Oireachtas Joint and Select Committees
Tuesday, 1 December 2020
Joint Oireachtas Committee on Housing, Planning and Local Government
Construction Defects: Discussion with Construction Defects Alliance
We are here to discuss construction defects. We are joined in person by Ms Kath Cottier, chair of the Construction Defects Alliance. We are joined remotely by Ms Deirdre Ní Fhloinn, barrister-at-law, Mr. Stephen Scott, building surveyor, and Mr. Des McCabe, director of the Apartment Owners' Network. Our other remote witnesses are Ms Ciara Holland, Mr. Barry Mulhern and Mr. Dónal Nugent, Construction Defects Alliance.
Members have been circulated with the opening statements as well as briefing material received from Mr. Scott and the report of the previous committee, entitled Safe as Houses? A Report on Building Standards, Building Controls & Consumer Protection.
The witnesses are all very welcome. I will first ask Ms Cottier to make her opening statement and then ask Ms Ní Fhloinn for her contribution. Members will then be invited to address their questions and we will try and keep it to five minutes as usual. For the information of witnesses, our five-minute slot is for the question and the answer. If we stick to that, we can generally get round the room two, maybe three, times.
Witnesses attending the committee room are protected by absolute privilege in respect of the presentations they make to the committee. This means that they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Chair to ensure this privilege is not abused. If witnesses' statements are potentially defamatory in relation to an identifiable person or entity, therefore, they will be directed to discontinue their remarks. It is imperative that witnesses comply with any such direction.
For witnesses and members attending remotely, there are some limitations to parliamentary privilege and as such they may not benefit from the same level of immunity from legal proceedings as a person who is physically present. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons, or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against persons outside the House or an official either by name or in such a way as to make him or her identifiable.
The opening statements submitted to the committee will be published on the committee website following the meeting. I invite Ms Cottier to make her opening statement.
Ms Kath Cottier:
I thank the committee for having me here today. I am director of housing services for Clúid Housing Association as well as chair of the Beacon South Quarter Owners' Management Company and the Construction Defects Alliance. The reason I have taken up these roles is to use Clúid's property expertise to help resolve an issue that is crippling many ordinary households and negatively affecting the reputation of apartment living, which is a key component of long-term planning for our urban centres.
On behalf of the Construction Defects Alliance, I thank the committee for giving us this opportunity to address the real-life experience of homeowners who are having to deal with structural defects in their homes which have arisen through no fault of their own but for which they have been left holding the baby. We hope that the committee's deliberations today will contribute to the delivery of the relevant commitments in the programme for Government.
The Construction Defects Alliance is an informal grouping, which has the support of the Apartment Owners Network, AON, currently involving hundreds of owners and owners' management companies, OMCs, from over 80 different developments around the country which are affected by construction defects. We also have active involvement from some of the professionals who are working with the owners and OMCs concerned. Our panel is made up of Mr. Dónal Nugent, Mr. Barry Mulhern and Ms Ciara Holland, who are owners of apartments that have experienced defects, as is Mr. Des McCabe from AON, and Mr. Stephen Scott from Scott Murphy, who is managing the remediation of many defective apartment developments.
The alliance’s campaign has one very simple aim, which is the implementation of this committee's Safe as Houses? report. Most of the members of the alliance own homes in apartment developments, the majority of which were built during the Celtic tiger era. However, some predate that era and some defective homes were also built after 2008.It is worth bearing in mind that Central Statistics Office, CSO, data shows that over 131,000 apartments were built during the period 2000 to 2008, just before the financial crash and deep recession which hit this country. We simply do not know how many are affected by defects. Indeed, because of the consequences in terms of potential remediation and insurance costs, loss of property value and difficulty in selling their homes, many homeowners simply do not want to know if their apartments or houses are affected by fire or other defects. From a health and safety point of view, this is an appalling vista. We cannot continue with a hear no evil, see no evil approach to the issue of fire and other defects. We do not even have to mention Grenfell Tower to see to where that road leads. Earlier this year, Eamon O'Boyle, fire engineer and one of the expert witnesses before this committee in 2017, wrote in the Engineer’s Journal:
Fire safety of apartments is one of the many ‘legacy issues’ to be faced by government and it cannot be long-fingered until there is a tragedy.
It is essential that high-risk buildings be identified, and the initial focus should be on buildings where people sleep overnight. These include apartments, hotels, hospitals, dormitories and student accommodation blocks.
It is important to point out that while a review of high-risk building was undertaken at Government’s behest post Grenfell, it only covered buildings over 18 m high so the vast majority of multi-unit developments in Ireland were not part of this review’s remit. In real terms, the process of identifying high-risk buildings has yet to be carried out. In terms of the metrics of the problem in Ireland, Eamon O’Boyle estimates that 75% of Celtic tiger era apartments are affected by fire defects which would mean, based on CSO statistics, that almost 100,000 apartments have legacy defects. The cost of remediation is unknown but, based on experience, it can vary between €5,000 to €60,000 per apartment, with €15,000 seeming to be the median cost.
It is important to step back and look at the nature of defects and they largely fall under two headings, namely, fire and water ingress. The fire issues arise because insufficient fire stopping was put in place during the construction process or it was put in incorrectly. This is a critical issue for people living in multi-unit developments as fire stopping is the material used to compartmentalise one apartment from another and from the common areas and to impede the spread of fire if one breaks out. Fire stopping allows a conflagration to be tackled at its seat and also facilitates an orderly evacuation of the affected premises. If there is insufficient fire stopping in place, then fire and smoke spread more quickly than they should, which makes the task of containment and safe evacuation much more hazardous, or worse.
The problem with fire stopping is that it is hidden behind walls, around doors and in between floors and ceilings. Therefore, nobody purchasing an apartment can see whether it is in place or not and they take the fire certificate at face value. The issue of inadequate fire stopping generally comes to light when people smell smoke or cooking fumes from another apartment, hear louder noises than they should, see light coming through from someone else's home or experience water breaking through from the common areas or another apartment. By the time these issues come to the fore, the builder, developer or both, are long gone.
Rectifying fire stopping issues requires taking down plasterboard, lifting floors and ceilings, going behind service shafts and risers and putting in additional material. It is time-consuming and costly work. The only way one can ensure fire stopping is properly installed in the first place is by having on-site building control oversight and supervision at intervals during the construction process. Once the building is completed, it is too late and, of course, the State has failed to ensure the level of building control required to capture fire and other defects was in place.
As public representatives sensitive to their constituents’ concerns, I am sure members are aware that apartment defects cause the owners involved huge stress because of the financial burden, considerable worries about the spectre of fire safety and also impacts on the relationships between owners, their OMCs and the agents acting on behalf of the OMCs, all of which undermines the very idea that one’s home is a sanctuary. Some of my colleagues who are online will attest to that later in these proceedings.
I want to address the worries over fire safety first. As members can imagine, all the talk over recent years about Grenfell Tower has had a profound effect on people living in properties that are not secure from a fire perspective. It is a well-founded worry. There have been eight fires in recent years in Beacon South Quarter with some apartments being absolutely gutted. We know people died as a result of a fire in Verdemont, Blanchardstown. A terrace of houses in Newbridge, County Kildare, was destroyed by fire in the not too distant past and considerable damage was done to the Metro Hotel in Ballymun when people were resident in it.
It is because of this threat that OMCs are obliged to act to remediate fire defects and to take additional fire safety measures while undertaking remediation works, including employing additional fire wardens on a 24-7 basis as well as installing additional fire alarms. All this costs money and leads to hikes in annual service charges on top of mortgage payments, massively increased insurance costs and the remediation levies.
On the financial side, OMCs need to get in as much money as possible upfront to get the remediation works done. There is no point in starting works without the funds in place to pay the contractors concerned. The need to get money upfront places huge strains on owners who must find the resources to pay the levies, averaging €15,000, in addition to all the other costs.
Coming back to the issue of the financial burden being experienced by homeowners, it is only fair to say it is placing huge stress on many people and we know some are really struggling to pay their levies. Another aspect of this stress is that many homeowners are worried about the impact on their lenders and insurers if and when they find out about the defects, as well as the real concern that they may have difficulty selling their property. Experience is that apartments affected by defects only change hands on a cash basis as financial institutions will not lend for their purchase. These worries are why so many of the people involved in the alliance are happy to talk to their public representatives but will shy away from the media, and it is why many of them are sitting in the Gallery and not before the committee this morning.
