Wednesday, 10 March 2010
Seanad Éireann Debate
Minister for Justice, Equality and Law Reform (Deputy Dermot Ahern): Following discussions in this House on Second Stage and in response to various submissions I received, I am making a provision to extend the Bill’s scope to cover both residential units in mixed use multi-unit development, that is, developments containing commercial units and traditional housing estates where property management companies have been put in place.
For this purpose, it is necessary to insert appropriate definitions or amend existing definitions of the following terms “childcare facility”, “commercial unit”, “mixed use multi-unit development”, “multi-unit development”, “residential unit” and “unit”. This is the principal purpose of this set of amendments. The definition of “childcare facility” is required as it is the intention in the Bill to include as residential only developments those in which a child care unit has been constructed. In other words, a development which contains only residential units and a child care facility will not for the purposes of this Bill be considered mixed use development.
In a similar fashion, a new definition of “commercial unit” is inserted to distinguish such units from residential units. A demand for inclusion of residential units in mixed use developments became clear during our consultation process following publication of the Bill. The scope of the draft Law Reform Commission Bill was confined to apartment developments which did not include any commercial units. The new definition of “mixed use multi-unit development” makes it clear that such a development is one which includes commercial units. However, a development which has residential units and a child care facility will be considered as residential rather than mixed use.
An amendment has been tabled to the definition of “multi-unit development” to broaden the scope of the definition and, therefore, the Bill to cater for situations where a management company committee has been established for developments which consist only of residential houses. On Second Stage, the inclusion of such developments was requested by several speakers and this amendment is a response to their requests.
It is also necessary to define what is meant by a “residential unit in a multi-unit development”. In amendment No. 9, a child care facility will be considered as a residential unit as long as it does not share amenities, services and facilities with commercial units in the development. Amendment No. 11 is designed to ensure that where the word “unit” is used in the Bill, it refers to a residential unit while amendment No. 12 is a further refinement of what is considered to be a residential unit in the context of the Bill. It defines what is meant by a unit having self-contained facilities. Amendment No. 20 is a drafting amendment which arises as a consequence of various changes I have mentioned.
Senator Denis O’Donovan: This issue was brought to the Minister’s attention and I compliment him on taking the points made on Second Stage on board. The amendments allay the anxieties of those who spoke and I support them.
Deputy Dermot Ahern: This revised text makes it clear that common areas extend to internal and external common areas of a multi-unit development. There were some submissions when the Bill was published in regard to the existing definition of “common areas” that it did not go far enough. We are now making it clear that it extends to internal and external common areas.
Senator Paudie Coffey: We welcome this amendment because it gives clarity. It is essential to give a clear definition in legislation of what is a common area. We are happy to support this amendment because it gives that clarity.
Deputy Dermot Ahern: I recognise there were significant issues relating to the completion of multi-unit developments. I also acknowledge the very real concern which lies behind the amendment. However, I am not convinced the proposed mechanism in this amendment will resolve these problems. If a satisfactory agreement can be worked out between the parties, there is no obstacle to that.
Experience shows, however, that there is a need for binding remedies and this is the reason I have made specific provision in section 18 for dispute resolution. Section 18 already makes provision for a court-based mechanism to resolve disputes in regard to any rights or obligations arising in regard to the completion of a multi-unit development. In amendment No. 63, I propose a new paragraph (j) to that section that the court may make an order directing a developer to complete the development in accordance with the terms of the contract or the Planning and Development Acts or the Building Control Acts. As I stated to my Department, I am very much in favour of the use of alternative dispute resolution mechanisms wherever possible to avoid costly court proceedings. For this reason, I have proposed in amendment No. 70 that a court may, of its own motion, direct the parties to engage in a mediation conference. I believe the courts will favour this option and the fact that it takes place with court oversight will encourage the parties to reach a satisfactory outcome. As matters stand, the alternative dispute resolution mechanism only kicks in at the instigation of one of the parties. While I am willing to reflect on the proposed new mechanism referred to in the amendment, the provisions in place in the Bill will prove more effective in solving the problems of non-completion raised.
Deputy Dermot Ahern: In some developments the developer of the site does not construct the buildings and units and this work is undertaken by another builder. The definition of the word “developer” is, therefore, being extended to make it clear that it includes the person who either carries out the development or arranges for another to develop and construct the buildings.
The developer should be required to indicate on the planning application and in all brochures what are intended to be the common areas to ensure there will not be any scope for subsequent changes, for example, to prevent a developer from subsequently building on a park viewed by owners as part of the common areas.
Deputy Dermot Ahern: Having examined the matter, I cannot accept the amendment because the deletion of the relevant lines would make the Bill less clear and cause difficulty with regard to developments which are normally completed in phases. While we may not want developments to be completed in phases, we cannot change the position and must tailor the law to this circumstance.
Amendment No. 8 addresses the issue of phased developments. Its aim is to take into account the construction of phased multi-unit developments. Certain parts of developments are completed before others and it is often the case that some elements of a development are complete and occupied before work begins on the construction of others. In such cases, it would not be appropriate to provide that all common areas in a development be transferred to the management company on completion of one phase. The amendment makes it clear that the relevant parts of the common areas are those which are necessary to enable unit owners in completed phases of the development to enjoy quiet and peaceful occupation of their units.
Deputy Dermot Ahern: This amendment makes it clear that a reversion is the residue of ownership which remains after the grant of a lease. The normal conveyancing practice in cases of apartments has been to grant a long lease to the purchaser with a freehold reversion being vested in the owner’s management company, of which the purchaser is also a shareholder.
Deputy Dermot Ahern: Amendment No. 12 is designed to ensure the developer of unsold units in a development is recognised as the unit owner. In that context, the developer will have the same rights and responsibilities as other owners in the development. The amendment addresses the objective of amendment No. 13 tabled by the Labour Party.
Deputy Dermot Ahern: Amendment No. 17 constitutes a major change to the Bill, as published. It inserts a new section which extends the scope of the Bill to residential units in mixed use developments and more traditional housing estate developments. Subsection (1) replaces the provisions of subsection (3) by providing that the sections referred to in Schedule 1 will apply to multi-unit developments which comprise two or more units but not less than five units. Amendment No. 15 deletes section 1(3).
Subsection (2) is designed to deal with multi-unit developments which consist solely of houses, that is, the development resembles a traditional housing estate but has an owners’ management company. The provisions of the Bill referred to in Schedule 2 will apply to any common areas of such developments.
Subsections (3), (4) and (5) relate to mixed use multi-unit developments. The object is to extend the scope of the Bill to residential units in such developments. This subsection (3) provides that, subject to subsection (4), the Bill shall apply to residential and commercial units in a development to the extent that amenities, facilities and services are shared by such commercial and residential units.
Subsection (4) provides that in circumstances where there is more than one management company in a mixed use development, that is, where there is one company for residential units and another for commercial units, the obligations on such companies will be met where the provisions in the Bill with respect to the annual service charges and contributions to the sinking fund are applied in a fair and equitable manner.
With regard to voting rights in mixed use developments, the general rule that there will be one vote per unit is not always practical in such developments, given the different uses and categories of units. The subsection provides, therefore, that the management companies in such developments will be deemed to have complied with the provisions of the legislation where the voting rights of members are apportioned in a manner which is fair and equitable.
Subsection (5) seeks to make it clear that in ensuring such matters are dealt with fairly and equitably, account must be taken of all relevant matters, including the level of use of common areas by the different classes of units. The objective of amendment No. 49 is to ensure that voting rights in a mixed use development operate in a fair and equitable manner.
Amendment No. 73 inserts the new Schedule 2 to the Bill to apply to developments which consist of traditional housing units that have an owners’ management company. I propose that developments will be obliged to transfer ownership of any common areas in such developments to the management company which will be obliged to complete the development in line with planning permission and building controls.
Section 13, which concerns the holding of annual meetings of the management company, will also apply to these developments. However, I have excluded three subsections: 13(c) which relates to a sinking fund; 13(2)(g) which concerns the block insurance; and 13(2)(h) which concerns fire safety provisions from Schedule 2 as I do not consider these are applicable to traditional housing estates.
Although section 14 of the Bill, concerning annual service charges, will apply, I do not consider it necessary to apply the provisions concerning the sinking fund, section 15 or section 17 on house rules. It is important, however, that the residents in such developments have recourse, where necessary, to dispute resolution mechanisms and, accordingly, I have provided for that in sections 18 to 22.
Senator Paudie Coffey: This is a significant amendment to the Bill and I believe it is essential. The Minister will agree that speakers on Second Stage outlined the great concern and complications that exist where large multi-unit developments are present. For example, apartment blocks and traditional housing estates might be part of the one development. There is confusion about the entire area. I hope this amendment will bring clarity to the situation because there has been resentment from those in the traditional housing sections of a development or estate who have had to pay management fee costs for services they do not use and where there are common areas that do not even apply to the section of the development in which they live.
The Minister might clarify that this amendment will satisfy those people who would have concerns about obligations under the management fees and services rules and that people living in traditional housing sections of an estate who do not share the common areas of an adjacent apartment development will find comfort and protection in it. The Minister mentioned matters being “fair and equitable” on a number of occasions in his last address to the House. In any fair assessment of the situation, people who do not utilise services or common areas should not have to pay service charges or management fees when they do not benefit thereby. The Minister might clarify this for me and for the benefit of the House.
The amendment is a significant one and is detailed and technical to a certain degree because it contains many cross references to later amendments and to the Schedules. The Minister might clarify, in layman’s language, that it is the case that this amendment will address the concerns of those people in mixed use estates who do not utilise apartment complexes, services or common areas in adjacent apartments. That is what we would like to hear.
Senator Denis O’Donovan: I welcome this amendment and thank the Minister for introducing it. I shall begin by making some brief comments on the amending of the original Bill to include mixed use developments. As my colleague stated, this situation is not confined to the greater Dublin area. There are examples in many towns throughout the country where a ground floor of a relatively new development might be for retail use with the first floor in office use and the second, third and sometimes the fourth floor would be apartments. I know of two such examples in west Cork; it is typical usage. This amendment extends the legislation in a very subtle way to include such developments.
A second point worth mentioning is where the Minister rightly deals with an issue that exists primarily in the greater Dublin area rather than in Munster towns. For whatever reason, some estates were built to a certain model. In a normal situation when an estate is developed, the intention is that at some stage in the future the local authority will take charge of all services within and leading to the estate, including footpaths, water provision, electricity and cabling, etc. That is normally what happens after perhaps two to four years. However, whether because of a lacuna or an intentional fudge, the development of these estates was done in such a way as to avoid the imposition of blame or culpability or the notion that the local authority would take charge. I may be wrong about this but the amendment is very welcome. As my colleague, Senator Coffey, pointed out, in some of these estates there were many complaints from people who were paying a management company or others involved for services without being sure what services they were getting. There was no accountability or transparency and this matter should be sorted out.
A greater issue is for the Department of the Environment, Heritage and Local Government and the relevant Minister, to ensure that this situation should not and will not happen again. It has created problems. I am glad that the amendment, as set out by the Minister, has clarified significantly a number of issues that affect people living in such estates. Other bodies involved in the development of estates also have raised these issues. This is a very prudent amendment on the part of the Minister and I support it in full.
