# Bill to regulate Management Companies for apartment blocks. Overall good bill?



## Brendan Burgess

This was published yesterday and commented on in today's Irish Times. 

The Irish Times -  Friday, June 11, 2010 *Bill to regulate management firms for  apartment blocks* 

Any volunteers to summarise and evaluate it? 

Brendan


----------



## markpb

I'm surprised no-one has jumped on this one yet!

The big points are:
- vesting on incorporation (the developer can't hang onto new, in-progress or completed developments)
- the developer must pay the service charge for un-sold units
- no golden shares, majority votes or other unfair voting covenants
- the owners must approve the budget each year
- house rules are part of the contract
- the district & circuit courts have jurisdiction so it's cheaper to collect unpaid service charges and solve disputes. 
- the court can direct mediation
- CRO can restore a struck-off company within 6 years instead of 1

Overall it's a good bill but there's still some work to do, especially around completion. It should help a lot of existing developments too.


----------



## Brendan Burgess

Hi Mark

It is a bit odd alright. 

There are many questions and complaints on Askaboutmoney about managment companies.

Now people have a chance to influence legislation to solve these problems, and no one apart from you discusses it. 

Brendan


----------



## bigchicken

Does the legislation provide for existing developments?
Our builder still owns more than half the apartments and is still the director of the management company. He is not paying service charges for the apartments he owns (and they are all rented out!). Is he now obliged to pay those charges and if so from when? e.g is back dated or is from today onwards or something?


----------



## DubShelley

I'd be very interested to know the answer to this as well as I have just agreed a payment plan for the coming year. Almost half the units in our development remain unfinished / unsold and I don't believe the developer (also the managing agent) is paying for every single unit! I must scrutinize that budget again!


----------



## markpb

As far as I can tell, he'll be obliged to pay service charges on all completed, unsold units from the date the legislation takes effect. Then, within six months of that date, he'll have to transfer the common areas to the management company. Unfortunately, with the current drafting, if he still has more than half the units, he'll still retain control of the company.


----------



## bigchicken

When does the bill actually become law?


----------



## markpb

It only entered the Dail last week so at best, it will become law in the Autumn.


----------



## bigchicken

Thanks for the info!


----------



## ajapale

Is the Bill available on line? If so could anyone post a link? thanks


----------



## markpb

There's a link to it on our website: [broken link removed]

[broken link removed]


----------



## ajapale

Thanks markpb


----------



## queenlex

markpb said:


> I'm surprised no-one has jumped on this one yet!
> 
> The big points are:
> - vesting on incorporation (the developer can't hang onto new, in-progress or completed developments)
> - the developer must pay the service charge for un-sold units
> - no golden shares, majority votes or other unfair voting covenants
> - the owners must approve the budget each year
> - house rules are part of the contract
> - the district & circuit courts have jurisdiction so it's cheaper to collect unpaid service charges and solve disputes.
> - the court can direct mediation
> - CRO can restore a struck-off company within 6 years instead of 1
> 
> Overall it's a good bill but there's still some work to do, especially around completion. It should help a lot of existing developments too.


 
Does approving the budget suggest the owners will be able collectively to prevent being overcharged for their yearly charges bc thats one of the biggest things stopping me buying an apartment/anywhere with management charges?  It would be good if there was a percentage above with charges culdnt increase for example from year to year...   Apologies if this is covered in the Bill its late and I didnt read it...yet

thanks

Q


----------



## markpb

queenlex said:


> Does approving the budget suggest the owners will be able collectively to prevent being overcharged for their yearly charges



The current draft says that the budget must be discussed at an AGM and voted on. If at least 75% of the owners vote against the budget, the existing budget remains in effect.



> It would be good if there was a percentage above with charges culdnt increase for example from year to year



It's not really realistic to put limits on the increases. If major repair works needs to be done and the sinking fund doesn't have enough to cover it, the service charge must increase. Preventing it in law would just mean the work wouldn't be done.


----------



## Neg Covenant

This appears to be a good bill in that it seeks to address the most common problems with managed estates. Dermot Ahern is to be commended for getting legislation drafted in a difficult and complex area.

The Bill does not address the inequality whereby those who live in managed estates contribute (through taxes, water charges and waste charges) towards the costs of upkeep for those who live in estates which have been taken in charge by local authorities.

This is doubly unfair where service charges are having a big negative impact on the value of properties in privately managed estates (i.e. management company estates). This inequality needs to be addressed.


----------



## shesells

I have a huge issue with the mandatory minimum contribution to the sinking fund of €200 per unit. It's going to bump up our fees hugely and our sinking fund is already healthy.