The various stresses experienced by homeowners are also, in turn, impacting on relationships within the different developments. For example, the agents of OMCs are tasked with collecting the levies. This is not easy and can sometimes involve legal proceedings, which are not pleasant for all concerned. In other cases, the OMC directors, who are only volunteers after all, have to levy sums against their neighbours. They are deeply unhappy about this and it causes much difficulty for relations. Let us remember that all this stress and strain arises through no fault of any of the people involved, yet they are left to mop up after other people’s failings.
The commitments in the programme for Government to examine the issue of defective housing in the first 12 months having regard to the recommendations of the safe as houses report is the first serious effort by Government to address the matter of legacy defects, and that is why the alliance warmly welcomes it.
As members will be aware, the Government has proposed to establish a working group to conduct this review with a specific focus on legacy defects. We are particularly pleased that the programme sets a time limit on this review process, requiring it to be completed by July 2021. Adherence to this timeframe is crucial so that whatever recommendations come from the working group can be put to Government in sufficient time that they can be taken into the calculations for budget 2021.
We understand from what the Minister said that the Construction Defects Alliance and the Apartment Owners’ Network will have one representative each on the working group and we look forward to playing our part in this process. We also know from our ongoing dealings with the Department and the Minister that they are in the process of appointing a chairman and once this is completed, the rest of the appointment process will be undertaken.
Members might recall that at the outset, we said our aim is to campaign for the implementation of the Safe as Houses? report. As members know, this reports sets out a range of options for tackling the costs of legacy defects, including a redress fund to be paid for by the State, the construction and insurance industries, as well as access to cheap loans and tax breaks. The alliance's preferred solution is a redress fund and there is a precedent in terms of mica and pyrite. We have had to address the loans issue publicly because it has been raised with us by various Oireachtas Members and political parties.
It is important that committee members and the Government are absolutely clear on our position. Access to cheap loans on their own, whether with no interest or very low interest, would not be acceptable to the Construction Defects Alliance as a solution for tackling the costs of remediation. While they would ease the cash flow pressure on OMCs and owners, they would still leave the owners 100% on the hook for remediating defects they did not in any way cause. The very least the alliance would accept would be a combination of soft loans and tax breaks or a financial equivalent.
It is also important that everyone is clear that the financial solutions which arise from the working group process would have to include a retrospective element. It is a fundamental principle for us that apartment owners who have done the right thing and have taken on the burden of paying for remediation works have to be included in whatever scheme is proposed by the Government.
I hope this opening statement sets out in broad terms the issues facing tens of thousands of homeowners around the country, in particular the stress and strains that the thing they most dreamed of, namely, having a home of their own, is now causing them and their neighbours. As I said earlier, my colleagues can and will outline much more eloquently the nature of this lived experience during the questions and answers to follow.
It is critical that the committee and Government are aware that the full ramifications of the defects crisis in our multi-unit developments have yet to unfold. If OMCs and apartment owners are left unassisted in the process of tackling legacy defects then this problem has the potential to completely undermine the national strategy for high density living. The public must have confidence in apartment living and for this to be the case, they need to know that the State will intervene to ensure that high density residential accommodation works for all concerned.
I again thank the committee for asking the Construction Defects Alliance and the Apartment Owners Network to appear before it this morning and we look forward to engaging with members' questions.
Ms Deirdre Ní Fhloinn:
I thank the Chairman and committee members for the invitation to address them today on residential building defects and proposals to help homeowners with defective homes.
I am a practising barrister specialising in construction law and was formerly a solicitor specialising in commercial and residential construction and infrastructure projects. Last year, I was awarded a PhD from the law school at Trinity College Dublin on the subject of liability for building defects. My research was prompted by the many thousands of Irish houses and apartments built during and since the Celtic tiger years that have been found to have serious defects. From my professional experience, and as is clear from media coverage of developments around the country, there are many apartment buildings that have serious defects, including deficiencies in fire-stopping, inadequate separation between units and water ingress. Some of the problems that have emerged with houses include pyrite damage, mainly in Dublin and the surrounding counties, and the failure of brickwork caused in part by muscovite mica, which is particularly acute in counties Mayo and Donegal.
The major findings of my PhD are that there are significant substantive and procedural deficiencies in the system of legal remedies for housing defects. By substantive, I mean that a homeowner will typically find that the original building contract with the builder of their home will often not provide him or her with a remedy. The builder may be insolvent. If the homeowner is not the first owner of the apartment, he or she may not be able to rely on that contract. There is a long-standing practice of builder-developers setting up a different limited company for each development that they build. The money comes through the developer and the building company is just a shell. Even if the owner can sue the builder, the builder is unlikely to pay for the defects in the home. Builders are also not required to carry insurance in respect of defects. Instead, homebuyers are steered towards latent defects policies that have significant limitations on what is recoverable. The main home defects policy in the Irish market does not cover pyrite damage, for example, which is one of the reasons the pyrite remediation scheme was set up.
Homeowners also face many hurdles in securing a remedy even if they have a good legal case. The building contract they signed may have very unfair terms in it. It is likely to have an arbitration clause in it, which is a process the homebuyer may find difficult, and that usually will not involve other parties who might also be responsible for the defects, such as architects or engineers.
Litigation, if available, is extremely expensive and the value of the home defects would often put claims in the monetary jurisdiction of the High Court, which is a very slow and expensive process.
Some attempts have been made to hold receivers responsible for building defects. In two recent cases, the High Court and the Court of Appeal held that receivers were not bound by the obligations of developers to complete multi-unit developments in accordance with planning and building control requirements. This will present further obstacles for management companies and apartment owners to obtain any assistance with the costs of fixing defects. There are many examples throughout Ireland of receivers being appointed in respect of developers’ borrowings to sell unsold parts of developments, including commercial and apartment units, and realise the lender’s security. If the receiver is not liable for any repair costs in respect of the defects in the development, the apartment owners will be left to pay the costs of fixing the defects.
The other major finding of my PhD thesis is that the building control system failed to prevent the occurrence of widespread building defects in Ireland. In my opinion, the system was designed to be a light-touch regulatory system that appears strong but that has never been enforced in a robust or consistent way. The building control system, which forms the backbone of Irish construction regulation, operates without oversight from an external building regulator and is not enforced consistently, in contrast to other regulated industries. Failure to give proper consideration to the appropriate regulatory model for construction led to design failures in the system that have compromised its legitimacy and effectiveness since its introduction in 1991. Insurance models in respect of building defects are limited and unsatisfactory, which will undermine any law reform to improve remedies.
These problems are not unique to Ireland. In many other jurisdictions, there are licensing and registration requirements, insurance obligations and regulatory powers that are visible and enforced. In Ireland, there is no licensing or registration requirement for construction work and the regulatory system operated by local authorities is under-resourced and underfunded compared with other sectors.
There have been some developments in the UK since the Grenfell Tower fire which will be of interest to the committee. Following this fire, the Irish Government established a fire safety task force which reported in 2018, but which failed to address the underlying causes, both in industry practice and in regulation, that have led to widespread residential defects, including fire safety-related defects. There has been a comprehensive review of building regulations and fire safety in the UK in the two reports of the Hackitt review, which was initiated following the Grenfell fire and resulted in the 2020 building safety Bill. This proposes a regulator for building safety within the UK Health and Safety Executive, responsible for ensuring the safety of persons in all new multi-occupancy buildings in England over 18 m high. The Bill also provides for the establishment of a new homes ombudsman, which had been recommended by a parliamentary committee some years back, and makes provision both for the publication of a code of conduct for developers as well as criminal liability of officers and managers of bodies corporate for offences committed under the Act.
I am happy to deal with the committee’s questions.
I thank Ms Ní Fhloinn. Some of the witnesses will be familiar with this committee, having appeared before us in 2017 and 2019. Many members are new to the committee and this is a good opportunity for us to engage with the witnesses again. When we were discussing our work programme and themes for the committee, this issue was high on the agenda for many members to follow up. I welcome, as outlined by Ms Cottier, the commitment in the programme for Government to address this issue and the establishment of the. We can discuss that later.
I thank the witnesses for their presentations and submissions. As the Chairman said, as new committee members, we were very keen to address this issue early in our work programme. It has to be every homeowner's worst nightmare to find, having finally bought a home, that the security of the property has been undermined, not knowing how badly it has been undermined or how much at risk it is. I am a former city councillor and I am also from Dublin city. It is very important, not just for the individual homeowners, that this issue is urgently addressed by the Government.
For the city's development and urban development generally we have to take real and decisive action to re-establish some level of confidence in apartment living in dense residential high-rise buildings and offer some security to homeowners and society at large.