Deputy Dermot Ahern: I thank the Senators. This amendment was in response, not only to representations we received but also to the Second Stage debate on the matter. There has been a great deal of deliberation about this legislation. I am the sponsoring Minister but there has been significant input from the Departments of Enterprise, Trade and Employment and the Environment, Heritage and Local Government. Before the Bill was published there were many meetings between me, the Tánaiste and the Minister, Deputy Gormley, and interaction with the Attorney General’s office to try to pull together the various elements. As Senator O’Donovan remarked, many of these are dealt with in the planning area which is the responsibility of local authorities, the Department of the Environment, Heritage and Local Government and An Bord Pleanála. The Department issued guidelines in February 2008 in regard to the taking in charge of residential developments and the corresponding management arrangements. These were comprehensive. However, we came to the view that to a certain extent the Law Reform Commission report did not refer to the issue of mixed-use developments or deal with it in any great detail. There are significant numbers of such developments around the country, which combine commercial and residential elements and where the residential element may be divided into duplexes, apartments, houses and in some instances even old people’s dwellings. We must cater for all those circumstances.
Regarding voting rights, to have a fair voting system we moved away from the norm of one vote per unit because that might give the developer or the developer’s interest an opportunity to out vote people. We have left it to the court or the dispute resolution mechanism to decide on what is fair, reasonable and equitable in all circumstances.
Regarding traditional housing estate developments, the practice was that when these were built developers brought in management companies to look after common areas, mar dhea. The owners were then required to pay money. As Senator O’Donovan said, in some cases, they were not particularly sure what they were paying for because they were not getting any service. This is to bring them into the remit of the Bill but to take into account that they are not like the mixed-use developments but normal developments with a different type of residential unit. What we have done here is to comprehensively cover all aspects of our living arrangements. Obviously, if there is anything else that requires to be done over time or issues that arise, we would have to come back to the legislation at a later date.
Senator Paudie Coffey: I thank the Minister for his reply. Perhaps he would clarify one further point. This is a significant amendment that will have an impact on the whole area of management of developments. When it becomes law, will it be retrospective to existing developments or will it apply only to new developments? That is a pertinent question having come through a prominent construction boom but we are now on the other side and the position is quite the opposite. The developments are in place but there is much confusion around existing developments. I will give credit where it is due. The Bill addresses many of the issues and problems identified and, without being too critical, it is probably too little, too late in many cases. If it is retrospective, it might clear up many of the issues and problems that exist. We do not want people living in apartments or traditional houses paying management fees for the commercial sections of these developments. They are already put to the pin of their collar to pay their mortgages and household costs and should not have to pay fees of which they may not have been aware prior to the purchase of their house or apartment to sustain sections of the development in which they had no involvement. In effect, they are being asked to take on payment of part of the risk or the overhead cost of running those developments. Will the Minister clarify whether the legislation can be applied retrospectively to many of these areas?
Deputy Dermot Ahern: Large elements of this Bill can be applied retrospectively because they do not overturn agreements made previously. For example, it is not retrospective in regard to the issue of voting rights because it may already be included in existing documentation pertaining to the development that certain voting rights are available. We cannot retrospectively change that. Issues relating to the holding of an annual general meeting, service charges and so on are dealt with in regard to pre-existing estates. It is not on all-fours with the other issue being debated in the other House on a Private Members’ motion, which is about rewriting contracts. This is not about rewriting existing contracts as such but the element of voting rights would be.
Senator Paudie Coffey: I am happy to hear the Minister’s response on this issue. I understand that if there are contracts in place, it will be difficult to break them. If there are existing arrangements, by contact or otherwise, such as voting rights, it will be difficult. The main areas are the grey areas that have been in existence up to now. People did not know where to turn.  They were being levied these bills but there was no accountability on who was levying them and what they were paying for. This Bill will clarify many of those grey areas and bring comfort to many. Residents associations and others will be seeking guidelines on its implications. The Bill is technical, as it needs to be. Perhaps the Minister’s Department or the Department of the Environment, Heritage and Local Government would provide guidelines on it and outline clearly to residents associations and citizens their rights following the enactment of the Bill. It is important they know where their rights lie. Many have been unfairly taken advantage of by developers or people in authority. If the Bill is to have full effect, it needs to be put into the public domain in an easily digested fashion so that residents and citizens of estates know their rights and the authority they have to challenge many of the levies that have been unfairly imposed on them.
Senator Jerry Buttimer: As Senator Coffey has said, there are grey areas. If the Bill is to be effective, there must be an understanding on the part of the management company and developer of their responsibilities. Given that the Minister is an experienced politician, he knows full well that where there are grey areas, those who up to now have not been helpful to the tenant or those who bought the apartment dwellings need to be responsible and accountable.
In my constituency, a particular management company has been tardy in acceptance of its responsibilities, is hiding from the works it has to carry out and has been less than upfront with those who have bought properties. Where there is a common area, it has been remiss in respect of its engagement in works and in complying with its requirements. I am concerned that if company law is enforced, these management companies will obfuscate their responsibilities. I hope there will be an inspection process and complete regulation by the management companies when the Bill becomes law.
Deputy Dermot Ahern: Senator Coffey’s point is a good one. We are reasonably satisfied from the contact we have had with the various interests that fed into this legislation that all the representative groups, representing builders, apartment owners, etc., are well aware of the import of this Bill. I am a solicitor by profession and really the onus should be on the people. One cannot spoonfeed people. They pay substantial legal fees to be fully advised——
Deputy Dermot Ahern: ——by their solicitors so that, having made the biggest purchase of their lives, they are fully aware of their entitlements but more often they are not. While the State can spoonfeed people, as it does when it passes legislation, there would have to be some onus on advisers to give as much information as possible. There is no doubt that in the past 20 years, estates and apartment blocks have been completed, units sold and people have come away with the keys. They go to the ESB, Airtricity, Bord Gáis and so on but they are not told about the obligations in respect of the common areas and their rights and duties. That is a pity. I know the Law Society has endeavoured as much as possible to get its members to relay that information. However, so much of the information is in legalese that even if they were to give their clients the memorandums and articles of association of the management company, people would not read past the second paragraph. The point made by the Senator about the need to provide information is something we will consider, perhaps in terms of a provision obliging legal advisers or the purchaser to provide some basic information about the entitlements and duties that exist with regard to the management company.
Senator David Norris: Yes, I understand that. I lend my support to these amendments, which are important, particularly from the point of view of management committees. I have raised this on numerous occasions in the House and received little response, so I am glad the Government is addressing it. Has the Minister considered — although from a glance through the amendments, I think he has done so — that an unscrupulous developer can retain one unit and thereby control the management committee to the disadvantage of the residents? I hope this is addressed, although it seems it might be. I have come across this on numerous occasions. The tactic is often used, as I have said before, to allow the developer and his family to control the management committee in such a way as to create financial advantage for themselves, for example, by hiring other family members to do cleaning, servicing and so on. This is grossly and utterly wrong.
The other matter to which I draw the Minister’s attention is perhaps more for the local authorities than the Government, but there may be a Government angle. A fine job of refurbishment has been done at what was Fatima Mansions but is now Herberton. There is a management company. I know people who have bought flats there, most of them nurses in St. James’s Hospital, under the affordable housing scheme.
For example, some management committees have raised management fees considerably and suddenly. People were given indications of a fee of €1,500 per year but were then asked for a deposit of €1,500 as well as the first year’s fee. This is ridiculous. They are paying twice. Then the fee was raised to €2,000, which is outrageous. I hope the Minister will bring this to the attention of his contacts. Affordable housing in this city is not affordable any more. I am happy to support these amendments in as far as they address problems associated with multi-unit developments and the issues with management committees which have caused much concern to citizens.
Deputy Dermot Ahern: Senator Norris referred to sections 3 and 4 which deal with the issue of incompletion and the obligation to transfer ownership on completion, and to a lesser extent section 14, which deals with the apportionment of service charges. I empathise with the points he has made. These amendments deal with the extension of the remit of this legislation to mixed-use developments, which contain commercial and residential units within one development, as well as the practice that has been mentioned by Members whereby developers, starting a few years ago, have built traditional housing estates and then imposed, without any justification, management companies and the accompanying charges. There is general acceptance of the amendments.
This is an attempt to clarify the conditions relating to the sale of units in multi-unit developments. The Bill as it is currently drafted refers to “[a] person to whom this section applies”. What does “a person” mean? Who is this person? We are trying to be more specific when we suggest the insertion of the words “developer or any other”. The Minister has already defined the word “developer” in section 1. This is an effort to bring more clarity to the description of the developer or any other person to whom section 2 would apply. What are the Minister’s views on this?
Deputy Dermot Ahern: We considered this but we believe section 2(2)(b) already caters for this. It is already clear that the section applies to any person who is the owner of common areas in a multi-unit development, which would in most cases mean the developer.
Deputy Dermot Ahern: I do not consider it appropriate to make such provision in this section. I can understand the concerns behind the amendment and I will consider whether it would be possible to include a requirement along these lines in another section before Report Stage.
Deputy Dermot Ahern: This relates to the 5% of the purchase price being withheld. This was considered by an interdepartmental group which was set up to look at the Law Reform Commission recommendations. At the time the group sat — it is some time ago — it came to the conclusion that a developer might react by simply increasing the sales price by 5% and it would prove completely ineffective in securing completion of the development.
My experience over many years as a solicitor and a practising politician is that when we interfere in this way, the price tends to be increased. I remember when housing grants were given over the years and the builder would put the sum of the grant on the price. There was no net gain to the purchaser as a result.
Considering the experience of one-off building, why is it that up to now we have not had a standard that where there is a purchase of property built by a developer, the purchaser does not withhold money at the end? It may happen in certain cases but it does not occur as a standard, particularly from a legislative perspective. Perhaps if we take 5% to ensure the completion of the common areas, we should also mandate in law that another 5% be taken to make sure the unit itself is completed.
I have some sympathy with the issue and I appreciate that the economic matter has moved on a little since the interdepartmental group took the view on the 5%. I would hasten slowly on this because the Legislature should not make an amendment only to find that another 5% would be lumped on the cost for the purchaser. I will look at this between now and Report Stage and before it comes to the Dáil to see what we can do in this respect without any potential difficulty with the purchase price.
We have looked at some of the models across Europe and our model of the management company, etc. is probably the exception rather than the rule. I am open to suggestions, although I am not altogether sure if this is the right amendment as it might raise the price of the dwelling.
Senator Ivana Bacik: I apologise for not being here to move the amendment and I am very grateful to my colleague, Senator Prendergast, who did so. I was attending a committee meeting. I am grateful to the Minister for indicating he has a certain sympathy for this amendment, particularly in light of the changing economic position. With the housing market more or less collapsing, the fear that this would lead to an increase in the purchase price of the property has much less foundation. I am also grateful that the Minister has indicated he will review the issue between now and Report Stage.
The Royal Institute of Architects in Ireland has been actively lobbying the Minister on this issue. It is asking that the provision be inserted and the Law Reform Commission also recommended it. Our amendment and that of Senator O’Toole are very much drawn from the Law Reform Commission’s report and suggested wording.