----------



## markpb

It's not €200 anymore, just "€200 or such other amount"


----------



## ontour

shesells said:


> I have a huge issue with the mandatory minimum contribution to the sinking fund of €200 per unit. It's going to bump up our fees hugely and our sinking fund is already healthy.


  You are probably almost unique by having a healthy sinking fund !
  Why would any apartment owner want to put money away now for a replacement roof in 20 years time? The perspective of many apartment owners is still that apartments are owned for a few years.  IMHO MUD should have made it mandatory for the developer to retain an appropriate professional to produce a schedule of replacement works and projected costs.  This could provide a schedule of sinking fund contributions appropriately spread over the life of the assets. Part of this is covered in Schedule 3 but it is incomplete.

  The act is welcome but it is patching a very flawed system.
  The definition of common areas in the act does not refer to balconies or windows, two areas where there seems to be great confusion.  A much clearer definition of common areas would contribute greatly to providing clarity around what block insurance should cover.  If block insurance was not such a dark art, more insurance companies might compete for the business.

  The assumption that the problem with multi unit developments is passing the care of the development from a nasty developer to a waiting collection of owners with the skills and available time to be directors is flawed.  There is not a queue of people who want to give freely of their time to act as a director of a management company.  The act should make some provision for the compensation of directors to encourage the appropriate skilled people to volunteer. It could be something like a provision that up to 33% of a directors management fees on a single unit could be waived in recognition of their contribution to the management company.

  The act deals primarily with one part of the lifecycle of a multi-unit development, namely the transition from development to owner managed.  It does not deal with the planning, construction, ongoing administration and maintenance in any great detail.

  The fact that the service charges can only be reviewed annually may cause problems.  If one month after the AGM the fire safety system needs urgent replacing to ensure safety, the management company must try to fund this extraordinary expenditure and wait 11 months to add it to the next year's service charge.  An EGM should be able to amend the service charge.

  The direction on the sinking fund would appear to indicate that sinking fund contributions should be a fixed amount per unit rather than a weighted amount per unit.  Not sure if that is intentional or me reading too much in to the wording!

  The act should require that a prospective purchaser is provided with a statement of the sinking fund balance and the projected sinking fund requirement.  It is important that there is a clear value placed on sinking funds for purchasers and sellers.

  I could not see anything in the act about the sale/ transfer of units and the management fees.  Should the seller pay the management fees up to the date of sale and be reimbursed the balance or is it like car tax and it runs for a cycle regardless of when the unit is bought or sold.
  Under the House Rules section there is a note with regard to the actions that can be taken for breaches of house rules: "may recover the reasonable costs of remedying such breach"  This would appear to make it more difficult to apply monetary penalties to discourage breaches of rules. A retrograde step IMHO.  The references to the court system to solve problem would appear to be time consuming and expensive.
  The payment of management fees is also lightly covered.  It should prescribe that owners can pay quarterly without penalty rather than one annual lump sum.  It should also set in place some rules about the application of interest to overdue accounts.

  Reference to the role of the management agent, an integral part of most multi unit development, is fairly light.  Nothing to protect the less vigilant or less experienced directors from getting fleeced by management agents.

  The act tries to put structures in place to process issues rather than avoiding issues.  High management fees are one of the most significant gripes of owners, many of these could be avoided by better energy management, waste management etc.  For example, why is it not compulsory that all windows have to be accessible for cleaning.  Many of these issues link to the planning process which should be changed for future developments.  The act could address development where the developer has yet to hand over to the owners.

  The act is welcome but I fear that multi unit developments in Ireland are a BP style problem and we are looking optimistically at the MUD Act as if it was the little hat that was going to solve the problem in the gulf of Mexico a few weeks ago.  It is right to be positive and optimistic but is this act  up to solving the current and future problems of MUDs?


----------



## markpb

You're dead right about almost eveything you said there! I just have to clarify a few things:



ontour said:


> MUD should have made it mandatory for the developer to retain an appropriate professional to produce a schedule of replacement works and projected costs.



We suggested this to the DoJ and they're considering it.



> It does not deal with the planning, construction, ongoing administration and maintenance in any great detail.



The bill was written by the DoJ and they can't or won't encroach on anything that could fall under the jurisdiction of other government departments. Planning, construction and completion are DoEHLG so they won't touch it.



> I could not see anything in the act about the sale/ transfer of units and the management fees.  Should the seller pay the management fees up to the date of sale and be reimbursed the balance or is it like car tax and it runs for a cycle regardless of when the unit is bought or sold.



There's no need to legislate for this - it's a private matter between the seller and purchaser (and their solicitors). Most solicitors advise purchasers that any debt must be paid by the seller and any payment in advance should be paid by the purchaser to the seller. There's no need to complicate things or even involve the management company in that.



