation group has also compiled and published a public register of licensed auctioneers and estate agents which it intends to extend to property management agents in due course. It is all too easy to say the new authority is only operating on a voluntary basis. It is better that the authority operates on that basis pending the establishment of the authority than we wait for the enactment of the legislation to have an authority up and running in this area. The issues raised by the Senator are urgent and must be addressed in a brief timeframe.
During the consultation period, a number of initiatives were taken by Departments and State bodies to address some of the difficulties faced by residents in multi-unit developments. Further action in this area will include the issue of new planning guidelines on residential development which will update and expand on the residential density guidelines.
Regarding the taking in charge of residential estates, the Minister for the Environment, Heritage and Local Government informed planning authorities in a circular letter of July 2006 that they should not attach conditions requiring management companies to planning permissions for traditional housing estates, that is, estates of houses with individual private gardens except in specific circumstances. The circular acknowledged, however, that further consideration needed to be given to the issue of responsibility for the maintenance of certain shared facilities in newer estates comprising a mix of houses, duplexes and apartments.
Accordingly, the Department established a working group in August 2006 representative of local authorities, architects, planners and consumer interests to consider this issue. The group has completed its work and produced suggested draft policy guidance. The Minister has asked his officials to re-examine a number of issues, especially in the context of the new programme for Government.
Earlier this year, the National Consumer Agency established a forum that was attended by many of the interested parties in the sector. Negotiations are ongoing with the house building sector on the establishment of a voluntary code of conduct in respect of multi-unit developments. Similar discussions are being held with the property management agency sector, which is under my remit. That code will be ready early next year. The NCA has also developed a training module that will seek to address an acknowledged gap in the understanding of owners of units in apartment blocks of their rights and roles as members of management companies.
In a similar vein but concentrating on the company law side of the equation, the Office of the Director of Corporate Enforcement is developing a document for members of property management companies that will outline from that perspective the role of the company and its responsibilities as regards compliance with requirements under the Companies Acts.
I await with great eagerness the report of the Law Reform Commission. While property management companies are regulated by traditional company law, it is clear from recent years’ experience that their distinctive features require distinctive regulation. The Departments involved have asked my Department and me to co-ordinate a response.
The Minister referred to the Department of the Environment, Heritage and Local Government’s draft policy guidance and the fact that its Minister may tweak some of the recommendations. The Office of the Director of Corporate Enforcement is considering producing a document for residents. Is there a timeframe for the production of either document?
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