The Government has committed to quite a tight timescale. It aims to have the working group established and for it to have reported by July of next year so that the work can then feed into the budget of the following year. I presume that the groups are ready to engage with that process. It was mentioned that they have already had discussions with the Minister. I would be interested to know what feedback the Minister has given it in terms of the timelines. I suggest that the committee write to the Minister after this meeting and advise him that we have met and are seeking the urgent establishment of a working committee so that the timelines in the programme for Government can be met.
I can understand why homeowners do not want to self-identify their properties as being at risk of fire or being affected by other safety issues. The establishment of some form of register of affected properties will be critical to dealing with this issue so that there is transparency. Homeowners will only be willing to do that when they know there will be support for them in responding to the issues identified. When the witnesses reply, perhaps they could talk about how ready homeowners are to participate in that process and if it is likely that some form of register of affected properties can be established.
Until we can quantify the legacy issues, we cannot deal with them and have some form of redress. I accept the point Ms Cottier and the members of the Construction Defects Alliance are making on the redress having to remove the burdens from, rather than adding an additional burden to, homeowners. The focus of the working group needs to be on ensuring that all future construction works avoid the mistakes of the past, that controls are put in place and that certification and regulations are robust and enforced.
Ms Kath Cottier:
It is a tight timeframe. The key to that is defining the scope of the committee. That has been done by the Department. One key aspect is identifying the scale of the problem. We are happy with the make-up of the committee, which includes people with lived experience from the Apartment Owners Network and the Construction Defects Alliance. It also includes legal experts and construction professionals. The make-up of the committee is important, as is its scope. The scope is about construction defects rather than broadening the scope, which will be vital to ensuring that the committee delivers its report within the timeline specified.
In terms of self identifying, over the past few years more people have been willing to come forward because they are not feeling as alone. Having a forum like the Construction Defects Alliance means that people can come forward anonymously and there is a voice for them. We have to remember that, in the context of my comments on relationships, there is never a uniform situation in an owners' management company where people want to out the situation they are in. That was our experience in Beacon South Quarter. There was a lot of animosity when people chose to go to the media but others did not want that. That caused a severe breakdown among neighbours and in the owners' management company.
The more this conversation is had in the public sphere and as the committee progresses and we keep a close eye on that, we will find more and more people will come forward and outline their experiences.
Ms Kath Cottier:
That is one of the things in the programme.
It is one of the definitions or scopes of the working group.
Much is being done but it is about collating it. Mr. Stephen Scott is working on a number of schemes and there are people who are aware of this issue. The more professionals are involved, we will begin to see a scope of work materialise. I do not want to underplay how difficult that is. The reality is that until one starts opening up walls, one cannot always check on the scale. One might know a development is affected. Mr. Stephen Scott might be able to give more information about that.
Mr. Stephen Scott:
On the issue of quantification of costs, my practice is involved in a large number of cases, not just in Dublin but in Cork, Shannon and the west. As has been discussed among the surveying fraternity, there could be a role for engaging with professional bodies, such as the Society of Chartered Surveyors Ireland, the Royal Institute of the Architects of Ireland and Engineers Ireland, to canvass their members without necessarily having to identify specific apartments or get the consent of owners. This would give some sense of the number of schemes which have been remediated and their costs and those which are currently under investigation and their likely budget costs. That would be some mechanism of getting a sense of what the problems are to date, even though there are other schemes which have not been inspected yet.
I thank the witnesses for the two presentations.
The issue of latent defects is a scandal. The committee has to understand the extent of the scandal. The previous committee did significant work and agreed unanimously on a good report in 2017, which set out clearly what we felt the Government needed to do in this area. It is not just bad builders and developers that caused the problems which the homeowners experienced. They were able to do that because the regulatory regime was weak.
If one goes back and reads the Dáil transcripts from the late 1980s and early 1990s when the regulatory regime was introduced, a small number of Deputies said not to allow this form of self-regulation to be introduced or, at a future point in time, homeowners would be left with huge bills and no legal protection. The Oireachtas was warned when the old system was being passed into legislation and ignored that advice. Unfortunately, the correct predictions of that small number of Deputies came to pass.
It is regrettable that the previous Government, despite the fact that we had cross-party unanimity in this committee, held the line that latent defects was a private matter between purchasers and sellers, meaning the Government had nothing to do with it. Conversely, I welcome the announcement by the current Minister and the content of the programme for Government for this issue to be examined. The working group is a good development. We will all want to play constructively any role we can in supporting that.
I am less optimistic about the timeline because it is ten months before recommendations will be produced. Much work has been done on this, both by this committee as well as the Pyrite Resolution Board. I am even more concerned that we are not looking at any redress into 2022. People have bills to pay and insurance policies on their apartment blocks which are being withdrawn but they do not have the money to pay for that. That is affecting constituencies across the country.
It is also important to acknowledge that this is not only a Dublin issue. There are currently live latent defects in at least five counties across the State. It is a rural and urban issue and one affecting all of the State in different ways. Accordingly, the quicker we can get a good scheme in place, the better.
I am also concerned that the programme for Government refers to accessing low-cost finance.
Large numbers of people with latent defects will not be able to sustain debt and, therefore, the issue of grant aid directly from the State and industry, as well as tax relief, has to be on the agenda, and I will actively push for that.
For members who might not be as familiar with this or may not have come across it in their constituencies, will Mr. Scott talk us through how defects occur? What are the more common kinds of defects and what kinds of costs are there? I do not mean at the extreme end, because that can be €60,000, €70,000 or €80,000, but the more common costs.
My next question is on behalf of the various homeowners in a number of developments who have appeared before us. They have previously expressed to the committee their concern that the developers directly responsible for the defects in their properties subsequently get planning permission to build new developments. Does Mr. Scott have a view on that? Without asking him to comment on individual developers, will he share some of his views on the law reform that may be required or how it makes him feel personally?
Ms Cottier might confirm whether there is yet a timeline from the Minister as to when the committee is going to start meeting. Will it be this year or is it unlikely to be until next year?
Mr. Stephen Scott:
To respond to the question about how these defects have happened, every development or dwelling in a multi-unit scheme has to be a self-contained fire compartment. The regulations stipulate the required level of compartition between units. Generally, a fire in one unit should be contained for one hour within the walls of that unit before it spreads anywhere else, which is to give time for the occupants to escape and for the fire brigade to deal with it. The requirements for fire resistance increase depending on the height and complexity of the development, such as the number of escapes. In some areas, fire protection could be required for up to two hours. Achieving that requires a particular form of construction, with multiple different products, such as plasterboards, blockwork, brickwork and so on.
At the outset of the construction process, a fire certificate is prepared by a fire specialist, who outlines the requirements for that specific development, dictated by the height of the development, the number of escapes and lifts, the fire-fighting systems and so forth. That document is approved by the fire officer and handed to the design team, who then take responsibility for implementing a design that will satisfy each of those requirements. They will decide on the construction of the walls, the door types and so on that will, supposedly, achieve those fire requirements. That is a relatively office-based or desk-based system.
The plan is then handed to a contractor, who has to construct it. In doing so, he or she will employ various specialists to supply and install the material. One problem is that during the installation, multiple firms or trades could be working on a particular item or area of the apartment. There might be electricians following plasterers, for example. Multiple pairs of hands are on the construction. My sense of what happened during this period is that while, invariably, the fire certificate was correct, sanctioned and signed off by the relevant authority, and while the design in most cases was probably compliant, when the process went on site, with the constructing of the doors and the risers that pass through the apartment, that was where a breakdown in the process occurred, in terms of both the knowledge and understanding of those involved as to what they were doing. In the majority of cases we see when we go into developments, we can see the fire products that have been used. The correct plasterboard, fire compound and floor levels may have been used, but they may have been installed incorrectly and may not meet the requirements.
There are gaps, holes and openings. There was obviously some sense of doing the right thing by the contractor, using the materials that had been specified, but how that was put together was where there was a failure. That points to a failure of the inspection, monitoring and sign-off regimes. Because of all these different components and moving parts, that is where it fell down, in my view.
On the costs of units, we have been involved in schemes where costs for apartments have been anywhere between €10,000 to €20,000 per apartment. We have had schemes where apartment owners have had to deal with the internal aspects of their apartments only, to do with entrance hallways and so on. They have been at the lower end, at €5,000 or €6,000 per dwelling. That is a broad assessment of what the costs are.
On developers subsequently being given consent to go on and build-----
Mr. Stephen Scott:
-----if I was an apartment owner, I would be highly aggrieved if I saw that somebody who was responsible for the construction of my development that was inadequate or did not meet statutory requirements was then given consent to build another scheme without addressing the first issue. That is a personal view.
I thank Mr. Scott. We are out of time on that section but we will return to the timeline on the committee, on which a question was put to Mr. Scott, and we will return to the planning Act, that section that relates to previous planning.