> Under the House Rules section there is a note regard to the actions that can be taken for breaches of house rules: "may recover the reasonable costs of remedying such breach"  This would appear to make it more difficult to apply monetary penalties to discourage breaches of rules. A retrograde step IMHO.



Totally agree, it's a massive step backwards.  On the other hand, jurisdiction for most cases will go to the district and circuit courts so it should be cheaper  than the present to bring people to court. The court can also send both parties to mediation to reduce the costs further.



> Reference to the role of the management agent, an integral part of most multi unit development, is fairly light.  Nothing to protect the less vigilant or less experienced directors from getting fleeced by management agents.



There is a separate piece of legislation making it's way through the Dail at the moment which regulates managing agents. The quango to enforce that legislation, the NPSRA, already exists.



> For example, why is it not compulsory that all windows have to be accessible for cleaning.  Many of these issues link to the planning process which should be changed for future developments.  The act could address development where the developer has yet to hand over to the owners.



Like I said earlier, they can't address those issues because they're out of their jurisdiction. On your second point, a large part of the the act does cover developments which have not yet been handed over.


----------



## ontour

markpb said:


> On the other hand, jurisdiction for most cases will go to the district and circuit courts so it should be cheaper  than the present to bring people to court. The court can also send both parties to mediation to reduce the costs further.



You are not going to bring people to court for putting some old furniture in a bin bay or having a big party on a Saturday night.  Other owners would not stand for funding the cost of employing a solicitor to pursue this and the directors are not really looking to do more work for free.

There are some complex issues between owners and management companies where it is appropriate that they are resolved by courts / mediation however most issues between residents / owners and the management companies relate to silly breaches of house rules.  These need to be 'nipped in the bud' to create the culture or standard in the development that it is not acceptable to act in that way.  Pursuing court cases and mediation does not really support 'nipping it in the bud'.


----------



## DubShelley

Hi All,

Just wondering if anyone know if this Bill is now completely passed into Law? 

Thanks,
Shelley


----------



## markpb

It was scheduled for a vote last Thursday but got postponed.


----------



## Time

It may not survive this government.


----------



## Brooklyn

It's scheduled for completion in the Dáil next Wednesday.


----------



## balkanhawk

What happens after the vote? does it immeadiately become law after the presidents signs it?


----------



## Time

It must be passed by the Seanad first. 


> does it immeadiately become law after the presidents signs it?


It may be subject to a commencement order.


----------



## markpb

Time said:


> It must be passed by the Seanad first.



It has already been passed by the Seanad - it went their first instead of the Dail for some reason.


----------



## Time

It must have originated there so.


----------



## markpb

Here's the schedule of events from from DoJ:



> On completion of Report Stage, the Bill is sent back to the Seanad to inform them of changes made in the Dail. Once that process is completed the Bill is sent to the President for signature and then becomes an Act. The majority of the sections will commence very shortly after signature by the President. A number of
> sections may require regulations to be made and will be commenced when that process is completed.


----------



## markpb

The bill was passed at 11.10 tonight. Some changes were discussed but because the previous debate ran late, they guilotined the debate, accepted all the remaining ministers changes and passed the bill.


----------



## redfedora

thats good news. any idea when it comes into affect


----------



## moyno

I'm hoping some one can make my day and clarify an issue I have.

I live in an own door duplex with no access to 'inside' common areas yet almost half of my service charge or about 410e goes towards: electricity of common halls, cleaning, carpet cleaning,  vermin control (inside), electrical repair and maintenance of common halls, fire safety equipment, access and intercom systems and internal building repair.

The MUD Act states in section 18 that "The annual service charge shall be calculated on a transparent basis and shall be equitably apportioned between unit owners" - does this mean I now have a legal basis for challenging the parts of the service charge outlined above from which I derive zero benefit.


----------



## BazFitz

moyno said:


> I'm hoping some one can make my day and clarify an issue I have.
> 
> I live in an own door duplex with no access to 'inside' common areas yet almost half of my service charge or about 410e goes towards: electricity of common halls, cleaning, carpet cleaning, vermin control (inside), electrical repair and maintenance of common halls, fire safety equipment, access and intercom systems and internal building repair.
> 
> The MUD Act states in section 18 that "The annual service charge shall be calculated on a transparent basis and shall be equitably apportioned between unit owners" - does this mean I now have a legal basis for challenging the parts of the service charge outlined above from which I derive zero benefit.


 
I very much doubt it.  Lift maintenance makes up a significant proportion of the common area expenditure in apartment complexes, but those on the ground floor stil have to pay for such maintenance.


----------



## moyno

BazFitz said:


> I very much doubt it.  Lift maintenance makes up a significant proportion of the common area expenditure in apartment complexes, but those on the ground floor stil have to pay for such maintenance.



