ARTICLES
Multi Units Developments Bill 2009
At present the Houses of the Oireachtas are debating the Multi Unit Developments Bill. When enacted this Bill will overhaul the existing system and significantly improve the legal protection afforded to the owners of apartments and houses within multi-unit developments. It will have major repercussions for the developers of these multi-unit developments (MUD), which are defined as buildings divided into units, of which not less than 5 are designed and intended for residential use. Some of the provisions of the Bill will also extend to buildings containing more than two but less than 5 residential units.
It is intended to establish a new statutory framework to deal with the transfer of common areas to the Owners Management Company (OMC), the management of such areas, the ownership of the OMC, the effective internal governance of the OMC and a dispute resolution mechanism for such developments. It is expected that it will be passed by both Houses of the Oireachtas before the summer recess.
The major changes effecting developers and owners are as follows:
Transfer of Common Areas
The Bill proposes that no new unit in a MUD may be sold until such time as an OMC is established and the common areas in the development transferred to it. However the beneficial ownership of the common areas will remain with the developer until the entire development is completed. This is to ensure that the developer is not relieved of responsibility for the completion of the common areas as a result of the transfer of ownership of same. Once the development is completed the developer will make a declaration that its beneficial interest is extinguished.
With regard to a MUD which has been partly or fully completed, the developer must transfer ownership in the common areas to the OMC, within 6 months of the coming into operation of the legislation.
The transfer of ownership of the common areas of a MUD does not relieve the developer of responsibility to complete the development. The developer will retain the rights of entry and access onto the common areas in order to complete them, even after he has transferred ownership of the common areas.
The developer shall indemnify the OMC and shall keep in force insurance in connection with the use, occupation and completion of the MUD. It is not specified in the Bill how long such indemnities and insurances need to be kept in place. This may be clarified in the final version of the legislation, but it could be presumed that these must remain in place until such time as the beneficial interest passes to the OMC.
The developer must minimise the inconvenience to the owners of the units and must ensure clean and safe access for the unit owners. The benefit of any guarantees or warranties used in the construction, repair or improvement of the MUD shall be transferred to the OMC on the transfer of the common areas.
COMC
The OMC will be obliged to prepare an annual report and provide a copy to each apartment owner. It must hold an AGM to discuss the report. In all MUD commenced after the enactment of the legislation, the name of the OMC shall contain the words “owners’ management company” in their name, which may be abbreviated to “OMC”. Each unit in the MUD will receive one vote in the OMC.
Service Charges
The OMC must establish a scheme for annual service charges to fund expenditure on maintenance, insurance and repair of the common areas, which must be approved at a general meeting of the members of the OMC, before it is levied. The legislation sets out what categories of expenditure may be included in the service charge scheme.
Each unit owner is obliged to pay the service charge as levied, which must be calculated on a transparent basis and equitably apportioned between the unit owners. The service charge in respect of any unsold units must be paid by the developer (as it is the owner of the unit until it is sold). The Service Charge cannot be used to defray expenses incurred on matters which are the responsibility of the developer.
Smoking Fund
The OMC must establish a building investment fund known as a sinking fund, for expenditure on refurbishment, improvement or maintenance of a non recurring nature of the MUD. Unit owners will be required to make contributions to it, which will be at least €200 per annum or such higher figure as may be agreed by the members of the OMC. The sinking fund must be established within 3 years of the first transfer of a unit in the MUD or within 18 months of the commencement of the legislation, whichever is later. The contributions to the sinking fund shall be held in a separate bank account.
House Rules
The OMC may make House Rules for the effective operation and maintenance of the MUD, and both unit owners and any tenants they might have shall be subject to these house rules.
Dispute Resolution
The OMC, a member of the OMC, a trustee of such a member, the developer or any other person as a Court sees fit, may apply to Court for an order to enforce any rights or obligations imposed under the legislation. The Court may direct that the parties engage in mediation if it might assist in the settlement of the dispute.
Strike off provisions
If an OMC is struck off for failure to comply with the companies law reporting requirements, the legislation provides for an extended period of 6 years (as opposed to 1 year) for restoration to the Companies Register.
This Bill could be on the Statute Book by the end of July. Accordingly we would advise all developers, who have not to date transferred the common areas in their developments to consider doing so as soon as possible. It is important for developers to examine their properties to ascertain if this proposed legislation applies to them, and to take prompt action to ensure that they will be in a position to comply with the requirements of the Bill when it becomes law.
The owners of units in a MUD will have the legal entitlement to receive the various rights set out above and will be able to insist on having the common areas transferred.
If you have any queries please contact any member of our Commercial Property Team who will be happy to assist you.
Commercial Property Team
- Bernie Coleman - bcoleman@orourkereid.com
- Angela McHugh - amchugh@orourkereid.com
- Fiona Kilrane - fkilrane@orourkereid.com