Dermot Ahern (Louth, Fianna Fail)

I thank the Senators for their comments and reiterate the ones I often make when I come to the Seanad and which are genuine. Although I do not make this point in a political way, it would be a sad day for the country if the Seanad was to be done away with. In common with the Dáil, it, of course, in need of reform, but strong checks and balances have been built into the Constitution, one of which is an active Upper House. As someone who it is estimated puts two thirds of all legislation through the Oireachtas, my experience has been that, with due deference to the other House, the level of debate and examination of Bills produced by my Department is second to none in this House. Much of that is reflected in the amendments that have been made in the Dáil and Seanad.

One of the big problems I found with this Bill was that a lot of it relates to other Departments and to legislation they have sponsored. We endeavoured to change other fairly complex legislation in the areas of planning, completion, building controls and fire safety certificates, all of which are within the remit and competencies of other Departments and agencies. Ultimately, the Bill is good and it is to be hoped it will assist people living in existing and future multi-unit developments.

The second group comprises a large drafting amendment and other minor adjustments or technical changes intended to clarify the content of the Bill or presentation. Senators will recall that the scope of the Bill was extended during earlier Seanad Stages to include traditional housing estates which have an OMC structure and to cover residential units in a mixed unit multi-unit development. Neither of these categories was included within the scope of the original Law Reform Commission proposals.

These changes necessitated the introduction of the definition of "commercial unit" which now appears in section 1. Section 1 contains a definition of "unit" as meaning a residential unit. The result of these changes will mean that while the Bill as passed by this House makes numerous references to "units", it is not always clear whether such a reference is intended to refer to residential units, commercial units or both. In the interests of clarity the definition of "unit" is deleted in amendment No. 5 and the word "residential" is inserted before "unit" where appropriate in many other amendments.

The same problem arises whenever the word "development" is used. It is no longer clear whether the reference is to a multi-unit development, a mixed use multi-unit development or both. A number of amendments have been made to clarify exactly what is intended. The opportunity has also been taken to improve the text of the Bill in other respects to improve clarity and presentation.

The third group deals with the vexed use of voting rights in OMCs. Senators will recall that the general rule contained in section 14 is that one vote shall attach to each residential unit. Amendment No. 50 clarifies that the section concerned relates to OMCs of developments in respect of which no contract for the sale of residential units has been entered into prior to the enactment of legislation. What about the existing developments with unfair voting structures? I have introduced two completely new sections to deal with problems which had arisen regarding voting rights in regard to existing OMCs.

The first new section, amendment No. 51, deals specifically with voting arrangements in existing multi-unit developments. Subsection (2) provides that the voting rights shall, in line with the general rule in section 14, be one vote per unit and that no other person shall have a vote. However, we know that there are OMCs in which some members have multiple votes or golden shares to which additional votes are attached. To address this situation, subsection (3) provides that any person wishing to exercise more than one vote in respect of a unit cannot do so unless he or she applies for and obtains authorisation from the Circuit Court. In arriving at any decision to authorise multiple voting, the Circuit Court must be satisfied that the applicant has the essential economic interest in the voting right concerned which is required to protect that interest adequately. This amendment addresses, as far as is legally possible, the issue of multiple vote arrangements.

Amendment No. 52 deals with a different situation. It appears that in some OMCs the directors originally appointed by the developer may be entitled to remain directors for life. This is undesirable and the amendment prohibits the practice. Furthermore, in future a director shall not be permitted to have a term exceeding three years in the first instance and in existing cases such a director must relinquish the position within three years of the coming into operation of the section.

In the course of our previous discussions in the House the scope of the Bill was extended to cover mixed use multi-unit developments. As a result of the nature of these developments, the general rule of one vote per unit does not apply. However, provision is made in section 2 to ensure voting rights in such developments are distributed in a fair and equitable manner. To strengthen this provision, amendment No. 86 provides that under the dispute resolution mechanism in section 21, the Circuit Court may consider an application relating to such a development and, where it considers it necessary in the interests of justice to do so, make an order altering the voting rights in the development concerned.