I thank Ms Ní Fhloinn, Ms Cottier, Mr. Scott and everybody else who has helped shape this discussion this morning. This is an important issue and I am pleased that we have strong commitments in the programme for Government on bringing forward law reform to improve the legal remedies for home owners dealing with defects, to assist owners of latent defect properties by identifying options for those impacted and to address low-cost, long-term finances.
Construction defects are serious issues and affect tens of thousands of home owners in 80 different developments across the country. I am acutely aware of that because I am one of those people living in one of those developments. Yesterday, I packed up my home, laid down dust sheets and temporarily moved out to facilitate fire safety works. As we speak, there are builders in my home dissecting our ceilings to make the apartment I live in safe. Those works are urgent, essential and will counteract fire safety construction defects.
I am a renter so, while fire safety has been of personal concern to me since I first learned of this, I have not had the financial burden of paying upfront to rectify these defects. My landlords and my neighbours have and that is wrong. They purchased their apartments on the understanding they were finished to the highest and, most important, safest spec. As Ms Cottier said, defects like these have come to have a significant impact on homeowners through no fault of their own. It is clear that the regulation or self-regulation of the construction industry has failed them and, therefore, it has failed us as a nation. We saw that when it came to pyrite and we see it now when it comes to fire safety, one of the most important aspects of construction.
Homeowners across the country have acted as quickly as they could by saving, borrowing or investing to make their home safe. I agree with Ms Cottier that whatever financial supports we put in place to support homeowners in this situation need to be retrospective. The people who acted early are the people who did the right thing at the earliest possible time, at huge personal cost and inconvenience. The working group is the best way of getting under the hood of this issue, not just in terms of shaping the redress scheme, but also in terms of making recommendations on how to avoid future construction defects. This Government has committed to delivering record levels of homes across the country in the coming years.
It is imperative we make sure those homes are built to the safest specification. I would like to learn more from the witnesses about the redress scheme they propose, how soft loans and tax breaks would work, the likely cost of such a scheme and how it would be funded, and the role insurance companies would play in funding works as we move forward and also retrospectively.
Ms Kath Cottier:
We advocate a redress scheme similar to the scheme for homes affected by pyrite and mica. We call not only on the State for a response but on people involved in the sector to be able to do that. Regarding tax breaks, everything can be vouched. Everything can be properly calculated in terms of the costs involved and also service charges and levies that are applied. There are ways in which tax breaks can be done effectively.
On soft loans, we know there are Government agencies which can give very low interest loans. That is not our preferred option because it does not give financial release or remove the financial burden. However, it could quickly give the owners' management companies, OMCs, the ability to make people's homes safe. That is where the soft loans would be of benefit. However, there are very few mechanisms for OMCs to borrow money. They have no assets. The way that would be worked would be quite complex and the other options would be far more preferable for many reasons.
In terms of quantifying the issue, that is the reason we need the working group. If there are, on average, 100,000 homes affected and the average cost per home was €15,000, that would give a guesstimate. I do not have the figures with me and I do not know if any members of our group have them. It is one of the key outcomes from the working group.
If Ms Cottier wants to bring in any of the witnesses, she can do so or if any of the witnesses joining us remotely wish to speak, they should unmute and indicate as it is difficult to see them on the screen. Many of them have experience and may want to contribute.
Mr. Des McCabe:
I am from the Apartment Owners' Network. To emphasise Ms Cottier's point, the working group is quantifying the number of homes affected and that will be one of its key outputs. More precise costs should be obtained from that but we are currently looking at a cost in excess of €1 billion. That is a realistic estimate based on 100,000 units. It is a significant sum of money at this stage.
I thank the witnesses for the briefing. I have been involved in construction all my life and I am still a contractor. I welcome this engagement. I have listened to many Deputies speak on this issue and to the witnesses' briefing. They hit the nail on the head when they spoke about the way certain buildings were built using a main contractor and many subcontractors who carried out works. With respect to the oversight of fire-stopping, different contractors were involved. They may have drilled a hole 45 mm in diameter, which is too big as it is only supposed to be 40 mm for fire-breaking. Pipework may have been installed without fire stops around it. I welcome that this issue is being highlighted.
The witnesses mentioned Dublin and Cork but homes in Limerick are also affected. I received a phone call yesterday from a man who bought an apartment three years ago in a building that was built 20 years ago. When he discovered there was an issue he did not know where to go. Underneath his apartment is a seven-storey car park. We can only imagine what would happen to the apartment above if a car were to go on fire in the car park.
He came back from working abroad to buy this apartment and felt he was set up for life only to find out that he is in a seven storey apartment block over a car park and he has this huge bill. He cannot sleep at night. There has been a failure with regard to these type of developments, most of which happened during the Celtic tiger times when they were not properly supervised.
I am a contractor and most of my business is one-off houses but I have been involved in the industrial side also where fire-proofing is done and there are different ratings between detached and semi-detached houses. The biggest problem I find when people come to me for advice, help and my experience on issues they have with other buildings is the lack of what I would call a one-stop-shop. There is a phrase, "doctors differ and patients die". We need a dedicated engineering service that people can avail of that will deal with pyrite and fireproofing issues. They should have a list of services that they can avail of rather than ringing around everywhere to try to find out who will give them the best advice possible. Somebody should be able to provide such a service in, say, Limerick, Cork or Dublin. We need somebody who understands those people's problems and can send out a task force to the particular areas to examine those problems. That is the only way to deal with this issue. I deal with engineers on a daily basis. I could be dealing with 20 different engineers and every engineer is slightly different in terms of their thoughts. We need a task force that will deal with these issues and give answers directly to people, perhaps through a help line that they can ring about a specific issue and get a costing. If such a task force had all the collective experience and all the studies available to it, it would then be able to give somebody a definite answer, probably at a lower cost than somebody directly involved in that area. I welcome this and I will give 100% support to it but we need a special task force to deal with this issue county by county where people can ring a phone line. I have a list of names and I will be the first person to ring a task force to find out who can help. I can at least hand on the details to somebody and give them that experience. I am willing to learn also.
Ms Kath Cottier:
Construction Defects Alliance is filling a void at the moment where people do not have that opportunity to go to someone. Ms Ní Fhloinn might want to comment on this because with legal advice as well as construction advice there is a gap in terms of addressing this issue and helping individuals and companies.
Ms Deirdre Ní Fhloinn:
I would be happy to do that. On the previous occasion I was before this committee I specifically raised the fact that there was not even a helpline that people could call with these problems. In my experience, taking the example of apartment developments, when these defects are discovered, and we have heard from Ms Cottier about the prevalence of those defects, all those management companies retain their own professional advice. They will engage Scott Murphy Building Surveyors or one of the firms or people involved in this field. They will find out what has to be done. They will hold meetings with residents and tell residents about the scale of the problem. I have been to several of these meetings. The process is entirely repetitive. They will explain that they are taking legal advice and that the developers have gone bust. There might be a receiver in the picture but, as explained, it is likely that the receiver will not have to discharge the cost of rectifying those defects. There are some proceeds of sale of units in development.
To put that in context from the perspective of homeowners, with one of the developments I am aware of in south Dublin a receiver was appointed to the developer. The development had been left half finished. The residents had been living in a development with hoardings and unfinished sites for a period of years. The receiver appointed by NAMA had started to complete the development and was marketing the homes for sale. Those homes were going to be sold and there was going to be a return to the State. The residents of that development were watching all of this from their windows knowing that, in their case, they were struggling even to find the funds to pay for the assessment work that would have to be done to determine the remedial works necessary for their development, which is quite an exercise in itself.
I absolutely sympathise and feel the frustration of owners because this is a problem that calls out for a nationwide response.
Exactly as Deputy O'Donoghue said, there is no need for each owner's management company to reinvent the wheel each time. The Construction Defects Alliance and Apartment Owners Network are voluntary organisations that have gone in to fill the gap. The have done so because of a failure of leadership and because there is not a centralised resource, provided by local authorities or the Government. There has been a consistent response but the problem has been one for private individuals and the people they sold their homes to. One of the main findings in my PhD research was that homeowners really had no power at all in the transactions. They were represented by solicitors, but the solicitors were going through a conveyancing process that follows a particular format and is not really equipped to identify the problems. The solicitor will advise that one should retain one's own surveyor but, as Ms Cottier said, surveyors were not able to open up internal finishes to find out whether fire-stopping had been done properly. Therefore, people really lacked power in the relationship. People buying their first home have a great sense of hope and optimism and they do not enter the process believing they are taking on a risk that will be with them for the following ten or 20 years of their lives. That is the truth of it, however. This has been occurring in a context in which builders and developers have been insulated, by the legal system, from the risks related to what they build.
