Over the past number of years, Ireland has seen a huge rise in the number of apartment complexes being built, and this has brought with it a number of difficulties, particularly in the management of these new developments.

The rise in the number of apartment developments has been mirrored by a rise in associated problems. Examples include the lack of transparency of the roles of developers, owners and property management agents, excessive administrative control by management companies, developers retaining control of the management companies after all apartments are sold, AGMs held with inadequate notice, increasing annual service charges not explained and no long-term building investment funds (sinking funds).

But there is some good news for apartment owners: the Law Reform Commission has prepared a report on multi-unit developments containing recommendations for reform and a draft Multi-Unit Developments Bill. Some of the recommendations for new and existing developments are highlighted below.

Recommendations for New Developments

  • In developments of more than five units, the developer would have to incorporate an owners' management company (OMC). The report suggests that the developer would be required to transfer legal title of the development to the OMC and must register the title with the Land Registry/Property Registration Authority before any apartment sale was completed. The OMC holds the multi-unit development in trust for the developer until the scheme is completed. This would provide more clarity.
  • Core covenants (mutual agreements) would have to be agreed between developers, unit owners and the owners' management company.
  • Each apartment owner would have one vote in the OMC.
  • The purchaser would pay 5% of the purchase money to the OMC, which holds this sum in trust for the developer until completion is certified. This is designed to encourage developers to complete the common areas of developments and would also encourage a system of orderly snagging before hand-over of the retained sum.
  • An AGM to be held annually with 21 days' notice given to apartment owners, to be held reasonably near the development and at reasonable times.
  • Property managing agents (due to be licensed and regulated by National Property Services Regulatory Authority shortly) would be prohibited from having excessive administration control over the OMC (for example, being company secretary of the OMC).

Recommendations for Existing Developments

  • An AGM to be held annually with 21 days' notice given to apartment owners, to be held reasonably near the development and at reasonable times.
  • All developments to have schemes for service charges in place with adequate information on the breakdown of these charges.
  • All developments must provide specified financial information to apartment owners, including how annual service charges will be spent in the next year.
  • All existing developments to put a scheme for building investments funds in place within five years of the legislation coming into force. The commission wants to stop developers from using the investment funds to cover snagging.
  • Existing developments to be allowed to convert to new OMC system.
  • Core covenants must be agreed between developers, unit owners and the owners' management company.
  • The Small Claims Court could deal with non-payment of service charges or building investment funds up to €3,000 (this would also be applied to new developments).
  • The Circuit Court could make a 'remedial order' to allow rescue and rehabilitation of a multi-unit apartment development (for example, if company goes into liquidation). This is also applicable to new developments.

While not incorporating all the recommendations in the Law Reform Commission report, the draft Bill is a welcome development and will hopefully result in the implementation of new legislation in this area.