Progress on management company reform too slow

Talking Property:Reform of the law governing management companies is imperative but change is still some way off, reports Pat Igoe

Apartment owners have until April 30th to make submissions on how their apartment complexes are run and on the management companies which operate these complexes.

There are now more than 500,000 people living in apartments in Ireland and the numbers are growing, nowhere more so than in Dublin.

But the law surrounding management companies is in a state of flux, according to the Law Reform Commission.

So it is not surprising that the running of apartment complexes has given rise to concerns that could yet become an election issue.

"It is clear that there are substantial problems in the area which require to be addressed," according to Paul Appleby, the Government-appointed Director of Corporate Enforcement. For apartment owners, lack of information on the role of management companies, and what they do, is partly responsible.

His office would welcome comments until the end of this month on the running of management companies and their agents which run apartment complexes. A "Draft Guidance" has been prepared by his office on apartment complexes to help to maintain the value of developments and the quality of living of their residents.

There are at least 4,600 management companies. Some have been so poorly managed that they have been threatened with strike-off from the companies register.

There is a high degree of inter-dependency between apartments and their owners and occupiers which does not apply in more traditional homes.

This calls for services by the management company, including arranging block insurance policies, cleaning the common areas and arranging general maintenance.

Apartment management companies control huge and growing funds while owning and controlling common areas, including the car-parks, green areas, stairways and corridors.

Many of our growing number of apartment owners and dwellers still find the operating of their complexes unclear and confusing. The entitlements and responsibilities, of owners and management companies, need to be understood and then reformed.

It is a complex legal area, even for solicitors, with intricate rules governing sinking funds and annual service charges. How these charges are calculated can be Byzantine and not very transparent. Hopefully, this will change.

Meanwhile, a Dublin City Council report warned that failure to invest in maintenance and refurbishment in apartment complexes could even mean in some cases that "demolition and redevelopment will be the most economic and effective solution".

Law reform, which will benefit both apartment owners and the developers, is increasingly seen as seriously overdue.

In its recent report, the law Reform Commission stated that reform of the status quo was "imperative".

And the National Consumer Council complained in a report of its own that "we have little or nothing in the way of expressive legislative provisions dealing with the sector on the complex relationships between the participants". They also want urgent changes to the law.

On the plus side, the Government has promised to introduce legislation which will include regulation of companies providing management services, called managing agents. The Bill is at "an advanced stage of development", according to a Government spokesman. It is expected to survive the general election.

Further pressure to reform the law of apartments, which is part of the reform of property law, will be given when the Law Reform Commission publishes its final report on multi-unit developments (MUDs) in the coming months.

Many apartment owners seem to be unaware of their vulnerability. But, even without law reform, progress can be made. The website www.odce.ie would be a good place to start.

Pat Igoe is a solicitor practising in Blackrock, Co Dublin