I would really like committee members to understand that while there has been regulatory change, the circumstances that gave us all the defective apartments are largely unchanged from a legal point of view. There has been some regulatory reform but some would call this reform industry led and essentially comprising self-certification by the industry. I encourage members to read the evidence being given to the Grenfell inquiry to really get a sense of what happens when industry is left to police itself. We do not allow other important industries to regulate themselves. The regulatory failure is still with us. Even a redress scheme, which is essential and very much welcome, must, in order to be effective, be accompanied by regulatory reform to address this. The pyrite scheme was a sticking plaster for a particular type of problem. The mica scheme is a sticking plaster for a particular type of problem but we must ask how many times we need to have such schemes and how much money we need to invest in solving these kinds of problems in an ad hocway without addressing the underlying problem, which is that we are not regulating our industry properly and robustly or providing legal remedies to home buyers.
I welcome the delegates and thank them for attending to provide us with their insights on redressing legacy building defects. I congratulate them on their resolve and continued campaign for redress. I hope to continue to assist them, as the Minister, Deputy Catherine Martin, has done to date.
As noted in the delegates' presentations, addressing housing defects is part of the negotiated programme for Government. A commitment was made to examine defects in the first 12 months. As discussed here today, a working group is being set up by the Minister for Housing, Local Government and Heritage to determine how to deal with building defects. The aim is to "Assist owners of latent defect properties, by identifying options for those impacted by defects, to access low-cost, long-term finance" and other suitable measures.
My question has been partially covered. Do the delegates believe the timeline of the working group is sufficient? Will the work conclude in time for next year's budget?
Ms Kath Cottier:
The timeline is very ambitious. It will require genuine focus on the part of everyone who is part of it. They will have to be very clear on the outcomes and outputs we need. The working group has to meet within the timeline in question, as far as we are concerned, because we are relying on some sort of financial redress in the budget. We will be keeping a very close eye on progress. While there are many aspects that we want to close off in the future, our focus is really on solving the crisis people are currently experiencing and keeping the promise in this regard.
On the timeline, the Minister has told us he is appointing the chairman. The next phase will involve the committee members. We have actively engaged in the process. It is behind. Obviously, the Minister would have to answer for himself but I believe he would like to be further ahead than he is now. There is still hope, however, that a committee will be formed before Christmas.
Ms Kath Cottier:
Yes. One thing we said clearly was that the lived experience of people who were there had to be a strong voice on that committee, supported by professionals. There is a commitment that a member of the Apartment Owners Network and a member of the Construction Defects Alliance would be on that. Ms Ciara Holland, Mr. Barry Mulhern and Mr. Dónal Nugent are owners who are living in those apartments and can quite clearly state why they think that is important.
Mr. Barry Mulhern:
As Ms Cottier has pointed out, the important thing is lived experience. I can come back to the issue around insurance at a later point. One of the things I would point out is that about four days into the first lockdown, we had a fire in our development. It was quite a scary experience because at that time, each individual owner was facing into a €75,000 fire excess for each and every event. We had a fire in a first-floor apartment and there were apartments above and below and an apartment beside it. It would essentially have meant €75,000 for each owner. We feel it is vital to help people who are dealing with this and are putting their heads on a pillow inside an apartment that just does not feel safe. We absolutely have to be part of any committee that deals with this issue because, too often, our voices are not heard.
I hear talk about ambitious timelines. From my perspective, “ambitious timelines” might be the description used but we had to vote in a levy for all of our owners only recently, and the letters have gone out asking, in my case, for just shy of €15,000, which is a massive undertaking to try to get hold of. It might be referred to as an ambitious timeline but, from my perspective, it still seems somewhat vague. I would like more. I would like to get a set timeline so we can get redress or financial assistance in place for everybody.
Mr. Dónal Nugent:
To add to what Mr. Mulhern said, we introduced a levy in September and the contractors are ready to start work on 18 January. The problem is we have six-block apartments and four-block apartments and if we do not get everybody within those particular blocks to pay, the work cannot start. As of yesterday, we had 32 people committed to paying the levy out of 86 but that does not include one full block. In one block, five people are ready to go but one person has not got back yet. If that one person cannot get the money together, the repairs cannot be done, so there is no insurance, no fire cover and the apartment cannot be sold or rented without it being on the owner's conscience.
We need help with a lot of different issues. It is not just a case of introducing a levy and collecting money. Even one person can stop the works from happening. That is the position we are in at the moment.
I thank the Construction Defects Alliance and the other speakers for coming in. I also want to thank the Construction Defects Alliance for all the work they have done. I know this is very stressful and challenging for everybody involved.
One of the lessons from this matter is that we need much stronger regulation, enforcement and licensing in the industry and that there must be repercussions for and accountability on the part of developers, in terms of both future planning and defects. I looked into this matter in some detail when it arose in the area that I represent. I went through thousands of pages that I obtained through freedom of information requests from my local council in order to try to get to the bottom of it. I saw quite clearly that in one instance my local council had known about this and failed to act in its role as a building control, planning and fire safety authority. It is important that there is fairness and justice for homeowners and part of that has to mean that it is retrospective. I agree that this needs to be dealt with as a matter of urgency. If it is not retrospective, we will be looking at a double injustice visited upon those who have been affected and who have been most responsible in putting in all the work in order to get works to go ahead.
I ask Mr. Nugent and Mr. Mulhern in particular to outline what the effects were for them of finding the defects. What was the impact on insurance costs? How much are the defects costing the owners and what is it like? It has been mentioned what it is like trying to collect money from the other owners. What was the reaction of the witnesses when they found out that their local authority had known about the defects for six or seven years and had not told the residents in the estate?
Mr. Barry Mulhern:
I will speak on the insurance matter and Mr. Nugent can then go through the timeline of what we discovered. We had an underwriter in 2016 that was charging us €22,000 for 86 units. In 2017, that went up to €24,000. As the 2018 renewal period came up, we were summoned to that underwriter's office and basically told that we had to have a substantive plan in place and works under way, otherwise it would withdraw cover from us. What was meant by substantial works was that we had to have work under way to get it done and that feeds back into the issue whereby we simply did not have the money and even if we had voted in the levy, which we had not done up to that point, then getting that money together was going to prove impossible. That left us with the insurer of last resort, which was a firm that traded out of the United Kingdom. It hit us with a €31,500 renewal premium, which was an increase just shy of €10,000. With that came the €75,000 each on every excess. We were essentially hit with a 30% rating increase and in return for that we got substantially less cover. In 2019, the cost of the insurance went up again to €33,500 and that was with a €75,000 excess. That particular underwriter has left the market and is no longer writing business in Ireland. It took hours of phone calls from directors. Mr. Nugent and I are directors but we have our own jobs and we do all of this in our spare time away from friends, family and leisure activities. We managed to get another insurer that has come in and the cost of the insurance is down. For the time being, this insurer has given us a reduced excess but if we do not get the work done and if we do not get blocks brought up to the safety standard required, the excess will go back up again.
Deputy Cian O'Callaghan mentioned a double injustice. We are facing a situation whereby there is no guarantee that we will be able to complete the work. If we cannot complete it, then I, as an owner, am facing into a situation whereby if there is a fire in the apartment above mine and my apartment is left uninhabitable, I will have to find €50,000 of my own money just to get the work started. Once those works are done, I would still be facing into a substantial excess.
That is what one faces each and every day. I will defer to Mr. Nugent who will go through the timeline of what we faced with our particular county council but I have given the realistic lived experience of someone who is in this situation.
Mr. Dónal Nugent:
Yes. In 2007, our county council discovered that there were fire safety defects within the apartments that it acquired in the estate. Between 2007 and 2015, the county council repaired its 44 apartments but did not notify everybody else in the estate until 2012 in a letter sent to the management companies. In 2012, I was not a director so I do not know whether that is true and have never seen the letter. In 2016, we received a letter in our letterboxes from a local Deputy stating that there could, potentially, be fire defects within the apartments. In 2007, Fingal County Council knew but did not notify everybody in the estate.
On the cost of repair works, our estate is made of different blocks - six-block timber frame and masonry built and four-block timber frame and masonry built. There are 42 six-block timber frame, which will cost €14,696 per apartment. The four-block timber frame, which is 28 people, will cost €13,503 per apartment. The six-block masonry will affect 12 people, which is €4,197 and the four-block masonry, which will affect four people, is €4,298. The all-in cost for the 86 apartments is in excess of €1 million to do repair works. The problem is that we need everybody in one block to agree to get this repaired or the work will not be done. The issue has been very stressful and taken hours, days and weeks of my life. To be honest, this has been the most stressful three years of my life.
