A law to protect apartment owners will put them in control of the buildings they live in from tomorrow
TOMORROW is a critical day for the estimated half-million people living in apartment complexes, many of which have sprung up over the past 15 years.
It is the date set by the Multi-Unit Developments Act (Mud), signed into law last January, for developers to finally hand over ownership of all the common areas of apartment complexes/ private housing estates and also the land on which the apartment buildings are built to owners.
From now on, no apartment in a new development may be sold unless the common areas have first been transferred to the owners’ management company (OMC).
Up to now, developers could legally retain control of the management companies and ownership of the common areas until the last apartment was sold – often years after the first apartment was sold. There was no time limit for transfer of control to apartment owners.
This has meant hapless apartment owners having to attend annual general meetings of the management company of their apartment complex year after year and being told by a representative of the developers the identities of the directors of their management company for the coming year.
Most apartment owners also had no control in setting the following year’s annual service charge. Some developers refused to pay the annual service charges on their unsold units, causing other apartment owners further frustration. This will change under the new law.
Apartment owners will now each hold one equal share in the owners’ management company (OMC). They will decide the future of their own developments. No longer will the annual service charge be dictated to apartment owners. They can decide, at the next annual general meeting by a majority of 60 per cent or more, what next year’s annual service charge will be.
The Society of Chartered Surveyors Ireland believes the Act provides a number of solutions and processes for the management of issues which have been challenging apartment owners for more than a decade, including the completion of developments, ownership of common areas and dispute resolution.
Siobhan O’Dwyer, chair of the Society’s Property and Facilities Management Professional Group, said the legislation will have a positive effect as it will put many apartment dwellers in control of the running of their complexes for the first time.
However, she points out that the handover will also place increased legal responsibilities on owners for the effective management and operation of the development. “Under the Act, the Owners’ Management Company (OMC) will be required to have annual general meetings, to provide a service charge budget and circulate it in advance among unit owners and to provide reports on a variety of issues such as fire safety, insurance, contractors and the mandatory sinking fund.”
Because of the privacy of property transactions, it is not known how many developers have already legally transferred the common areas. Neither is it clear how many developers are in financial difficulty, and are either in Nama or in liquidation or in receivership and therefore cannot easily comply with their obligations under the Act.
So what can apartment owners now do to take control of their own apartment complexes and to ensure compliance with the new legal requirements? Firstly, check on the Companies Registration Office (CRO) website that your existing owners’ management company, which may have been controlled by the developers, has not been struck off. If it has been, owners have six years under the new law to get it restored without having to go to the High Court.
A further simple check on the CRO website can confirm the names and home addresses of the directors of the owners’ management company (OMC), after which an apartment owners’ meeting can be convened. If developers have missed the September 30th deadline for transferring common areas to the OMC, owners can formally demand this, after getting a solicitor’s advice.
The fear among estate agents and solicitors is that apartments in developments where the law has not been complied with cannot be sold until the position is regularised. It could be a significant flaw on the title and could leave apartments and houses unsellable.
Nervous buyers and even more nervous banks will want to know why the common grounds have not been transferred to the apartment owners’ management company as required by law.
What if the developers no longer have either the power, the funds or even the inclination now to do so? A serious problem may be exposed when the property market reawakens and these gaps are brought into focus, with developers unable or unwilling to comply with their legal obligations. Seeking a Circuit Court order under the Act may be like suing a “man of straw”. The new law requires that these issues be faced now and not later.
The new law also requires that existing developments have a sinking fund by September 30th, 2012. For new apartment complexes, the deadline is within three years of the first apartment sale. The sinking fund must be clearly identifiable and separate from the ordinary accounts. One problem that the Act cannot resolve is how to fill voids if apartment owners do not step forward to become directors of OMCs. Where the developers’ directors are pushed out, there may be a void. Will there be senough competent apartment owners willing to become directors of their own OMCs?
The new law is an honest and comprehensive attempt to solve the running sore of dissatisfaction in apartment complexes and housing estates with management companies. But laws alone cannot solve all problems between apartment owners and developers or between apartment owners.
Clear as Mud: Why apartment owners are delighted with the new Act
PEOPLE who dont own apartments might find it hard to understand why many who do are delighted with the Multi-Unit Developments Act – or why one man told Deirdre Fox of the Apartment Owners Network that the new law was like a Christmas present. After six years of apartment ownership, most of them as a director of the owners management company of her apartment complex, Fox does.
She and her husband bought an apartment in Temple Gardens, Northwood, Santry, Dublin 9 and moved in in 2005. One day she noticed that the bins werent being collected and went to Fingal County Council. Thats when she discovered that the refuse collection bill hadn’t been paid. Often, owners arent aware that there are problems with their management company until services like this are withdrawn.”
She began to look into the matter, found the owners’ management company and, in time, became one of its directors.
Initially the company included representatives of the developers, but eventually the owners themselves took over running the company. “I started to find out what services are needed to run an 11-block complex.” (There are 260 apartments in 11 blocks of Temple Gardens/Temple Lawns, part of the major Northwood development in Santry.)
Other apartment owners will recognise the problems she found: the management company had no money, service charges hadn’t been collected, the register of names and addresses of owners was incomplete, the owners management company had a debt of about €500,000 and there was no sinking fund for future needs. “I had to start learning. I didn’t understand the amount of maintenance that must be done.”
The Temple Gardens management company got its debt under control and took action to get apartment owners to pay their service charges.
In 2007, she set up the Apartment Owners Network – a group that meets each month to discuss issues concerning owners. The owners in her development didn’t have the problems that beset those in schemes where developers didn’t hand over common areas and kept control of the management companies. The new law will help these people in particular, she says. But Fox also says that the Act will help all apartment owners, ensuring directors provide members of management companies with information yearly about their own companies – for example, how much is in the sinking fund, details on the insurance cover, the service charge budget and so on. “The Act also provides a mechanism to address disputes by means of remedial orders through the Circuit Court.
“It wont solve all the problems that apartment owners have but the Act gives management companies the tools to solve problems,” says Deirdre.
* apartmentownersnetwork.ie
OMC – what does it mean
Owners Management Company (OMC): the company formed by owners of multi-unit developments (apartments or houses). These existed up to now, but under the new law, developers can no longer be involved in them, and OMC members will or should control them from the company’s next AGM. Everybody – whether owner ocupier or investor – who owns an apartment in a scheme is a member of the OMC and will be invited to an AGM to elect directors, who are then legally responsible for managing their block or complex.
Managing agent: the company or individual hired by the OMC to look after maintenance, collecting service charges etc
* Pat Igoe is a solicitor in Blackrock, Co Dublin