There are no lifts. The building I live in are all own door with no 'inside' common areas. The building adjacent to us has a 3 floor common hallway where there are apartments. We pay to maintain their common area.


----------



## Yorrick

Your lease agreement should indicate the level of management fee you pay. This may be based on a percentage of the total square footage. If you are unhappy with this I think that it would require a special motion at an EGM to try and change it.
Of course not all owners may be infavour of a change because if it means you pay less someone else will pay more


----------



## redfedora

i believe the lease usually states an amount and as Yorrick says ts based on a calculation, bedrooms, square footage or a simple percentage ie all ie total budget divided by number of units. I know my lease doesn't mention what paid for out of that amount. the fact the company decide to spend it for various services doesn't come into it. also depending on the development shouldn't larger units pay more in insurance costs then  likewise top floor units should only pay for guttering.

i think if a company went down this avenue it would spend more time figuring out what each person actually had to pay based on services rather than just getting teh budget done and approved. 

I think when the MUD says transparancy of services it means that you are aware of where the money is going when you get your invoice and not just getting a bill each year with a figure on it.


----------



## moyno

Where I live there are 4 types of units: houses, apartments, own door access duplexes and shared access duplexes. 

There are two parts of the budget. 

All units pay a portion of budget A which covers gardening, admin charges, bins etc. 

Only duplexes and apartments pay budget B which covers block insurance, cleaning of gutters and maintaining common areas. I know exactly how much of each charge I pay (such as 100e to clean common areas and about 120e last year to maintain carpets in common areas). 

A house pays about €480 per year service charge while I pay closer to €1000. The only difference between my unit (and all other own door access duplexes for that matter) and a house we need to pay for block insurance and cleaning gutters which comes to €75 per year. 

The bill states that The annual service charge shall be calculated on a transparent basis and shall be* equitably apportioned between unit owners*. It is surely not equitably apportioned in this case. 

Why should a house not pay to clean these common areas and I do when neither of us derive benefit from them?


----------



## shesells

redfedora said:


> i believe the lease usually states an amount and as Yorrick says ts based on a calculation, bedrooms, square footage or a simple percentage ie all ie total budget divided by number of units. I know my lease doesn't mention what paid for out of that amount. the fact the company decide to spend it for various services doesn't come into it. also depending on the development shouldn't larger units pay more in insurance costs then  likewise top floor units should only pay for guttering.



A lease should mention a percentage of the budget rather than a monetary amount. The budget is a development budget and not a unit budget so it's a contribution to the overall costs rather than unit/service specific in most cases.

In our development it's purely a square footage calculation BUT in newer phases of the development (a mix of houses, own door apartments & duplexes and shared entrance apartments) only shared entrance apartments pay for expenses such as common area cleaning, fire alarm maintenance etc as the costs only apply to those units. That's a much fairer breakdown. 

The examples you suggest don't necessarily correlate, guttering issues affect the entire building and the roof which is in everyone's interest to maintain. As the management company insurance is for buildings ie the outer walls, unit size shouldn't matter when it's the shell that's insured? Don't forget insurance costs also include common areas, car parks, communal hallways, playgrounds etc.


----------



## shesells

moyno said:


> The bill states that The annual service charge shall be calculated on a transparent basis and shall be* equitably apportioned between unit owners*. It is surely not equitably apportioned in this case.
> 
> Why should a house not pay to clean these common areas and I do when neither of us derive benefit from them?



It all depends on what's in your lease. Yours seems a little fairer than ours but still not equitable. Unfortunately you signed that lease and are stuck with it. The only way to change the budget structure (and we've taken endless legal advice on this) would be to draw up new leases which would have to have 100% agreements by all the owners. That is never going to happen because some people have a great deal at the moment, get all the services, don't pay an equitable share of the budget, and will never agree to paying more.


----------



## redfedora

shesells said:


> A lease should mention a percentage of the budget rather than a monetary amount. The budget is a development budget and not a unit budget so it's a contribution to the overall costs rather than unit/service specific in most cases..


 
i know that but our lease actually does specify an amount. it also says how that is calculated ie total budget divided by mumber of units which makes no senxse because there are various different types and includes a clause to allow for a modification of the calculation. i assume thats for proper apportionment. 




shesells said:


> The examples you suggest don't necessarily correlate, guttering issues affect the entire building and the roof which is in everyone's interest to maintain. As the management company insurance is for buildings ie the outer walls, unit size shouldn't matter when it's the shell that's insured? Don't forget insurance costs also include common areas, car parks, communal hallways, playgrounds etc.


 
fair point but you propably get where i was going with it.


----------