Mr. Barry Mulhern:
Mr. Scott talked about situations where defects occurred as a consequence of fire safety material being put in but not being put in properly. What we have found is that the fire safety material simply was not installed at all. I heed the Chair's comments about defamation and so on but I do not know if that was cost-cutting or time cutting. It was not a case of stuff not being done properly; it was simply a matter of things not being done at all.
I will go back to what Deputy Ó Broin said. I have a safety certificate that says my apartment is fire compliant. I know for a fact that my apartment is not fire compliant and I know for a fact that the county council did not conduct even one inspection. So it goes back to the comments that have already been made about light-touch regulation or self-regulation. It was entirely predictable that this was going to happen. We know, for a fact, that the developer who built our apartments is trading under a different name but doing substantial works. We have asked the question but it has not yet been confirmed. We believe that they have received work from the State to do work. To go back to what Deputy Cian O'Callaghan said, it is not a double injustice but a quadruple injustice because the developer has done this to us yet the State has turned around and handed them money to build things, which is an exceptionally bitter pill to swallow.
I was going to come in on that point. I thank everybody for coming in. The debate has been really informative but it has also been difficult to hear the lived experiences of the witnesses. It is worth noting what was said by Deputy Ó Broin in that the timeline is ambitious but there are people who are there now who must get money upfront. This time has been very difficult for people many of whom have lost their jobs but people owe money now.
In the July stimulus package €10,000 was added to the help-to-buy scheme. Is the scheme effective and targeted or will it simply increase the price of housing?
The priorities are mixed up. My colleague, Senator Wall, told me about a situation he is dealing with. There are 34 apartments in Kildare and they will have approximately €7,000 to pay for it between now and January.
There are a couple of questions I want to ask specifically of Ms Ní Fhloinn regarding the underlying regulation because I am concerned that there are houses being built now that we will suffer the same fate with. There are two separate elements - a redress scheme for past construction defects and the type of regime that we have going forward. Ms Ní Fhloinn talked about a new homes ombudsman. What powers would she see the ombudsman having? Has she any examples of other countries that might have something similar? If it is a case of producing a report, I am not so sure that would be sufficiently robust for the construction sector. I ask her to elaborate.
I would also like to ask about homes that are being built and current builders. Has Ms Ní Fhloinn any suggestions for a legal regime whereby a builder one cannot change his business's name or continue to trade under the same name? Reform of section 35 of the Planning and Development Act has been mentioned but we can put more robust measures into procurement policy to essentially exclude people who have shown that they have been ignoring the defects issue or have produced shoddy work.
Finally, I want to ask if they have any suggestions. As there seems to be a move toward build to rent and institutional investors, we might see cases of owner-occupiers and institutional investors that have come through a number of legal entities and might be difficult to get at. I encounter this a lot when it comes to issues such as derelict sites. Does Ms Ní Fhloinn have any suggestions for a legal regime to tackle that, if there are institutional investors and money needs to be ponied up? Something each of the owner-occupiers is talking about is that everybody who is involved has to agree before works can begin.
Ms Deirdre Ní Fhloinn:
I thank the Senator for her questions. I might start at the end and the point the Senator raised about institutional investors and owner-occupiers. As our multi-unit developments system works, if one has a single institutional owner for an entire block with everyone living in the block a tenant of the block, that is much simpler in one way. The Senator might recall that approximately five years ago, the media reported on a block that had defects in Dundrum, Dublin 14 that was all owned by a single pension fund. All the tenants were decanted out of it, the work was done and they were all decanted back into it because there was a single payer and a single purse. In theory, that should be more straightforward.
Going back to the questions the Senator raised in order, the new homes ombudsman was a recommendation of a parliamentary committee report in the United Kingdom from approximately four years ago. They had a similar type of report to our safe as houses report. I draw the committee's attention to the date on it, which is December 2017. I was a fellow to that report. That is almost three years ago. Around the same time, a parliamentary report in the UK recommended a new homes ombudsman. One of the reasons for that is that, as I said, when individual house owners or apartment owners find they have a problem, they have to go through this very convoluted system that is not too different from the legal system that would apply for somebody who is a big commercial developer or a big commercial tenant. The homeowner has to go through the same route. It is High Court litigation or it is arbitration. It is really expensive. There is not a simpler way to get access to a remedy. When I spoke to the committee previously, I talked about a system they had in Australia where one can ring up a local regulatory tribunal, which sends an inspector out to look at the house, and the inspector puts a price on the work that has to be done and makes a recommendation.
The tribunal also has the power to impose sanctions if the builder does not go back and fix the problem or to make an award in favour of the homeowner for the cost of fixing the defect. The homeowner pays approximately $400 and the process is simple and quick. The process in Ireland is the opposite of that.
The position of new homes ombudsman is proposed in a section of the UK's new building safety Bill, which was introduced in light of the regulatory review after the Grenfell fire. It proposes that a position of ombudsman be set up. The ombudsman could direct particular types of businesses to subscribe to a scheme that the ombudsman will set up. The ombudsman could receive complaints, make compensation awards and provide further types of remedy such as an apology or another type of relief, but the principal relief would be compensation. It is outside the court and arbitration systems so it should be faster and cheaper.
In a way, this is a good time for us to start looking at regulatory reform because we can examine what is being proposed in the UK. Substantial proposals are being made for the reform of the building control system in the UK. Mr. Nugent mentioned the fire authority and building control authority. In England, they are proposing that local authorities will have the building control authority function taken from them and given to the new regulator for high-rise residential buildings. That regulator will have oversight of the entire regulation of safety in high-rise buildings and will focus more on the safety of people living there rather than whether they are an owner or tenant. Those are some of the things that we might consider.
It would be relatively simple to establish a new homes ombudsman and the idea is that it would provide a simpler way of making a complaint, somebody for people to call and a way of getting compensation.
The Senator also mentioned-----
My contribution will follow on from that of the previous contributor. I completely support the principle of funding homeowners. I have heard the absolute pain and annoyance of Mr. Nugent and Mr. Mulhern and I stand in complete sympathy with them. I have experience of trying to get a group of owners to pony up for engineering costs to establish fault in an estate of houses, one of which was my home, and one homeowner did not row in which meant that the rest of us had to pitch in and pay. That is all the more difficult in an apartment complex. I completely sympathise with all of the difficulty and annoyance of that.
On the other hand, I can see why the proposal is for a loan regime, albeit that is unfair, in particular, to owner-occupiers who own only one property. However, in the case of professional or institutional landlords with more than one property, if the Government was to provide grants, it would become disproportionate and may open the floodgates. Will Ms Ní Fhloinn address how to discriminate legally so that the people who really need money are prioritised and given grant aid? The unfairness will be colossal if that does not happen. I would value Ms Ní Fhloinn's opinion on that.
To elaborate a little on Senator Moynihan's view, has consideration been given to something akin to a tax clearance certificate that attaches to an individual in construction whereby the individual must produce a defect clearance certificate? That may be a way to overcome a temptation for phoenix syndrome within construction to avoid retrospective liabilities. Has any consideration been given to that?
Should we consider a scheme of certificates of compliance to certify a development as free of construction defects? That might incentivise management companies to have blocks of apartments declared free of defects or to encourage those blocks of apartments to have themselves declared free of defects, assuming we have some sort of a funding regime in place. Would that encourage people to declare where there are deficits and address them and then get this certificate and all of the insurance that would flow from it?
Finally, from an insurance point of view, has consideration been given to a State underwriting regime of some sort? I appreciate that is all very pie in the sky but, at the same time, in principle, I am happy to advocate for it.
Ms Deirdre Ní Fhloinn:
I am happy to come in on that. In the first instance, I thank the Senator very much for her questions. Regarding the first question on how one discriminates as to priority for grants, I believe that will be one of the things the working group will have to look at. We already discriminate in a way because institutional and commercial owners of apartments, for example, can write off all the remedial costs against their tax liability arising from their income, which a homeowner typically cannot. That is one issue for the working group. There is, however, an in-built discrimination in the system as it stands, so the working group will have to look at how a fairer system can be created for individual homeowners who are dealing with it and getting the types of bills we have heard about this morning.
Regarding a defects clearance certificate and the phoenix syndrome, one of the issues the committee considered in the past was the general scheme of the Building Control (Construction Industry Register Ireland) Bill 2017, which contemplates a registration scheme where an individual, for example, who is convicted under the Building Control Act would have to tell the registration body he or she has been convicted and might not get a registration the following year.