Section 8 provides for the automatic transfer of membership of an OMC on the sale of a residential unit. For this purpose, amendment No. 36 provides that a unit owner must always provide up-to-date contact details to the OMC. Amendment No. 49 clarifies an aspect of section 14(1) and entitlement to vote.

The fourth group deals with Circuit Court jurisdiction in regard to dispute resolution mechanisms. Amendment No. 7 was tabled to avoid possible confusion concerning the impact of the Bill on multi-unit developments which may have different OMCs for different parts of the development. It makes clear that the Bill does not require that only one OMC be established for the development and the provision in the Bill may be complied with if there is more than one such OMC.

Amendment No. 79 broadens the court's jurisdiction by providing that an application may be made in regard to any matter to which reference to making an application under this section is made in this Act. This will ensure applications in respect of voting rights are also covered in section 21. This change gives rise to two consequential amendments. Amendment No. 81 is a technical amendment to section 21(3). Amendment No. 82 inserts a new subsection which provides that where an application comes under the new subsection(1)(b), the court may make an order it considers just and equitable with a view to ensuring the effective operation of the OMC and the quiet and peaceful occupation of residential units in the development.

Amendment No. 80 makes it clear that the applicant under section 21 must indicate in his or her application to the Circuit Court whether mediation or any other form of dispute resolution process has been attempted. I am conscious that disagreements may arise between the developer and the OMC about the extent of common areas to be transferred to the OMC. Naturally, I would hope that such disputes could be settled without recourse to the courts but it cannot be ruled out. In some cases the matter cannot be resolved in any other way. Amendment No. 83 provides that in such a case the Circuit Court will have jurisdiction to make an order to determine the extent of the relevant part of the common areas to be transferred to the OMC.

The fifth group relates to the scope of the Bill. During the earlier debates in the House the scope of the Bill was extended to cover traditional housing estates which have an OMC and residential units in mixed use developments. The Bill included provisions relating to small multi-unit developments containing two, three or four residential units. Amendment No. 8 contains a small technical change in regard to developments comprising two, three or four units.

Schedule 1 specifies the sections of the Bill applicable to such small developments. Amendments Nos. 96 to 98, inclusive, extend the list of sections in Schedule 1 to include sections 18 and 19 and 26 to 29, inclusive. In addition, the three new sections contained in amendments Nos. 51, 52 and 69 will also apply to such developments. Amendment No. 29 clarifies the scope of section 2(2) which applies those provisions of the Bill specified in Schedule 2 to traditional housing units and estates with OMCs. The new wording is intended to make it clear that the sections included in Schedule 2 will apply to such housing estate developments whether they contain detached, semi-detached and terraced houses or a combination of any such units.

Amendments Nos. 99 to 102, inclusive, amend Schedule 2 to apply sections 4, 6, 9, 11, 12, 18 and 19 and the new section contained in amendment No. 69.

The four amendments in the sixth group deal generally with the issue of service charges and sinking funds. Amendment No. 53 provides that, where a sinking fund is established, the owner management company must outline the amount of money in the fund and give details of how contributions to the fund are calculated in its annual report to members. The purpose of amendment No. 58 is to permit an owner management company to set an initial service charge before any residential units are sold. It also provides that in setting the initial service charge the company must have regard to the methodology and items of expenditure listed in section 16(3). Amendment No. 62 is essentially a drafting amendment to clarify exactly what is meant by expenditure of a non-recurring nature. It is the type of expenditure funded from the sinking fund. It appears logical to me that the provisions of section 17 should apply to traditional housing estates that already have sinking funds in place. Amendment No. 69 inserts a new section into the Bill to achieve this objective.

The seventh group of amendments concerns the issue of house rules. Concern was expressed that such rules could be introduced for the benefit of some apartment owners but would have an adverse impact on other residents. Amendment No. 74 amends section 20(3) by providing that house rules must be consistent with "the objective of the fair and equitable balancing of the rights and obligations of the occupiers and the unit owners" of the development. Amendments Nos. 75 and 78 are designed to ensure owner management companies in new developments will be allowed to make house rules governing the operation of such developments prior to the sale of units. This will allow potential purchasers to have sight of any such rules before they conclude contracts to buy apartments in such complexes.