The Minister may refer to amendment No. 63, which would give some comeback where there had not been completion to the satisfaction of the purchasers. We are suggesting that this amendment would be a more effective way of ensuring that completion is carried out satisfactorily as it would pre-empt the need to take court action. There would be a financial incentive to complete the development as well.
The amendment as printed has a typographical error and the first reference to “developer” should read “purchaser”. I sent an amended version to the Bills Office but the other version has been printed. I ask the Minister to take this proposed amendment very seriously and take on board the arguments made by the architects’ institute and the Law Reform Commission in arguing that this should be done.
This provision would protect the interests of purchasers to secure proper completion and hand-over of common areas in apartment developments, both outdoors and inside. It would protect the legitimate interests of all those involved in the sale and purchase of such developments. I thank the Minister for his contribution and I hope to see some progress between now and Report Stage.
Senator Joe O’Toole: I welcome the Minister and apologise for not being here for his response. He is pushing through the business at a great rate and catching us out. Has Senator Coffey moved amendment No. 35?
Senator Joe O’Toole: I do not have to propose it formally. Having listened to most of the Minister’s response, I am glad to hear he is sympathetic to the point we are putting forward. We are trying to achieve consumer protection in a safe and quantifiable way that does not damage any of the interested parties. In many ways it complements what would happen in the public sector. Senator Bacik touched on the idea of local authorities which are about to take over an estate insisting on the development being completely finished. We have seen the chaos created in places around the country where an estate has not been finished properly and the local authority cannot take responsibility where it is unfinished.
A similar position can arise for apartments and the 5% that is withheld could allow some leverage to make essential changes or improvements. I listened to the Minister’s comments and accept much of his argument. Does the Minister have any ideas on how to make this work having considered best practice in other countries and jurisdictions? Does he have any ideas on protecting the consumer while giving leverage to a management company and putting pressure on a developer to ensure finality? Does the Minister have a best-case scenario in mind and should we consider issues for Report Stage? Could we do more?
Senator Paudie Coffey: This is similar to Senator O’Toole’s amendment and Fine Gael’s amendment No. 21, which I will not elaborate on further. The thrust of this and the related amendments is to secure an element of the purchase price to ensure the development or units being built are completed to a satisfactory standard. We are all at one on that issue.
These amendments come highly recommended by the Royal Institute of Architects in Ireland and also by the Association of Consulting Engineers of Ireland. Both of these professional bodies have operated in this arena for many years and have seen at first hand the devastation caused by estates not being finished. As politicians we have also seen this at first hand when our constituents come to us with concerns about unfinished estates and incomplete developments which make their daily lives a misery. The Minister acknowledges the issue.
The amendments look to take issue with an area that has already been addressed in the public sector. If an estate is currently being built, local authorities ensure bonds are collected from a developer that will act as a guarantee to finish the work. In the recent debates on the Planning and Development (Amendment) Bill 2009, contributions in this House highlighted how those bonds do not go far enough as we see the devastation of unfinished estates around the country.
The idea behind introducing bonds was to ensure estates would be finished. Works in this regard could include installing a proper surface on someone’s driveway, ensuring all manhole covers are in place and erecting public lighting. However, the amounts collected under such bonds would not come anywhere near covering the cost of completing certain estates on which major items of water and sewerage infrastructure have been left unfinished.
There is a precedent in this regard in the public sector, whereby local authorities collect bonds. The amendments suggest a levy or trust fund amounting to 5% of the purchase price would be collected. The Minister indicated his concern to the effect that the cost would be passed on to the purchaser. Any purchaser would rather pay the full cost and ensure his or her estate was completed rather than purchasing a house or apartment at a lower cost and discovering years later that there was no mechanism in place to ensure said estate was properly completed. This is happening to a major extent in the public sector.
There is an argument in favour of collecting 5% of the purchase price and investing the money in trust funds in order to ensure estates will be finished. As stated, many people have already been let down. I accept that the Minister does not wish to become involved in the property market, particularly in the context of increasing the costs faced by prospective buyers. However, the planning legislation introduced in 2009 has already given rise to additional costs for developers. It is obvious that these costs will be passed on to purchasers. The Minister for the Environment, Heritage and Local Government has taken action in this regard but the Minister for Justice, Equality and Law Reform is hesitant to follow his lead. As Senator O’Toole rightly pointed out, the issue that arises in the context of the Bill relates to consumer protection There is an argument that the matter would be better dealt with in this legislation because existing residents or prospective buyers could rest assured that trust funds which would facilitate the completion of housing developments, apartment blocks, etc. would be put in place. A protection of this nature is not provided. In addition, there is a lack of regulation of this matter.
The Minister has indicated that he will consider what Senators are saying about the creation of 5% trust funds prior to the Bill being dealt with in the Dáil. As a result, I will not be pressing my party’s amendment. Serious consideration should be given to creating these trust funds, particularly as the planning legislation enacted last year will give rise to added burdens and costs for prospective buyers. These additional costs will arise for good reason, namely, to facilitate the putting in place of items of social infrastructure such as schools, etc. The 5% trust funds are as important a development in this regard. If I was to buy a house tomorrow, I would like know that a trust fund would be in place in order that the estate or development in which I was going to live would not remain half-finished. I hope the Minister will take cognisance of the arguments we have put to him.
Senator Denis O’Donovan: I have great empathy with the proposal being brought forward by colleagues on the opposite side of the Chamber. The Law Reform Commission indicated in its report that imposing a 5% levy would be a good step. I am somewhat enamoured of the concept. The Minister and his advisers and officials have probably considered the matter from various angles. I am sure he would be prepared to engage in further scrutiny of the matter with a view to dealing further with it on Report Stage, which is fair.
Would there be any tax implications in respect of the figure of 5%? I accept that it appears to be a small percentage. However, what would be the tax implications —vis-à-vis VAT, etc. — for someone who builds a 100-unit development where each unit sells for €200,000 or €250,000? If 96 of the units are fully or substantially complete, how would the 5% be apportioned in the case of the four in respect of which difficulties have arisen? Would it be possible to mediate or arbitrate in the matter?
The Minister made a valid point, namely, that in the past the grant for first-time buyers would not have been passed on to those purchasing homes. Historically, we have failed to deal with this matter. In the early 1980s the Fine Gael-Labour Party coalition introduced grants to allow people to refurbish their homes. That was a great concept and it cost £5 million in the first year. However, many developers took advantage of the scheme and one such individual refurbished 18 or 20 properties. The then Government was interested in assisting those whose roofs might have been falling in or who wanted to build a new bathroom or kitchen. The concept was excellent but the scheme was so widely abused the then Government decided to abandon it before it left office. This example highlights the fact that there have been difficulties with moneys that were meant to benefit first-time buyers, etc. being diverted elsewhere.
Perhaps the Minister might indicate if there are any tax implications in respect of this matter. Will he also outline how the 5% trust funds might be administered? It would obviously be easier to apportion the moneys in the case of small schemes of five or ten apartments or houses. I have some sympathy with the concept. However, we are aware that the greed of builders and developers has led to the purchase price of houses and apartments increasing. I would not like to see such individuals exploit trust funds such as those to which Senator Coffey referred.
Deputy Dermot Ahern: We are ad idem with regard to what we want to be achieved, namely, that all developments will be completed — either on a phased basis or in toto— in a proper way. We considered what the Law Reform Commission had to say about this matter and a question arises as to how it arrived at a figure of 5%. Senator Coffey stated people would be willing to pay money into these trust funds if they could rest assured that the common areas on their estates would be completed. I understand that, in the context of the Law Reform Commission’s proposal and from a taxation point of view, it would be necessary for developers to retain the 5% and that, as long as this money was in their possession, they would be entitled to keep the interest that would accrue on it.
If a 100-unit development was being built on a phased basis and if the developer went bust before it was completed, what would be the position on the trust fund? Would it be sufficient to carry out the necessary completion works? It is difficult to say. Myriad issues arise in this regard. The local authorities have not, particularly in the context of planning permission, really used the bond system to ensure the interests of home owners are protected. That system was put in place, via legislation, in order to protect the interests of local authorities which would ultimately be required to take unfinished estates, etc. in charge. The primary purpose of the bonds is to ensure local authorities would have some funding available to them to carry out completion works where they were obliged to take unfinished estates or developments in charge.
In my experience, on any occasion when a housing grant or other change was introduced, developers took the money and then increased the purchase price accordingly. Purchasers and those in the wider community did not, therefore, enjoy the benefit of the grants made available. I hazard a guess that developers would discount the figure of 5% under discussion when making decisions on the amount to be charged for houses or apartments. They will discount the 5% and state that is for a later day. In other words, the purchaser will pay 105% for a house where he or she should pay only 100%. I agree that we need to square the circle on how we can ensure that estates are finally dealt with. This is not only true for this Bill but it may also be a matter for planning and development legislation.
To answer Senator O’Toole’s question on other mechanisms, the one real solution we believe we have come up with is contained in paragraph (j) in amendment No. 63 which has to do with dispute resolution mandated by the court and alternative dispute resolution mechanisms whereby the home or unit owners and the developer can go to court or mediation and dispute resolution to solve a number of these issues.
Senator Joe O’Toole: I thank the Minister for a very comprehensive response. The most important thing is that the Minister is as determined as we are to find some leverage to achieve the same conclusion. I certainly would not argue that what we are doing is better than what the Minister will come up with. Therefore, it behoves us to wait and see what the Minister brings forward. I also wondered why the figure is 5% and I think it goes back to the old legal and accountancy concept of materiality. Anything close to 10% would be considered a material amount and it would need to be less than that. I understand the figure of 5% emerged from trying to put a quantitative figure on what would be likely to be left unfinished in a house, and 5% seems a reasonable amount.
If a multi-unit development is not completed and we place responsibility on the management committee to complete it, which is the Minister’s intention and I thoroughly support it, a question of quantum and money is raised in terms of how that point can be reached. I agree with the Minister’s point of view and I supported the Government on the unpopular line on first-time buyers that the money was going into the builders’ pockets and being added to the cost. What has changed significantly in the meantime is that it has become a buyer’s market. The Minister commented on this and acknowledged that the market has changed. The problem now is that if someone adds 5% to the price, it might not sell. This is completely different from how it was a couple of years ago, as the Minister acknowledged.
While the Minister made an important point on this, we must pass legislation which covers all types of situations and we cannot legislate for a constant recession or buyer’s market; it would reflect badly on all of us. The Law Reform Commission conducted an investigation into this and arrived at a conclusion which was supported by engineers and architects. This was to ensure that units were finished prior to people buying and paying for them and prior to a management committee taking over the running of them. I am happy to hear the Minister wants to arrive at the same conclusion, that he is conscious of and acknowledges what has been done by the three bodies I mentioned, and is considering what he will bring back to us on Report Stage. It would be ridiculous for us not to welcome that. We look forward to hearing the outcome of that deliberation and to hearing the proposals he will bring forward. On that basis, I will not press my amendment and I thank the Minister for giving it full consideration.