One of the comments I made to the committee about it at the time was that to my knowledge there had never been a conviction under the Building Control Act. I am sometimes asked about sanctions and whether we should spend some of this discussion on improving sanctions and making sure there are sanctions against developers. There are sanctions in the Building Control Act in respect of anyone who constructs buildings that are not in compliance with the building regulations. They look robust and have been regularly recited in the Houses of the Oireachtas. They say that if a body corporate, for example, is in breach of building regulations and in breach of the Act, then individual managers and directors of that body corporate can be held personally responsible and can be convicted of the offences under the Act, which all sounds very robust, except it is never done.
There are, therefore, various ways to address this issue of phoenix syndrome but, as of today, I can set up a company called Deirdre Ní Fhloinn 2020 Limited. If I have a site, I can apply for planning permission. I might even get fast-track planning permission for it. I can commence building on it by submitting a commencement notice. I do not need any kind of approval from my building control authority. The only people who must be regulated on that site are either regulated by their own professional bodies, if they are architects, engineers and surveyors, or by an external regulator if they are gas installers and electricians. I am not regulated. I do not need to carry insurance or a licence. I can sell those homes and disappear next year. If anybody sues me, I can sign the certificate of compliance on completion, which is required under the building control regulations, in the name of my limited company and then if there is a problem with it, the person who is the assigned certifier, such as the architect or engineer, will probably be at much greater risk. We are aware of these issues and there are ways of dealing with them but that is the position today.
Does Ms Ní Fhloinn believe there has been a failure of prosecutions in this because there is a chain of liability where there is a lack of inspection? I see Deputy Ó Broin nodding. Is the deficit because the chain of liability means, in legal terms, it is not the beginning and end of attributing liability to any one party? Is that why there is a failure of prosecutions?
Ms Deirdre Ní Fhloinn:
There is a failure of prosecutions in part because the building control authorities are not funded properly and incentivised to carry out proper enforcement. A senior building control officer for the Royal Borough of Kensington and Chelsea gave evidence to the Grenfell inquiry that ten qualified building surveyors had been let go from that authority and one graduate trainee had been taken on to do the same work.
As Deputy Ó Broin mentioned, this system was designed in the 1980s to minimise any liability for building control authorities. That is clear from the Dáil debates and it is clear from a memorandum that was sent to the then Taoiseach following the Stardust nightclub fire.
The system was set up to be light touch and the Building Control Act itself does not require a building control authority to go out and inspect any building. It specifically states a building control authority does not need to read and verify the information it is sent with certificates of compliance and all the information that has to be sent in. It is a bigger problem than has been referred to. It is not really just about the chain of liability. It is that there are pockets of liability, such as architects and engineers who sign certificates and typically carry insurance, and then there are pockets of virtually no risk and no liability, which are the builders and developers who can set up what we used to call €2 companies and build and develop without carrying any insurance or having to have any money in the bank, as they do in Queensland, Australia for example, and without having to have a licence from any regulator that is external to their own industry.
To bring us back to basics, if any of us buy anything and we take it home and it is defective, the following day we bring it back to the shop and we either get it replaced or get our money back. This is a basic rule but not for the single most expensive purchase in people's lives. It beggars belief that we are even having this discussion. I am not at all criticising anybody here because this is a useful discussion but we are still discussing the fact there is not a proper remedy. To summarise for members, the safe as houses report recommended a one-stop-shop to address this issue whereby once people discovered they had potential latent defects there would be a body they could go to, which would be a free information service that would tell them exactly what the law stated and what the liabilities were, and it would provide them with advice. This does not exist today.
In the first instance, the principle would be that the developer or builder responsible for the defects has to pay. This is the fundamental principle of the proposition. Not unlike the Residential Tenancies Board, the one-stop-shop redress board would have the ability to mediate between the homeowners and the developer and-or adjudicate where mediation was not possible.
One of the issues, of course, is that some companies are still trading as the original entities responsible for defects but others have closed companies and opened new companies while some have gone bust. There is a legal question, and it would be great if the Government and Attorney General could look at it, as to what extent individuals still trading but under different names may be subject to that adjudication regime. We do not know the answer to this but it is crucial. Where developers are still trading they should be forced to pay if they are not willing to do so voluntarily. Where the developers are not trading and have gone bust, and are no longer living in or are out of the State, a fund will have to be there to be drawn on. Ms Ní Fhloinn rightly said landlords can already write off the capital cost of remediation against their tax liabilities. The question that Senator Seery Kearney rightly raises is easily resolvable because we can continue this regime and the grant aid would be for private home owners.
One of the difficulties with the loan is that the developer walks away. He or she gets off scot-free and this has to be an issue or a focus. We are not arguing as advocates of this that the taxpayer should pick up all the tab. In fact, the idea of the redress fund would be for the taxpayer to pick up as little of the tab as possible.
I want to go back to the Dáil debates I mentioned earlier. There were two reasons some Government and Opposition Deputies supported the light-touch regulatory regime that Ms Ní Fhloinn rightly said was proposed following the Stardust tragedy. The first was that our local authorities did not have enough staff. Repeatedly, we were told by Ministers from two parties, because the legislation took almost a decade to pass, and by backbenchers, that local authorities could not take on the burden of doing the inspections and that they were not properly resourced. The second was that it would be too expensive for builders, that it would add exponentially to the cost of building and, as a consequence, that it was not a good thing. To re-emphasise, a small number of backbenchers from a number of parties stated when something went wrong the homebuyer would pick up the tab. This is why the State cannot say it has no responsibility. People legislated for a regime that was inadequate.
. Ms Ní Fhloinn may remember a very important legal decision that was taken by the High Court on latent defects in Maynooth.
This was where a receiver was ordered by the courts to pay for the remediation works with proceeds from future sales. I ask Ms Ní Fhloinn to talk a little bit about that, please, because that was a significant judgment which has relevance to this. I am conscious that Ms Holland has not come in at all and, as she has a significant level of experience, I would like her to be given the opportunity to do so. She is one of those people who has paid for defects that she did not cause and if she can share her thoughts and feelings with the committee, that would be useful.
Ms Deirdre Ní Fhloinn:
I will return very quickly on the point raised by Deputy Ó Broin, and I thank him for his question.
The High Court decision mentioned by the Deputy was in the Grehan & Ors vMaynooth Business Campus Owners Management Company Limited, which I believe is the name of the decision. It was overturned by the Court of Appeal earlier this year. This year we had two similar decisions, one from the High Court in April in the Paddy Burke (Builders) Limited (In Liquidation and in Receivership) v Tullyvaraga Management Company & Ors case decided by Mr. Justice Denis McDonald; and one from Ms Justice Costello in the Court of Appeal in July overturning the decision in the Grehan Business Services case.
In this case in the High Court it had been found that a receiver in a multi-unit development, which was not a residential but a commercial development and where similar issues arose, there was an agreement with the original developer for the management company to take a transfer of what is called "the common areas" after the development had been completed. It was a condition of the transfer, however, that the development be completed. The management company said that it was not required to take over the common areas until the builder had completed the works and these works had not been completed because there were defects. That was successful in the High Court but was overturned in the Court of Appeal.
In the Paddy Burke case it was a residential multi-unit development and the management company had got an order in the Circuit Court under the Multi-unit Developments Act for the receiver to discharge the cost of remedial works from proceeds of sale. Often, a receiver is appointed in respect of the developer's interest, which is the block, the car parks, the outside areas, the corridors and the lifts, and it often also includes a number of apartments that the developer has retained, which they used to do in order to try to keep control of the management company. If a receiver is appointed in respect of that, it concerns quite a significant part of the development. With the receiver, the developer is still essentially the landlord because of how we sell apartments which is via long leasehold.
The court said in both cases that a receiver takes free of the management company's entitlement to require a development to be completed. There is a statutory provision in the Multi-unit Developments Act whereby the original developer can be ordered to complete a development in accordance with planning and building regulations which should be very good news except that the right by the management company, if such an order is received against a developer, is treated essentially as what is called an unsecured creditor. The lender who lent the money to finance the construction of the development can put in a receiver, extract whatever value they can by selling the remaining units, and can force the management company to take over the development in its defective state and not have to pay out from the proceeds of sale. These are two very significant decisions that really close off what management companies thought was an avenue of getting some moneyss from receivers.
Ms Ciara Holland:
Yes certainly, and I thank the Chairman. As mentioned by Deputy Ó Broin, I own a two-bedroom apartment in Stillorgan that had fire defects. We were informed in December 2018 and were levied with €16,250 a month later. We were in the fortunate position that most of the people had paid up and in the summer of 2019 all of those fire issues were remedied. My developer is still in operation and was recently granted planning permission just down the road from me. I objected to that planning application to Dún Laoghaire-Rathdown County Council on the basis of section 35 of the Planning Act but it unfortunately did not uphold my objection and the developer was granted planning permission.
