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L e ga l A f f a i r s Public Affairs Ireland June/July 2010

Apartment living and the Multi-Unit

Developments Bill 2009
Lorcan Sirr considers the issues unique to owning an apartment and
analyses the reform measure designed to address them.

Since becoming a nation of property fees are then passed back to the property management company to make ‘house
owners rather than tenants, it seems management company, i.e. the owners, to rules’. The developer must also establish
we have learned little about how to be added to the next service charge bill. an owners’ management company and
manage our little corners of the world. Moreover, there are questions over transfer ownership of the common areas to
how the service charge is apportioned. If it before any apartments are sold, but must
In mid-2010 there are somewhere
the development is only half sold, does still complete the development. This stops
between 300-400,000 apartments in that mean that those in occupation are developers from holding onto units, thus
Ireland and many of these apartments supporting the unsold proportion? What preventing owners being able to manage
now languish deep in negative equity exactly is the service charge to be used for? the development.
with many owners in arrears and Why should someone pay for maintenance
fearful of losing their home. But there of the lift when they live on the ground Short-comings of the bill
are other problems too. floor? This list is potentially endless. Disappointment has been expressed
Take the service charge: an apartment that there has been no provision for
owner automatically becomes part of The role of director in a the retention of a sum of money, say
a management company which in turn property management company five per cent, by apartment owners that
employs a managing agent to look after The owners’ property management the developer doesn’t receive until the
the physical maintenance of the communal company is a company bound by the development is certified fully completed
areas, gardens, parking and so forth, same rules, regulations and obligations by a local authority inspector. Local
and also to prepare for any future repair as a company like Dunnes Stores, and authority resources might not stretch that
and replacement, say of lifts. This is requires a minimum of two directors who far though. The matter of what constitutes
paid for each year by a service charge must publish annual accounts. However, ‘completion’ is also contentious. There is
billed proportionally to each unit in the management company directors act in also no recognition of the legal difference
development. a voluntary unpaid capacity and do not between ‘completion’ (of the development)
have the benefit of support resources and ‘compliance’ (e.g. with technical
Service charge transparency such as a company secretary. There is building regulations).
Major concerns surround the lack of a marked reluctance amongst apartment There is further dismay that dispute
transparency of the composition of this owners to become directors of their own resolution takes place in the Circuit Court
service charge. A service charge may be low management companies because it takes which is timely and expensive for all
for the first year of a resident’s occupation up time and also a director is open to involved, especially if there is only one
– as little maintenance is required, or to being sued, if for example a fire occurred owner out of an entire development who
entice potential purchasers – but then may and the management company had not has not paid. Parties must, however, state
escalate rapidly much to the surprise of the acted to prevent it Furthermore, it can whether or not mediation has yet been
new owner. Owners can also be frustrated lead directors into direct conflict with attempted.
by what they regard as cosy links between other apartment owners who are still their The Bill is also very focused on
the property agents and the companies neighbours. However, the converse also residential development, whereas recently
they employ to maintain the development: occurs: some owners become directors in much multi-unit development has been
a property agent may own the company order to effect their preferences, which can part of a mixed retail and residential
engaged to landscape or clean. Moreover, incur extra service charges for all owners. scheme.
a large number of apartment owners never
read their leases, which are frequently Multi-Unit Developments Bill Conclusion
sitting in a safe in their solicitor’s office, The Bill has, however, received much
and are without a personal copy for their 2009 support from many consumer and
own reference. As a consequence, there is Into this battleground, late but welcome, professional bodies, but is only one part
often confusion where scrutiny of the lease rides the Multi-Unit Developments Bill of much needed reform. The other arm is
would offer clarity 2009, much of it based on recommendations regulation of the companies employed to
These issues are a source of much of the Law Reform Commission. The aim manage developments, which is being done
antagonism in apartment developments, of the Bill is to increase protection for through the Property Services (Regulation)
with some residents withholding their apartment owners (new or existing) in Bill 2009. Between these two bills (when
service charge payment in protest. blocks of five units or more, and to ensure enacted), apartment living should become
However, threats of suing and forfeiture good governance of the development. In more transparent and hopefully less
of leases for non-payment are expensive the main it does that, ensuring for example stressful.
and usually result in payment of the a minimum of €200 per year sinking fund
service charges owed the day before the is collected from each unit, and, crucially, Dr Lorcan Sirr is a chartered surveyor
case appears before a court, resulting for a clear iteration of cost categories to be and lecturer in property economics
in expensive and non-recoverable legal included in the calculation of the service and management at Dublin Institute of
and debt collection service fees. These charge. Interestingly, it allows the owners’ Technology.

10 Public Affairs Ireland