Senator Paudie Coffey: I can understand from where the Minister is coming. I understand that if there was a 5% levy or charge for finishing estates, developers would load it onto the purchase price. However, we need to learn from the mistakes of the very recent past. We have all seen — and I am sure they are also in the Minister’s constituency — the impact of unfinished estates and developments on those who live in them. They feel isolated, let down and deserted because while they can approach the local authority, it has probably imposed bonds on the developer which are nowhere near sufficient to finish the estate and put in place the infrastructure needed to complete it to a satisfactory level. They also feel let down by the developer who has either gone out of business or does not have the funds to complete the development.
Legislation in this area is inadequate and has not protected consumers, citizens and the purchasers of these houses. The Minister has outlined that he will make an attempt to procure a mechanism to address the anomalies that exist and I appreciate that. He needs to consult with the Department of the Environment, Heritage and Local Government, whether on this Bill or on the planning and development legislation. Our citizens are being let down by developers and local authorities and they feel abandoned. They feel alone with no assistance or help. The amendments tabled are an attempt to address this. I will not state they are perfect and the Minister outlined his reasons for thinking they are not perfect but they are an attempt to address the matter in the interests of consumer protection and the citizens purchasing these houses in good faith in the belief that they will be finished to a high standard. There is evidence throughout the country of where this is not the case. It must be addressed in this Bill or in the planning and development legislation. I appeal to the Minister and his officials to put the resources and time into finding a mechanism that will prevent the mistakes of the past from happening again. It is essential for the residents and the citizens of the country.
Senator Ivana Bacik: Like Senator O’Toole, I will not press my amendment at this point given that the Minister indicated he will review this. However, the Law Reform Commission’s analysis of the 5% concept is persuasive. I re-examined the detail of its recommendation. It points out that the 5% gives a significant inducement to a developer to complete a development in a timely manner to a standard which fulfils the expectations of the certifying architect. In paragraph 4.41 of its report, the Law Reform Commission recommends that once the snagging and certified completion of the development has been achieved satisfactorily, the owners’ management company should then be obliged to transfer the 5% balance to the developer. It also recommends that of course where developments have been fully completed prior to sale of the final units, the purchaser would pay the 100% directly to the developer at the closing of the sale.
Apart from the obvious point about the inducement provided by the 5% and the delay in receiving the full price pending the satisfactory completion of the development, the Law Reform Commission identified three key benefits of the provision. As Senators Coffey and O’Toole pointed out, the practical implementation of the recommendation would be straightforward because the operation of the proposal is broadly analogous to the system used by local authorities and developers with development bonds. It is already in operation in the public sector and therefore developers have experience of operating this type of scheme.
The proposal would be of particular benefit to unit owners because it would counter their “knowledge deficit”, in the language of the Law Reform Commission. It pointed out that the hand-over of the 5% balance by the unit owners, in other words the consumers, on satisfactory completion would mark an important milestone in the life cycle of the development. It would emphasise to apartment owners that they would have control over the owner’s management company and over ownership interests in common areas in the structure of the development. This is significant given the complaints we all hear from apartment owners. The third key benefit of its recommended system pointed out by the Law Reform Commission is that where a developer has not properly snagged a development on completion, there would be a fund available for the purpose of completion. To answer Senator O’Donovan’s point, the Law Reform Commission also went into great detail on the tax implications of the proposal and expressed concern that the recommendation would be tax neutral. The key benefit this recommendation has over the measure proposed by the Minister in amendment No. 63 is that it is pre-emptive, that it does not require the consumer to have to take any further action. It envisages this being a part of the process of completing a sale where the development is not yet completed and the units are being sold. It seems an eminently practical solution but if the Minister has a better one then we are happy to hear to it because we are all working in the interests of the consumer in this regard. The amendment has a good deal of support from the Law Reform Commission, architects and engineers. I urge the Minister to consider it again on Report Stage.
Deputy Dermot Ahern: Then there would be a statutory requirement for them to give certificates of completion. They would not come cheaply. We have all been lobbied by various groups. We have to understand where they are coming from. If one were to adopt a measure such as the amendment proposes, independent certification of the completion would be required.
The Law Reform Commission does not investigate the effect of the retention of 5% of the purchase price by the management company on the price of such developments. The interdepartmental group did examine that question, albeit two years ago. All the major Departments were represented, in addition to the National Consumer Agency. While I do not attribute the proposal to the National Consumer Agency, it was the general view of the group at the time that to add 5% would have an effect on the purchase price to the detriment of the purchaser. It would be helpful to go back to the group and the National Consumer Agency for their opinions on the matter. I would like to take more advice on it.
I agree with speakers on the other side of the House and Senator O’Donovan on the involvement of the Department of the Environment, Heritage and Local Government. The 5% would not be necessary if the bond system was properly implemented by local authorities. We are aware that has not been the case. Perhaps instead of the 5%——
Deputy Dermot Ahern: Perhaps because the 5% is pretty clear. It is actual money. Local authorities did not require proper bonding and then they took housing estates in charge in cases of non-compliance or non-completion. The local authority bonding system related to a different type of circumstance. It was devised for traditional housing estate developments. Non-completion involved roads and footpaths. By and large in multi-unit developments one is talking about completely different issues in that one is dealing with a lot of internal common areas. It may be that a better and more detailed bonding system should be put in place. We will talk to the Department of the Environment, Heritage and Local Government to see whether anything can be done. It may be that we will return to the notion of 5% or other percentage deduction before the Bill is finalised.
The Bill has taken a long time but it is an extremely complex one that involved detailed negotiations between Departments and with outside interests. To a certain extent the Bill has been rushed in that there has been a political imperative to introduce the legislation because there has been much hoo-hah in the Dáil in recent times on why the Bill has been delayed. We have been accused of holding it up and being against people’s interests. If we are introducing legislation we should do it properly. I would like more time. The matter might not be resolved before Report Stage in the Seanad but I would like to think it would happen before the Bill is completed in the Dáil.
Senator Regan was proposing an amendment on taxation that was ruled out of order. The advice I received on his proposal is that it is more than likely that the provision he was suggesting would fall foul of EU rules, namely the VAT directive and the European Court of Justice case law which does not allow member states to make a person liable to an amount greater than he or she is entitled to receive.
Senator Ivana Bacik: Not at this stage in light of what the Minister has said although I very much hope he will come back to us on the matter before Report Stage in the Seanad. I accept what he said about wanting to take time but if we could have a decent interval between Committee and Report Stages in the Seanad we might have an opportunity to hear if the Minister has a proposal equivalent to the 5% retention proposal we have put on the agenda. I would be grateful if the Minister might consider doing that before Report Stage in the Seanad. I will not press the amendment.
This amendment is designed to make section 2(6) compatible with section 9(1). It mirrors the introductory wording of section 3(2), which states: “Except where the multi-unit development has been completed, the transfer ... shall reserve the beneficial interest therein”. The reference in section 2(6) simply refers to the transfer. We are transposing the words from section 3(2) into section 2(6). That would make the section properly compatible with section 9(1), which deals with the determination of certain beneficial interests on completion of a development. Section 9(1) provides that: “Where a multi-unit development has been completed the owner of any beneficial interest in the common areas and reversion in the units shall as soon as practicable thereafter make a declaration for the benefit of the owners’ management company that as respects the development such beneficial interest stands extinguished”. The intention is to ensure compatibility between the sections.
Deputy Dermot Ahern: I cannot accept the amendment because the section is designed to cover new developments only. Provision has been made in sections 3 and 4, respectively, for completed and semi-completed developments. The way we have structured the Bill takes care of new developments and semi-completed developments.
The amendment proposes the insertion of a new section 3 to the effect that a developer may not retain any units on completion of the development and that each unit on completion shall be subject to a common legal framework including liability for charges. The provision arises from a suggestion by the Apartment Owners Network based on a case where a developer had retained units thus avoiding liability for service charges at any time into the future.
Deputy Dermot Ahern: Preventing a developer from retaining a unit for his own legitimate purposes may very well infringe his property rights under the Constitution. What the Senator is trying to do is to combat the practice whereby a developer would retain a unit thereby preventing the management company from taking over the common areas. That will no longer be possible following the enactment of the legislation so therefore it is not necessary to prevent a developer from retaining a unit in a completed development. Sections 3 and 4 make quite clear what has to happen in terms of the transfer of common areas. The amendment is unnecessary and would potentially infringe a private individual’s property rights.
This amendment also proposes to insert a new section and again arises from a suggestion by the Apartment Owners Network. This new section would deal with second-hand units and states “No person may sell a unit unless 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.” The amendment is concerned with addressing the situation whereby at present, the Bill appears to leave second-hand sales unregulated, with the result that purchasers of second-hand units may be unaware of the obligations of membership of the owners’ management companies. The amendment attempts to address this issue and I await the Minister’s response regarding that mischief it tries to address.
Deputy Dermot Ahern: I am not altogether certain that the Senator’s proposal would achieve what she desires. I stated previously that I would consider the possibility of mandating in the legislation some form of basic information that would have to be given to purchasers on purchasing in order that they knew of their rights, entitlements and duties vis-à-vis the management company. I am not altogether sure. The amendment proposes that no person shall sell a unit unless 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. While this may be unworkable, it also is pretty draconian. It would be fairly invasive for those who wished to purchase property to then discover they would be obliged, forever and a day, to give their details to a management company. Even though such individuals may have had three or four changes in their dwelling ownership over a ten-year period, they still would be obliged to continue providing their change of address details to a management company with which they had dealings ten years previously.
Senator Ivana Bacik: I certainly take on board the Minister’s comments. He may be correct that there may be a better way to deal with this. I take it he can perceive the mischief the amendment seeks to address.
Senator Ivana Bacik: There may be a better or less intrusive way to deal with it. Certainly, his suggestion that the converse should be the case might be the better way to deal with this issue. In other words, a purchaser would be given information about his or her obligations within the owners’ management company. Consequently, I will withdraw the amendment at this stage, while reserving the right to table a slightly differently worded amendment on Report Stage if the Minister has not done something at that stage to address this mischief.
An Leas-Chathaoirleach: Amendment No. 28 is related to and is an alternative to amendment No. 27. Amendment No. 33 also is related. Amendments Nos. 27, 28 and 33 may be discussed together. Is that agreed? Agreed.
Government amendment No. 27:
Deputy Dermot Ahern: The purpose of the technical amendments Nos. 27 and 33 is to ensure all ownership interests held by the developer, including the reversion, are transferred to the owners’ management company. I understand that as amendment No. 28 has the same purpose, it will not be required if amendments Nos. 27 and 33 are accepted.
Senator Ivana Bacik: As amendment No. 28 is the same as amendment No. 27, I am grateful to learn that the Minister intends to accept this principle. The purpose of amendment No. 28 was to address an omission the Labour Party had observed in the Bill, which was that the section did not require transfer of the reversion to the management company. Clearly, the Minister now has addressed this omission in amendment No. 27. I am grateful he has accepted the principle and am delighted that, essentially, he has taken on board amendment No. 28.
Amendment agreed to.
Amendment No. 28 not moved.
An Leas-Chathaoirleach: As amendment No. 30 is an alternative to amendment No. 29, amendments Nos. 29 and 30 may be taken together. Is that agreed? Agreed.
