County councils held close to €300m in development bonds in 2020

Construction firms must place money on deposit with councils before carrying out work

County councils were holding in excess of €291 million in so-called development bonds at the end of 2020, according to figures seen by The Irish Times.

Firms carrying out construction work place money on deposit with local authorities, typically in the form of a bond, which is refundable providing no damage is caused to council property during the work.

The requirement is standard practice in most countries but construction firms here claim the process differs from council to council and the deposits can be onerous and time-consuming to retrieve, tying up vital capital that could be deployed on other building projects.

The figures, based on data obtained from the State's 31 local authorities, show Dún Laoghaire-Rathdown took in the highest amount of so-called refundable deposits in 2020 amounting to €43 million, followed by Fingal County Council at €37.2 million. Between them, Dublin's four councils held €129 million in 2020.

The figures show Dublin City Council added €3 million in refundable deposits to its accounts that year to hold €17 million in total, but paid back just €54,000.

Only eight councils – Galway county, Kerry, Longford, Roscommon, Sligo, Clare, Laois and Tipperary – saw the value of refundable deposits decline in 2020, while Limerick and Cork City recorded increases of 57 per cent and 74 per cent respectively.

Figures for 2020 were not available for Cavan, Cork or Monaghan county councils, although in 2019 they held €24.5 million between them.

Greater delivery

"To have almost €300 million of potential capital held disadvantages the sector that could make use of the returned monies to invest in greater delivery of critically needed homes for families and those trying to find more suitable accommodation," said James Benson of the Irish Home Builders Association (IBHA).

“In the absence of a standardised time-limited bond, it makes it difficult for the builder to have any certainty as to when the bond will be released as there is no guarantee as to when the development will be taken in charge.

“Consequentially, our members would report a growing use of cash bonds for developments within local authorities in recent years as the market cannot support the open-ended nature of bonds currently in use,” he said.

Dublin City Council said deposits are held until any reinstatement of services/infrastructure currently in the charge of the council, including roads, open spaces, car parking spaces, public lighting, sewers and drains is completed to the standard required by the council.

“Deposits are returned as soon as a report has been received from the relevant services department, that any works required to reinstate the services currently in charge has been completed,” it said.

A spokesperson for Dún Laoghaire-Rathdown County Council said: "When a development has been completed to taking-in charge standards and an application has been received from a developer for the return of cash security/insurance bond, the planning authority will carry out a final inspection of the development to ensure all snags have been completed and it is at that stage that a recommendation to return the cash security/release the insurance bond is made."

They added: “The length of time it takes to complete this process depends on a number of factors not limited to the following; mix of development, size of development, snags to be completed. It is in this council’s interest that when a development has been completed as per the conditions of planning permission that cash security/insurance bonds are released in a timely manner.”

Cork and Galway city councils made similar responses when contacted.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

READ MORE