Government amendment No. 29:
Deputy Dermot Ahern: Section 3 deals with developments in which some units have been sold but the development has not been completed. The words, “Except where the multi-unit development has been completed”, in section 3(2) are superfluous and amendment No. 29 proposes to delete them. Amendment No. 30 proposes the deletion of subsection (2) from the section. As this would mean that the developer would no longer retain the beneficial interest for the purposes of completing the development, I am not prepared to accept the amendment. Section 9 requires the beneficial interest to be merged in the legal interest following completion of the development.
Senator Ivana Bacik: The Labour Party considered that subsection (2) seemed to mean that while the developer was obliged to transfer title to common areas, he or she would retain the beneficial interest until the development was completed. Consequently, it seemed unnecessary. I have not examined how the Minister’s amendment affects this point. I seek a response from the Minister as to whether it deals with the issue. I note it is also dealt with in section 9. However, subsection (2) appeared anomalous to me and the Minister should outline how his amendment affects this provision.
Deputy Dermot Ahern: The Labour Party amendment proposes to delete all of subsection (2) which would then delete the necessity for the merging of the beneficial interest with the legal interest. I believe the deletion of the words as proposed in my amendment deals with the situation I am trying to address, that is, the transfer of developments in which some units have been sold but the development has not been completed. The deletion of the words, “except where the multi-unit development has been completed” from that subsection means it will begin thus:
Consequently, this is a stand-alone measure pertaining to the merging of the beneficial interest with the legal interest.
Senator Ivana Bacik: It appears to address the issue I sought to address. While I will withdraw my amendment, I will review it again in the light of the Minister’s amendment. I have not had the time to review the impact of the Minister’s amendment on what I was trying to achieve but I will withdraw it at this point.
Amendment agreed to.
Amendment No. 30 not moved.
Section 3, as amended, agreed to.
Amendment No. 31 not moved.
Senator Paudie Coffey: I move amendment No. 32:
Deputy Dermot Ahern: Section 4 imposes an obligation on a developer to transfer the common areas in substantially completed developments to the owners’ management company within six months of the enactment of legislation. I do not perceive any need to delay such a transfer by requiring certification by a professional person. There is a risk that this would provide an excuse for the developer not to proceed with the transfer of the common areas as is required and mandated by section 4. It probably would merely delay the issue.
Amendment, by leave, withdrawn.
Government amendment No. 33:
Amendment agreed to.
Section 4, as amended, agreed to.
Senator Ivana Bacik: I move amendment No. 34:
Amendment agreed to.
Section 5, as amended, agreed to.
Amendment No. 35 not moved.
Section 6 agreed to.
An Leas-Chathaoirleach: Amendment No. 36 is a Government amendment. Amendment No. 37 is an alternative to it and they may be discussed together by agreement. Is that agreed? Agreed.
Government amendment No. 36:
Deputy Dermot Ahern: Both amendments have the same intent, that is, to ensure the obligation on the developer to indemnify the owners’ management company in respect of claims made against it will be at the expense of the developer and no one else.
Senator Ivana Bacik: As the proposer of amendment No. 37, I am delighted the Minister has accepted its principle, which was suggested by the Apartment Owners Network, AON. It is important the developer should pay or, as the Minister phrased it, “shall, at its expense, effect”. Either way, the principle remains the same, but the legislation clearly places the obligation to pay for the insurance policy on the developer. I am delighted the Minister has accepted our amendment. He seems to be on a bit of a roll and I hope it continues in respect of the rest of our amendments on Committee and Report Stages.
Deputy Dermot Ahern: I am very amenable.
Senator Ivana Bacik: In the circumstances, amendment No. 37 falls, as it would have the same effect as amendment No. 36.
Amendment agreed to.
Amendment No. 37 not moved.
An Leas-Chathaoirleach: Amendments Nos. 38 and 39 are cognate and may be discussed together by agreement. Is that agreed? Agreed.
Government amendment No. 38:
Deputy Dermot Ahern: These are technical amendments.
Amendment agreed to.
Government amendment No. 39:
Amendment agreed to.
Section 7, as amended, agreed to.
Section 8 agreed to.
An Leas-Chathaoirleach: Amendment No. 40 is a Government amendment to which amendment No. 41 is an alternative and amendment No. 43 is related. Amendments Nos. 40, 41 and 43 may be discussed together. Is that agreed? Agreed.
Government amendment No. 40:
Deputy Dermot Ahern: The transfer of common areas provided for in sections 2 and 3 specify that, while legal ownership has transferred to the owners’ management company, OMC, the beneficial ownership remains with the developer. Section 9 provides that, following completion of a development, a declaration be made by the developer. Amendment No. 40 makes it clear that the required declaration will result in the merging of the beneficial interest with the legal interest, which is already held by the owners’ management company. The OMC will then hold both the legal and beneficial ownerships in the common areas and the reversion of the residential units. Amendment No. 43 makes the same clarification in respect of the corresponding provision in section 10.
Regarding amendment No. 41, the transfer of documentation from the developer to the OMC on completion of the development is covered by section 25 and a new Schedule 3 inserted by amendment No. 74. This Schedule states that any declaration made under section 9 or 10 must be given to the OMC.
Senator Ivana Bacik: In principle, our amendment has been accepted, albeit in a different way. I am delighted that the roll seems to be continuing. The principle, suggested by AON, is important. Not only would the owner of the beneficial interest make the declaration, but he or she would deliver it to the OMC to ensure the company knows about it. The purpose is straightforward, but I see that amendment No. 74 accepts the principle and relates generally to the documentation that must be supplied. This is welcome, as there has been a knowledge deficit for too long. Apartment owners have pointed out the problem of a knowledge deficit to many of us on doorsteps. This Bill will generally address that problem, so I am delighted that amendment No. 74 will accept our amendment in principle. In the circumstances, amendment No. 41 might fall, but I will withdraw it.
Amendment agreed to.
Amendment No. 41 not moved.
Section 9, as amended, agreed to.
Amendment No. 42 not moved.
Government amendment No. 43:
Amendment agreed to.
Section 10, as amended, agreed to.
An Leas-Chathaoirleach: Amendments Nos. 44 and 45 are related and may be discussed together. Is that agreed? Agreed.
Government amendment No. 44:
Deputy Dermot Ahern: These amendments provide some safeguard in terms of the right of an OMC to enter upon and carry out works on adjoining land held by the developer. The new subsection (2) provides that the OMC shall not carry out repairs unless it has first requested the person with responsibility for doing so to carry out the repairs and has offered him or her a reasonable opportunity to do so. However, subsection (3) will ensure that, where essential and immediate repairs are required, they can be carried out notwithstanding the provisions of subsection (2).
Amendment agreed to.
Government amendment No. 45:
Amendment agreed to.
Section 11, as amended, agreed to.
Senator Paudie Coffey: I move amendment No. 46:
I am tabling this amendment to acknowledge the efforts of the Law Reform Commission, LRC, in its 2008 report on multi-unit developments, which provides a comprehensive analysis of multi-unit developments and their management. The LRC went so far as to include a draft Bill based on its recommendations in the report, of which Fine Gael has taken account by tabling this amendment.
The commission recommended that an OMC, based on the designated activity company envisaged in the Company Law Review Group’s draft companies (consolidation and reform) Bill, is the preferred legal structure for larger multi-unit developments, those being developments of five units or more. Our amendment attempts to address this recommendation and I would be interested in the Minister’s opinions.
Deputy Dermot Ahern: I am not sure that the Senator would be interested in them because we are at a loss as to why this amendment has been tabled. It ignores the fact that many of the provisions of the new proposed section are already included in the Bill, for example, in sections 2, 12 and 13. The provisions of subsection (5) of the amendment are well covered in section 13. Similarly, the provisions of subsection (4) of the amendment concern membership of the company, a matter covered by sections 6 and 12. By and large, what is proposed in the amendment is already covered in the Bill.
Senator Paudie Coffey: I thank the Minister for his response and I take his comments on board. He mentioned that he will be consulting other stakeholders on elements of the Bill. Will he or his officials consult the LRC at any stage to take the recommendations of its comprehensive 2008 report on board? What has he taken on board from the report and for what reasons has he not included any of the LRC’s recommendations? I would be interested in learning the answers to these questions and about whether there will be further consultation between the Department’s officials and the LRC on the latter’s recommendations.
Deputy Dermot Ahern: It is up to the Government to propose and the Oireachtas to dispose. The LRC gives advice, but it is not an oracle. The Government can take or reject the LRC’s advice. It must also take advice from the Attorney General and listen to vested interests, the Opposition and the media. We do not have an ongoing communication with the LRC as regards this Bill. I appreciate the work that the commission regularly does on many issues and we can take some of its reports verbatim. If it proposes a Bill, we can sometimes, but not always, take the bones of that Bill, but we could not do so in this instance. This issue crosses so many Departments it was necessary for the Tánaiste, the Minister for the Environment, Heritage and Local Government, a significant number of officials and me to sit down on a regular basis to try to pull everything together. Many of the measures contained in the Bill were not dealt with by the Law Reform Commission. We considered that, as we were passing legislation, we should do so as comprehensively as possible. I say this with due respect to the Law Reform Commission.
Amendment, by leave, withdrawn.
Government amendment No. 47:
Deputy Dermot Ahern: This matter was raised by a number of Senators during the debate on Second Stage. It was always my intention that one vote would attach to each unit rather than unit owner. The amendment makes this clear.
Amendment agreed to.
Senator Ivana Bacik: I move amendment No. 48:
This amendment is aimed at deleting section 12(4). This subsection restricts the application of section 12 because it states it applies to multi-unit developments, in respect of which development works will commence after the enactment of the Bill. It seems the one unit-one vote rule, of which we all approve, does not apply to existing managements. That seems to be undesirable. In the Government’s amendment No. 17 which inserts a new section 2, there is a recognition that the one unit-one vote rule could be modified in a mixed use development. Did the Minister envisage a similar time limit in the case of the new section 2? As I am not sure why this is time-limited, I would be grateful to hear the Minister’s view on the matter.
Deputy Dermot Ahern: Senator Bacik’s amendment would introduce an element of retrospection in section 12. To do so would be to rewrite existing management company documentation, particularly their constitutions. Such documents are already contained in the legal documentation each unit owner has received. I am advised that this would not be possible. I have endeavoured to make the Bill applicable, as far as possible, to existing circumstances. There would be no point in passing a law which would only apply to future developments when we know most of the problems are in existing developments. We have, as much as possible, made the provisions retrospective from a legal point of view. However, there are circumstances where we cannot go back. We cannot rewrite constitutions or company memoranda of management companies.
Senator Ivana Bacik: I accept the Minister’s point.
Amendment, by leave, withdrawn.
Government amendment No. 49:
Amendment agreed to.
Section 12, as amended, agreed to.
Government amendment No. 50:
Deputy Dermot Ahern: Section 13(2)(h) requires that the annual report of the owners’ management company include a statement on whether a fire safety certificate has been issued for the development. It has been pointed out that a fire safety certificate is issued prior to the construction of a building and continues to apply until such changes are made to the building as would require the issue of a new certificate. Accordingly, there would appear to be little point in requiring that the same certificate appear in successive annual reports. I consider it to be more important and relevant to the owners’ management company which has responsibilities with regard to fire safety that it provide details on fire safety on an annual basis. The amendment provides for this.
Amendment agreed to.
An Leas-Chathaoirleach: Amendments Nos. 51 and 53 are cognate and may be discussed together. Is that agreed? Agreed.
Government amendment No. 51:
Deputy Dermot Ahern: Section 13(5) provides that the annual meeting of the owners’ management company must take place in reasonable proximity to the development and at a reasonable time, unless 75% of the members agree to another arrangement. The amendment makes it clear that any such agreement must be in writing. Similarly, section 14(2) provides that a meeting of the owners’ management company to decide on the annual service charge must take place in reasonable proximity to the development and at a reasonable time, unless 75% of the members agree to another arrangement. Amendment No. 53 makes it clear that any such agreement must also be in writing.
Amendment agreed to.
Question proposed: “That section 13, as amended, stand part of the Bill.”
Senator Paudie Coffey: The Bill is welcome, as it regulates the running of management companies. This section puts a structure on the organisation of annual meetings and reports of owners’ management companies and gives a clear definition to residents and citizens involved in multi-development units. Residents and members will receive annual reports and have an opportunity to raise issues at an annual general meeting. Opposition Members acknowledge the Government’s action in addressing this matter at long last, as it has caused confusion and concern for some time. This section gives people a voice and an opportunity to address matters of concern to them on an annual basis.
Question put and agreed to.
Senator Ivana Bacik: I move amendment No. 52:
The wording of the amendment has been suggested by the Apartment Owners Network, the members of which point out that the obligation to pay service charges should begin on the date the first unit is sold and that the developer should pay service charges on all unsold units, on the same basis as unit owners, from that date.
Deputy Dermot Ahern: I ask the Senator to withdraw her amendment. I will undertake to consider the matter and introduce an appropriate amendment on Report Stage which will take into account the content of the proposed amendment. The issue of when a developer becomes liable for the payment of service charges or a building investment fund contribution remains to be clarified. That will require more time.
Senator Ivana Bacik: I am grateful to the Minister for indicating his agreement that there is a mischief which we are trying to resolve. I will withdraw the amendment. I would be delighted to see the issue addressed in some way on Report Stage, although not necessarily through our proposed wording. The issue of the timing of the liability for service charges should be resolved in the legislation.
Amendment, by leave, withdrawn.
Government amendment No. 53:
Amendment agreed to.
Government amendment No. 54:
Deputy Dermot Ahern: The proposed threshold of 90% of members attending and entitled to vote is considered too high and out of line with other thresholds in the Bill. Accordingly, the amendment reduces the threshold to 75% of those attending and entitled to vote at a meeting on annual service charges.
Amendment agreed to.
Amendment No. 55 not moved.
Question proposed: “That section 14, as amended, stand part of the Bill.”
Senator Feargal Quinn: I support a point made by Senator Mullen which speaks for itself. The Senator proposes that the annual service charge be proportionately allotted between unit owners with due consideration being given to the type and size of the unit owned. The alternative is not suitable and the Senator is aiming at achieving a more suitable arrangement.
Deputy Dermot Ahern: I am sympathetic to the concerns raised, although if we were to be prescriptive in this regard, we might see officials going in to measure units to determine their size and type.
I always err on the side of over-regulating but I will consider whether we can come up with an appropriate wording before Report Stage, although I am not sure we can.
Senator Feargal Quinn: I understand what the Minister is saying. It is a satisfactory answer.
Question put and agreed to.
Government amendment No. 56:
Deputy Dermot Ahern: It has been pointed out to the Department that to provide that a sinking fund contribution be apportioned in the same manner as the service charge would be inconsistent with current best practice. While service charges covering insurance, refuse collection, etc., are normally related to the size of an apartment, contributions to the sinking fund are calculated on the basis that all apartment owners use the common areas, for instance, lifts, landscaped areas and so on and that the usage is not directly related to the size of the particular apartments. For that reason, section 15(4) will be deleted by the amendment.
Amendment agreed to.
Senator Feargal Quinn: I move amendment No. 57:
This amendment speaks for itself. I support the requirement for a sinking fund. It is relatively inexpensive at €200 a year for apartments but a minimum charge should not be legislated for because different complexes have different needs. This is particularly relevant to housing estates. Some small housing developments are run by management companies and the common areas to be maintained are limited. For instance, there may only be grass cuttings. Therefore, a minimum annual contribution of €200 to a sinking fund would be excessive for such a residence. An amendment needs to be considered to exclude developments where there is little common space. In recent years developers squeezed so many dwellings into small spaces that many people have no space around their complex. Therefore, a sum of €200 would be too expensive. My proposal is intended to overcome this problem.
Deputy Dermot Ahern: It is better if the decision on a sinking fund contribution is left to the owners rather than putting the matter into the hands of a professional surveyor. If they want to use the services of a surveyor, they are free to do so. I am conscious some owners may have a difficulty in paying high contributions, especially first-time buyers. The legislation tries to encourage the owners to take an active role in managing the development and I would prefer to leave the decision to them.
With regard to the threshold of €200, given the inclusion of traditional housing developments under the legislation, it may be that the sum is excessive for some developments. We will examine providing more flexibility on the figure between now and Report Stage or before the Bill is taken in the Dáil.
Senator Feargal Quinn: I thank the Minister. That is the issue. There are developments in which there is so little space that a €200 charge would be too much. I accept the Minister’s comment. However, I support Senator Bacik and also would prefer if the amendment was made in this House rather than in the Dáil. I hope the Minister will have time for consideration of the amendment while the Bill is being taken in the House.
Amendment, by leave, withdrawn.
Government amendment No. 58:
Deputy Dermot Ahern: There is a significant overlap between subsections (3) and (8). Therefore, I propose the deletion of the latter.
Amendment agreed to.
Question proposed: “That section 15, as amended, stand part of the Bill”.
Senator Ivana Bacik: There is no obligation on the developer to pay a contribution to the sinking fund. Will the Minister comment on this? I did not draft an amendment in this regard but other Members and I received an e-mail from property management personnel on the matter. The owner of each unit, including the developer or building contractor, is obliged to pay service charges but there is no obligation on the developer to pay a contribution to the sinking fund. If I am correct about this, why is that so?
Deputy Dermot Ahern: If the developer is exiting the development, I cannot see why he would be liable to pay into the sinking fund. Perhaps I am misunderstanding the Senator. This may, in turn, mean the price of each unit could increase because if the developer was required to pay into a sinking fund, he or she may add the payment to the price. I accept developers have to make a contribution regarding the common areas. I will also examine this issue between now and Report Stage.
Senator Ivana Bacik: I put this badly. The three-year timeframe is the difficulty. Section 15(6) states, “The obligation to establish a sinking fund and to make contributions shall apply on the happening of the later” of three years or “18 months since the coming into operation of this section”. Clearly by then the developer should have exited. Should good estate management practice not be that the sinking fund should commence from the first year of occupation of the development? There is potential for significant refurbishment, improvements, etc. in the first three years. If the developer does not pay a contribution because he or she is out of the picture by the time the fund is established, should the fund come into operation sooner? Perhaps it is not necessary for the developer to pay if he or she has exited but three years is a long time to wait for refurbishments and so on.
Deputy Dermot Ahern: Three years was a compromise figure. The developer will be long gone after three years. Many of those who purchase units will be first-time buyers and we do not want to overly burden them.
Question put and agreed to.
Section 16 agreed to.
An Leas-Chathaoirleach: Amendments Nos. 59 and 60 are related and they will be discussed together.
Senator Ivana Bacik: I move amendment No. 59:
I am grateful to the Minister for accepting the principle underpinning this simple, technical amendment to enable the owners’ management company not only to make house rules but also to amend or revoke them. The Minister’s amendment No. 60 addresses this issue by providing that house rules may be amended from time to time in the same way as they may be made. I am happy with this. I withdraw my amendment and thank the Minister for accepting the principle.
Amendment, by leave, withdrawn.
Government amendment No. 60:
Deputy Dermot Ahern: This amendment provides for a better phraseology that than proposed in Senator Bacik’s amendment.
Amendment agreed to.
Senator Ivana Bacik: I move amendment No. 61:
The amendment addresses a bugbear for any of us who has lived in an apartment. There is a right to dry campaign that points out the environmental and personal hygiene advantages of allowing air drying which is prohibited in many apartment leases and covenants. We are seeking to ensure house rules do not prohibit air drying of laundry. It is an issue that excites a good deal of controversy on both sides. Having lived in flats around Dublin for many years, I have always thought it is important to be able to air dry one’s laundry, yet I know there is an equally passionate lobby against this practice——
Senator Paudie Coffey: Was the Senator hanging her stockings on the balcony?
Senator Ivana Bacik: ——who consider the hanging of one’s smalls on balconies or from windows to be unsightly. This is perhaps a rather contentious point but it should be considered, given the imperative to try to reduce carbon emissions. Tumble drying is one of the most energy intensive household tasks but it can be the only alternative in drying one’s clothes if one is living in a confined space. One cannot have one’s clothes drying all over the very small rooms one finds in modern apartments, in particular. Therefore, people use tumble driers, but it is extremely undesirable to encourage the practice. It would send an important signal in terms of environmental considerations, as well as personal hygiene, if people were allowed to air dry their laundry in their apartments.
Senator Feargal Quinn: When I read this amendment, I realised immediately the intention in tabling it and it is well worth supporting. While it is unsightly, as Senator Bacik said, to see smalls exhibited commonly in apartment blocks, on the other hand, the use of tumble driers poses a problem in terms of achieving the climate change objective set. If we do not take steps such as this, we will not even take the first step in achieving it. Therefore, I support Senator Bacik in bringing forward this amendment.
Senator Paudie Coffey: This is an interesting amendment. The issue arises as a consequence of modern living conditions and standards. When people lived in traditional houses, they would have had a back yard or back garden in which to put up a clothesline. I am not saying I come down on either side of the argument because we would not want to have all kinds of unsightly paraphernalia and various items of attire, in many colours, hanging from apartments. From an environmental perspective, I do not know if the design of apartments should include such a provision which might be more appropriate to the planning and development Acts. Consideration was given to the storage of wheelie bins and other such services, but is there any technological or engineering design that might overcome this problem? It will be difficult to legislate but, from an environmental point of view, I can understand from where Senator Bacik is coming. People should be allowed to dry their clothes but how they do it is another matter. I am interested in hearing the Minister’s response.
Senator Ivana Bacik: I am grateful to Senators Quinn and Coffey for their support for the amendment. I was being somewhat flippant earlier but I want to make one further important point. Inserting a provision such as this in the Bill would not only send an important signal in terms of environmental considerations but it would also force a change in apartment design. Senator Coffey asked if there were ways to overcome aesthetic considerations about unsightly displays of underwear and so on. Families living on the Continent are culturally used to living and being brought up in apartment blocks and people routinely dry laundry on balconies. A provision for air drying clothes is built into the design of apartments. That is what we would see happening if a provision such as this was inserted in the Bill. It would change the way in which apartments were designed; they would be more conducive to family living and could contribute to a change in culture. On the Continent one sees retractable clotheslines on balconies as a matter of course and in apartments which do not have balconies such clotheslines are fitted to window frames. They are not unsightly and people get used to them. It makes apartment complexes look more lived in.
The analogy with the smoking ban is useful in this context. It was claimed it would lead to difficulties and practical problems. However, pub and bar owners have become creative about the design of smoking areas which are often attractive in appearance. They have generally changed the nature of our pavement culture in a very nice way. Similarly, we have to get over seeing laundry hanging outside apartments as unsightly; we have to develop a different way of looking at this. This is important from an environmental point of view but it is also important if we are trying to generate a culture in which people believe they can live and bring up children in apartments. Up until now our apartment design has been poor and shoddy. For the most part, apartments have been designed for couples or single people. We have to overcome this problem. Dublin City Council, among other councils, has recognised this and is trying to ensure better planning and the building of bigger apartments that are more family friendly. I would consider this as part of the context for the amendment.
I would like to receive some indication from the Minister that he might be prepared to consider doing something along the lines of what is proposed in the amendment. I hope he can at least appreciate what we are trying to achieve.
Senator Lisa McDonald: Senator Bacik has raised an interesting point. A major problem in implementing what she has proposed is that many leases in multi-unit developments contain a restrictive covenant in this respect. Another common restriction that has cropped up lately is that wooden floors must be more than 10 cm deep. Leases which contain such restrictive provisions pose a difficulty.
The Senator’s point about the planning code would be a way forward if balconies were big and wide enough. Most restrictive covenants in leases stipulate that clothing must not overhang the balcony. Therefore, if there was room on a balcony to hang clothes, their hanging would not be restricted. That practical answer is provided for but the fact is that the design of many balconies is too small to accommodate it. It is probably impossible to make the proposed provision a mandatory requirement, given the nature of conveyancing in respect of multi-unit developments, but the matter could be addressed in terms of the size of apartment balconies.
Deputy Dermot Ahern: I could be flippant and say far be it from me to prevent Senator Bacik from hanging her undergarments on her balcony.
Senator Ivana Bacik: Washing my dirty linen in public.
Deputy Dermot Ahern: I balance it by saying I am not sure that if Senator Quinn had an apartment, he would like to see Senator Coffey’s undergarments hanging on the line.
I am not sure I agree with Senator Bacik that it is good for people to have their washing hanging on the balcony of their apartment block. I have seen such apartment blocks on the Continent and sometimes the practice gives them an unsightly appearance. What the Senator is seeking to do in the amendment would probably be better achieved through the proper design of apartment blocks, thereby ensuring there were locations where people could air dry their laundry which we would all like to encourage as much as possible. The point made about restrictive covenants in leases applies. It is academic what provision one may or may not want to insert in house rules because it is probably already restricted and prohibited by covenants in the lease. Where would one stop in this regard? We have heard about the requirement regarding wooden floors and the restrictions regarding the keeping of dogs, cats and other animals. It is best left to the people living in apartment blocks and those who are part of the management company to determine the house rules to suit their own requirements, subject to the restrictions laid down in the lease under which they took on the properties.
An Leas-Chathaoirleach: The Minister is hanging the amendment out to dry.
Deputy Dermot Ahern: No. We could give consideration to including a provision that the “house rules should as much as possible have regard to environmental considerations”.
Senator Ivana Bacik: I am trying to think of another dreadful pun to wrap up the debate on the amendment.
I note what the Minister and Senator McDonald said about restrictive covenants. The amendment could be seen as having a less broad effect and aiming to ensure that where a lease is silent on this issue and there is no restrictive covenant contained in it, the house rules could not then prohibit air drying.
The Minister cited the example of the keeping of pets. Sometimes, even where a lease is silent on the issue, house rules are brought forward by the residents or the management company prohibiting the keeping of pets or air drying in apartments. I am not suggesting this provision would necessarily override restrictive covenants but rather where covenants and leases are silent on this issue, the house rules could not prohibit this practice.
Another point which the Minister made under section 12 is that this provision would only be prospective. Therefore, it would not apply to existing complexes where house rules have already been drawn up, as I understand it. Perhaps it is of more limited scope than the Minister believes. However, I would be grateful if, as he suggested, he put something in a more positive framework stating that house rules should have regard to environmental considerations and to the desirability of air drying of laundry. That might be a way to deal with it.
I will withdraw the amendment but reserve the right to table a new one with perhaps a more positive wording on Report Stage because it is an important point in terms of lifestyle and the nature of living in apartments. It is such a burning issue, although “burning” is the wrong word when talking about clothes. It is an issue which, as I said, excites much opinion and controversy.
Amendment, by leave, withdrawn.
Section 17, as amended, agreed to.
Acting Chairman (Senator Paul Bradford): Amendment No. 63 is related to amendment No. 62 and amendments Nos. 64 and 65 are alternatives to amendment No. 63. Amendments Nos. 62 to 65, inclusive, may be discussed together by agreement.
Government amendment No. 62:
Deputy Dermot Ahern: These amendments propose changes to section 18(4). Amendment No. 62 extends dispute resolution to cases where there are separate blocks or buildings in a development, where there are units of different character, residential and commercial, in the development or where units are put to different uses in the development. Amendment No. 63 inserts three new subsections under section 18(4). The need for these new subsections mainly arises from the expansion of the scope of the Bill to mixed use development. Such developments can encounter different types of problems compared with residential only developments.
The first additional subsection provides that the court may make an order which determines whether the management structure of a mixed use development is in line with the provisions of the Act and, if not, the court may direct that certain steps be taken to ensure the management structure is in compliance with the Act.
The second subsection concerns cases that where proposals are made which would alter the character of a mixed use development, the court may make an order which determines whether any such proposal would affect any class of unit owner in a disproportionate or inequitable manner. The third subsection provides that an order may be made which directs the developer to complete the multi-unit development in accordance with the terms of the contract, planning permission or the Planning and Development Acts and the Building Control Acts.
I can accept amendment No. 64 which amendments the collective citation of the Planning and Development Acts but not amendment No. 65.
Senator Ivana Bacik: I wish to move amendment No. 64. I am grateful the Minister has indicated he will accept it. It is a technical——
Acting Chairman: I am advised that if amendment No. 63 is agreed to, amendments Nos. 64 and 65 cannot be moved. We are on amendment No. 62.
Senator Ivana Bacik: I thought the Minister said he would accept amendment No. 64 but not amendment No. 65.
Acting Chairman: Perhaps the Minister would clarify that.
Deputy Dermot Ahern: I am told amendment No. 64 has been integrated into amendment No. 63.
Senator Ivana Bacik: I see that. I am grateful to the Minister for incorporating amendment No. 64 into amendment No. 63. The Minister said he would not accept amendment No. 65 which was a technical amendment to include requirements under the Building Control Acts as well as the Planning and Development Acts in section 18.
I already mentioned the Minister’s amendment No. 63 and he also referred to it when we debated my amendment No. 22. This is the way in which he said he would deal with issues around unsatisfactory completion of developments. I have no difficulty with the amendment but it is not enough to address the problems we sought to address with amendment No. 22 and with the equivalent Independent and Fine Gael amendments. While I support amendment No. 63, it is not an answer to the problems which have arisen where developments have not been satisfactorily completed.
Amendment agreed to.
Government amendment No. 63:
Amendment agreed to.
Amendments Nos. 64 and 65 not moved.
Senator Ivana Bacik: I move amendment No. 66:
This amendment would provide for some appeal mechanism if rules are adopted which are over-zealous. The amendment proposes to insert a new subsection (j) under which somebody may apply to the court to annul a house rule or any provision if the rules interfere unreasonably with the rights of an owner of a unit.
I suppose there is a point there in terms of air drying. This might be a way to resolve an issue if somebody was prohibited from air drying clothes and felt that was in some way unreasonable. It is to include a sort of appeals mechanism to ensure house rules do not interfere unreasonably with the rights of an owner. One can imagine in a small development that it might be possible for rules to be adopted to get at a particular unit owner. It is important there is a mechanism such as this within the section.
Deputy Dermot Ahern: I am reluctant to accept this amendment because it could lead to some friction. Who determines if such rules interfere “unreasonably” with the rights of the owner? It could be a source of discontent among unit owners if one person digs his or her heels in on an issue. I would be somewhat reluctant to be too prescriptive in this regard. However, we will look at it between now and Report Stage but I could not guarantee that I could bring in an amendment which would satisfy what Senator Bacik is trying to do.
Senator Ivana Bacik: In light of what the Minister said, I will not press the amendment. However, I am glad he said he will look at this. He can see the mischief with which I am trying to deal. I accept his point that it could give rise to friction but it could also be seen as a way to try to deal with friction where a group of unit owners ganged up on another owner and introduced a rule which interfered unreasonably with the right of the unit owner. The court would decide what was unreasonable which is its function under section 18. That is why we proposed to insert the paragraph.
Deputy Dermot Ahern: It could be a very pernickety issue and a cranks’ charter for a difficult tenant who may go as far as the court for a determination.
Amendment, by leave, withdrawn.
Acting Chairman: Amendments Nos. 67 and 68 are related and may be discussed together. Is that agreed? Agreed.
Government amendment No. 67:
Deputy Dermot Ahern: Section 18(6)(a) relates to the making by the court of ancillary orders. Amendment No. 67 provides that the court may direct the registration of any deed required to be executed in order to comply with the order made under subsection (3). In addition, the amendment provides that the court may make an order directing compliance with the new subsection (7) which relates to the provision of certified copies of any deed to unit owners of the development. Amendment No. 68 inserts a new subsection (7) into section 18 which provides that where any deed is executed and registered in compliance with an order under this section, a certified copy of the deed shall be furnished to each unit owner.
Amendment agreed to.
Government amendment No. 68:
Amendment agreed to.
Section 18, as amended, agreed to.
Section 19 agreed to.
Senator Feargal Quinn: I move amendment No. 69:
The Minister will understand the purpose of my amendment, which is to provide that the Small Claims Court could deal with cases arising from the non-payment of service charges or building investment funds up to the value of €3,000. The section’s provisions for dealing with the non-payment of management fees are excessive and involve a drawn out process of bringing a case to the Circuit Court. This is an expensive step which requires using the services of a solicitor or barrister. The provisions are also contrary to the recommendation of the Law Reform Commission that the Small Claims Court be used in disputes of this nature. Such a procedure would be relatively fast and inexpensive and the system would be much more efficient for all parties concerned. The amendment would be a useful addition to the Bill.
Senator Ivana Bacik: I support the amendment, as its insertion would simplify arrears recovery, speed up the process and save management companies considerable costs associated with pursuing arrears. It is a sensible suggestion which I hope the Minister will accept.
Senator Maurice Cummins: I also support the amendment because we should, where possible, reduce bureaucracy and simplify procedures. This is a good proposal which I hope the Minister is in a position to accept.
Deputy Dermot Ahern: As a general rule, to be eligible to use the small claims procedure, a consumer or business must have purchased goods or services from someone selling them in the course of business. Claims cannot be made to the Small Claims Court in respect of debts, personal injuries or breach of lease agreements. The small claims procedure has always been pro-consumer and was never intended to serve as a mechanism for the recovery of claims against consumers or outstanding rent or other charges from tenants. The small claims procedure excludes claims by landlords against tenants. Inclusion of claims for the recovery of unpaid service charges and sinking fund contributions could undermine the pro-consumer ethos of the small claims procedure which I am anxious to preserve.
The current monetary threshold applicable to the small claims procedure is €2,000. Providing for a higher threshold of €3,000 in respect of this type of claim would be at odds with the threshold applicable to claims generally under this procedure. The limit of €2,000 is also in line with the European small claims threshold, although from time to time we examine the possibility of raising the limit.
The Law Reform Commission report which gave rise to the amendment suggests the Small Claims Court deal with contract debts. Notwithstanding the report, the small claims procedure only deals with claims for goods or services purchased from someone selling them in the course of business. I am, therefore, loath to agree to an extension of the procedure, as to do so would result in further claims for the use of the court and the purpose for which the court was originally intended would become completely enveloped. I suggest to Senators that we proceed slowly on this matter. The appropriate court for determining claims of this nature is the District Court which is, by and large, relatively inexpensive.
Senator Feargal Quinn: While I understand the Minister and share his objective, his response does not overcome the problem. The Bill confers jurisdiction on the Circuit Court. Did the Minister indicate that the District Court rather than Circuit Court would be a less expensive option for dealing with this matter? I am not sure I understand the precise details.
As the Minister will note, the objective of the amendment is to reduce costs in cases of this nature. He is correct that the purpose of the Small Claims Court was to benefit consumers rather than landlords. While I understand the objective he is trying to achieve, will he clarify the role of the District Court as opposed to the Circuit Court in cases of this nature?
Deputy Dermot Ahern: The District Court is available under the legislation and would be the first court to which persons would take a case. It is, by and large, relatively inexpensive to take a case to the District Court, albeit not as inexpensive as the Small Claims Court. The latter was designed to deal with minor, non-complex issues, whereas cases arising under the section are relatively complex and would require the adjudication of a District Court judge rather than the small claims procedure.
Senator Feargal Quinn: The Minister understands what my amendment sets out to achieve. If there is another way of achieving the objective, I am willing to have him examine the matter again.
Amendment, by leave, withdrawn.
Section 20 agreed to.
Government amendment No. 70:
Deputy Dermot Ahern: This section relates to the holding of mediation conferences to resolve disputes in relation to multi-unit developments. I have decided to amend the provision to provide that a court may, of its own volition, direct that mediation be attempted to resolve the conflict. It has always been my intention to encourage the use of mediation in these circumstances and I consider that allowing the court the opportunity to direct that mediation take place will further encourage the use of mediation as an alternative to court proceedings.
Amendment agreed to.
Question proposed: “That section 21, as amended, stand part of the Bill.”
Senator Ivana Bacik: It is sensible that the court should be able to refer a case for mediation on its own motion. What model is being used for the dispute resolution mechanism in section 21? Is it modelled on personal injuries legislation? Is it sufficiently tailored to disputes about completion which may require the resolution of technical issues by an engineer or architect mediator or conciliator? Does the Minister have a view on whether the procedure provided for in the section is sufficiently tailored? Would it be preferable to make provision for the Minister to introduce regulations on methods of resolving a dispute where the dispute turned on a particularly technical point that may best be resolved by somebody with an engineering or technical qualification? In raising this issue I am not opposing the section, although I reserve the right to introduce an amendment on Report Stage. I would be grateful if the Minister indicated what model has been used for the dispute resolution procedure.
Deputy Dermot Ahern: We examined recent provisions in the Civil Liability Act and concluded they would be reasonably applicable in this type of case. I do not propose to introduce regulations governing how the mediation should be organised, as this matter is best left to those involved who have the necessary expertise. I am aware of a significant shift, particularly among those in the legal profession, towards the use of mediation and alternative dispute resolution mechanisms. The section provides a sufficient overview to enable matters to proceed in these circumstances.
As I stated, the purpose of my amendment is to encourage dispute resolution through mediation rather than in a court with a judge determining the outcome. The former option is preferable. The amendment will encourage the Judiciary to insist that people participate in mediation before a matter can come before the courts again. If the Senator wishes to be more specific as to what she wishes us to do, perhaps she will table an amendment on Report Stage.
Senator Ivana Bacik: I need to look at this issue in greater detail. It is a concern that was raised with me by the architects institute. I agree with the Minister that the objective should be to move to some type of alternative dispute mechanism rather than going to court. That objective is entirely positive and I agree that mediation conferences are infinitely preferable. The chair of the mediation conference should not necessarily be a lawyer. I am glad to see it can be another person nominated by a body prescribed. There is a provision in subsection (4)(b) for a ministerial order to specify what sort of other person could be chair of a mediation conference. I will have a look at it again and see what precisely are the concerns of the architects institute. I wanted to flag at this stage that it had some concern that this might not be an appropriately tailored process to deal with disputes where there was some technical issue to be resolved. There may be enough flexibility in the current wording to provide for that but I will examine it and see whether there is some improvement that could be made.
Question put and agreed to.
Question proposed: “That section 22 stand part of the Bill.”
Senator Ivana Bacik: I will reserve my right to introduce an amendment, if necessary, on Report Stage. I support the principle behind the section to move to alternative dispute resolution.
Question put and agreed to.
Sections 23 and 24 agreed to.
Acting Chairman: Government amendments Nos. 71 and 74 are related and may be discussed together, by agreement.
Government amendment No. 71:
Deputy Dermot Ahern: In addition to the transfer of guarantees and warranties provided for in section 25 I want to ensure that all relevant documentation be provided to the owner of a management company. To enable the smooth running of the company, the extensive list of required documentation is now specified in the new Schedule 3 of the Bill.
Amendment No. 74 inserts a new Schedule 3 into the Bill. Section 25 provides that any person who has developed a multi-unit development must, on completion of the development, transfer the benefits of any warranties or guarantees to the owners’ management company. I have received many submissions on this section, all of which stated that their documentation should also be transferred to the owners’ management company on completion. The reason given for the necessity of transferring documentation was that the owner of a management company would be more able to function, as provided for in the Bill, if additional information and documentation was available to them. To that end, I have provided that the owners’ management company should be supplied with any certificates or opinions of completion regarding the planning permission and Building Control Acts. I have also provided that the management company should receive confirmation that any financial contributions required under the planning Acts have been paid and so ensuring that the responsibility for the payment of these contributions will not fall on the management company on the transfer of control of the development.
In addition, the safety file of the development which contains relevant health and safety information which should be taken into account during any construction work undertaken following completion of the development must be given to the management company. I am aware it is not normally the case as built drawings of developments are carried out. However, I am also aware that professionally prepared drawings or the latest versions of the drawings of a development are prepared by a design team. It is important that these are available to the management so I have provided for this in the Schedule.
In a related context as built drawings of the service relating to the development, water, sewerage and electricity are prepared on completion of the developments, I have provided that these must be transferred to the management company. In addition to the above I have also provided other information relating to the plant and equipment in the development and the service and maintenance contracts relating to the development must be transferred to the management company. In many cases title documents of the development are not passed on to the management company on the transfer of ownership. I have now provided that they should be transferred along with counterpart leases and other deeds relating to the units in the development. Finally, I have provided that any documents which the developer, while in the control of the management company, is required by law to maintain, together with financial and management accounts and records relating to service charges in respect of the development, should also be transferred to the owners’ management on completion of the development.
Senator Ivana Bacik: I support Government amendment No. 74. However, I have one query for the Minister on it. Item No. 3 of Schedule 3 requires that the safety file be transferred. Is that sufficiently specific? A fire safety file requires the production of all relevant documents that might be required to facilitate the owners and management company in meeting their statutory obligations under fire safety regulations. I wonder whether that is covered sufficiently in that term.
Deputy Dermot Ahern: The “safety file” is the term used. We understand it would include the fire safety documentation but we can double check it for Report Stage.
Senator Ivana Bacik: I thank the Minister.
Senator Maurice Cummins: Likewise I welcome this amendment. It is important that all those documents would be transferred on the completion of these units. I commend the Minister on introducing such an amendment which clarifies problems that many bodies have highlighted in the recent past. It adequately covers that whole area.
Amendment agreed to.
Section 25, as amended, agreed to.
Sections 26 to 28, inclusive, agreed to.
Senator Ivana Bacik: I move amendment No. 72:
This amendment seeks to ensure that a two, three or four-unit development would still have a management company. Otherwise it was thought the existing paragraphs of the Schedule would have made little sense. I am not sure if that is already covered in Government amendment No. 17 which deals with smaller multi-unit developments. I would welcome clarification on that issue. Government amendment No. 17 sought to insert a new section 2. It relates to the application of the Act to multi-unit developments comprising two or more units but less than five units. I understand that a modified version of the Bill is to apply to them. Notwithstanding that, would our amendment still be required? It may be superseded.
Deputy Dermot Ahern: We are going on the basis of what the Law Reform Commission recommended. A smaller number of units do not necessarily have the comprehensive common areas we are trying to address in this legislation. What the Deputy is seeking is that developments which have two or more but less than five units would have a management company which would be a fairly significant burden on a small number of unit owners. We have taken the approach recommended by the Law Reform Commission. We have provided in section (1)(4) and Schedule 1 provisions which we believe are sufficient to meet the type of developments that are at issue in this amendment.
Senator Ivana Bacik: I will not press the amendment at this stage.
Amendment, by leave, withdrawn.
Schedule 1 agreed to.
Government amendment No. 73:
Amendment agreed to.
Government amendment No. 74:
Amendment agreed to.
Title agreed to.
Bill reported with amendments.
Acting Chairman: When is it proposed to take Report Stage?
Senator Denis O’Donovan: On Tuesday, 23 March 2010.
Senator Ivana Bacik: The Minister has kindly indicated he will consider quite a number of provisions in the Bill between now and Report Stage. Given that Senator Quinn and I have said we would like to see changes made on Report Stage rather than in the Dáil, on the basis of the full debate we have had today, does the proposed date give sufficient time for consideration? I am not opposing Senator O’Donovan’s date of 23 March, but——
Senator Maurice Cummins: What about the guidelines?
Acting Chairman: The provision for holding Report Stage on 23 March simply means the Bill cannot be taken before this date. Obviously there can be negotiation to allow for a later date.
Minister for Justice, Equality and Law Reform (Deputy Dermot Ahern): I ask that Senator Bacik intervene with her parliamentary colleagues in the Dáil, who keep asking why this Bill is taking so long in the Seanad. Perhaps she would impress upon them that there is a need to take time for consideration.
Acting Chairman: I will bring an end to the party political broadcast and advise that the Whips can work together to find a date for Report Stage.
Senator Ivana Bacik: I thank the Acting Chairman.
Acting Chairman: I thank the Minister for his attendance and for his behaviour up to 30 seconds ago, and I thank my colleagues.
Report Stage ordered for Tuesday, 23 March 2010.
Sitting suspended at 4.50 p.m. and resumed at 5.15 p.m.
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