The county council was fully aware that developer had previously built defective homes and had not complied with the fire certificate that was granted to it but the council granted the developer planning permission in any event. I feel completely let down and I am shocked and disgusted that this was allowed and that the regulatory environment just does not work. It does not protect the innocent people. I have two little girls and I put them to bed all of their little lives in a fire- defective home. It is not right. Safety is more important to me than getting any money back from the €16,000 I have paid to make my developer accountable and responsible for what he has done and ensuring that this does not happen again. When my little girls grow up I can say to them that I fought for something to improve this and make it right and ensure they could buy an apartment in the future.
The way things stand at the moment I would advise people not to buy apartments because they are not protected and do not know what they are buying. I bought my apartment second hand. I did everything right. I engaged a surveyor who inspected and signed off on the property. Unless he had taken down the ceilings, walls and vents, he would not have known the deficiencies in the property. The only person who did was the developer. We have been utterly failed not only by the developer but also by the Government. I have been in touch with everybody. When I first found out about this in December 2018, I got in touch with the council, the fire officer and the then Minister. I looked for support on Google. I have done everything and anything I can to try to get justice and I have vowed that I will keep working on this until I do and my developer is held accountable for what he has done to us.
I thank the witnesses for joining us. In many ways, it is poignant that they are joining us from their homes, which are the subject of today's meeting. Many of those who have spoken have said they were not in a management company at a particular time. That is partly because the group of people which has been asked to take on many of these issues comprises those who voluntarily contributed to their owner management companies. They are the organisations that ten years ago would have dealt with unfinished estates, the liquidation of developers and issues around the Multi-Unit Development Act. They then discovered issues around defects. It was like a third wave.
All of that has taken a huge toll on people who have voluntarily contributed to the process to, in effect, co-own the developments they live in. We have talked a great deal about co-living, but apartment owners effectively co-own properties. It is important that we acknowledge the work that has been done by homeowners. There has been a significant departure in the programme for Government in the direction relating to this issue. While previously the Government relied on the view that it was a private matter, as Deputy Ó Broin said, there has been an indication that there is a significant State involvement in this and that it is not a purely private matter. I welcome the hope that we can deliver some new scheme in next year's budget and that the working group will help to deliver that at the start of next year.
I know that the witnesses have met with departmental officials and that the relationship with the new Minister is positive. They will want to see the detail of what that will actually mean. It is easy for a new Minister to support them, but that has to be delivered and I hope we will start to see that. I have spoken to the Minister. He has moved quickly to deal with issues such as pyrite and mica. I hope he will also be able to move in this area.
I want to discuss what Ms Holland referred to, namely, accountability. I remember some of the early meetings with Ms Deirdre Fox of the Apartment Owners Network in the atrium in Dublin City Council. The witnesses have been forced into a very difficult position whereby they have had to take a pragmatic approach to try to resolve their issue rather than going down the chain of accountability to which Senator Seery Kearney referred. The problem with that is while we might be able to find a resolution, the people who caused the problem may not face consequences.
Trying to get a resolution for each owner is important and we must focus on that first. However, we also have to let the industry know that it failed and that there must be accountability. If it is not forthcoming in supporting the funding of this problem the Government will have to go further and force it to do so.
I suggest that the legal mechanisms which will be introduced may not be retrospective. That will pose a significant challenge. Ms Holland's contribution was important because the issue of accountability has to be addressed, as well as remediating the financial costs involved.
I refer to multi-unit developments and the legislation relating to them.
This idea of neighbours forcing other neighbours to do certain things is emotionally difficult. There has to be a legal resolution. We need to revisit the multi-unit developments legislation and ensure that it is progressed by the Department.
Ms Kath Cottier:
The owners in Beacon South Quarter initially were not looking to the Government for the solutions to their problems. They wanted the contractors and the developers to be held to account. We spent hundreds of thousands of euro getting legal advice only to be told that the mark for recovery was so poor and the risk was so high to members in terms of levying to take legal action that we could not, as directors, make that decision to take it forward. Our commitment to the owners is to lobby. As Ms Holland said, that accountability is really strong.
Multi-unit development legislation reform is an area that dovetails in this regard. We talk about building control reform but there is a need to reform of how we manage multi-unit developments.
Mr. Des McCabe:
The Apartment Owners Network is keen that the existing multi-unit developments legislation be amended. There is a key report that was produced by the Housing Agency and Clúid Housing on apartment living and management companies. We would like to see the recommendations of that report implemented. One of the report's main recommendations concerns the setting up of a regulator for OMCs. Currently, there is no regulation of OMCs. It relies on the Multi-Unit Developments Act 2011 and company and contract law . This are all mismatched. There is no one regulatory body or organisation or one-stop shop to which owners of OMCs can go. We would like to see a regulator set up.
From personal experience, I note the fire defects issue has created a huge amount of tension between apartment owners and their OMCs. In the past, much of the tension was between the management agent and the owners. Now there is a lot of tension between owners and OMCs. Owners do not feel they have anywhere to turn to. From a governance side, they cannot pick up the phone and say there is a problem with their OMC. The Property Services Regulatory Authority licences managing agents but there is no equivalent for OMCs. It is for a different time and a different debate. We are keen, however, that the Multi-Unit Developments Act be reformed as soon as possible.
I do not think we will get a third round. Senator Dooley was due to contribute on this and wanted to raise the issue of pyrite and mica in Clare. I just want to put it on the record. Obviously, we will not be able to get to that third slot.
I compliment the Construction Defects Alliance for the work it has done in this area and the awareness it has raised. I thank everybody for their contributions. The lived experience which people have spoken about has been enlightening to me as a new member of this committee. It is critical that they are part of the working group going forward.
There is a commitment in the programme for Government to address this matter. My colleague, Senator Seery Kearney, referred to positively discriminating for those need who need support, such as those on the MS Teams call with us this morning. We have tax write-offs for PAYE workers with the living city over ten years and the cycle-to-work schemes on a limited basis. Perhaps PAYE workers could avail of tax write-offs for latent defects and the cost of their remediation.
That may be one that our guests can take up with the working group. The tax write-off available over ten years through the living city initiative is considerable.
Ms Ní Fhloinn mentioned legal changes being needed now but later noted that while the legislation was strong in this area, there have not been prosecutions. Will she give a little more information on what specific legal changes may be required? I am conscious that while we are talking predominantly about cases arising from the Celtic tiger period, the issue is not related solely to them. Cases could be developing on other construction sites as we speak, where actions may be being taken that are not in compliance with the guidance and regulations. There are good and bad builders and we have to acknowledge that. Will Ms Ní Fhloinn outline what legal changes are needed to ensure that what has happened previously will not happen again in the coming years as we ramp up our construction sector?
Ms Deirdre Ní Fhloinn:
I thank the Senator for his very good questions. The reference I made to sanctions under the Act was not to suggest that the Act is perfect as it is. I have a concern about the Building Control (Amendment) Regulations 2014, which introduced a mandatory system of inspection and certification by developers and their appointees. For most developments of any significant size, developers must appoint competent people who are registered with the Royal Institute of the Architects of Ireland, the Society of Chartered Surveyors or Engineers Ireland to act as inspectors and to sign certificates at various stages during construction and on completion of developments to say that the correct steps have been taken and that the development complies with building regulations. That certificate, on completion, has to be signed by the builder as well. That all sounds very positive but all the people involved are employed by the developer.
This committee, in the safe as houses report, recommended that this function be carried out by local authorities and that local authorities be properly funded to do it. Based on my research and on what I have seen in other countries, there is certainly scope for having a private element in inspection and regulation of construction, which most countries have. The really important part, however, is that somebody ensures people are doing what they are supposed to and to have visible and effective enforcement of sanctions. One of the main comparisons I carried out in my PhD was with the Food Safety Authority of Ireland, which has a similar system of inspectors who are entitled to go into restaurants and places where food is being prepared or where animals are being prepared for slaughter, carry out inspections and issue notices if things are going wrong. A national regulator can take enforcement and monitor what is happening. There is no national regulator for buildings.
When I was conducting my PhD research, I wrote to every local authority to ask how many enforcement notices they had issued, because they are supposed to keep a register of enforcement notices, which is their first responsibility under the Act. When they see a breach of building regulations, the register is the first regulatory tool they have. Most of the local authorities I contacted, however, either did not have a register of enforcement notices or had a policy of never issuing enforcement notices because they were worried about being challenged by developers or having legal challenges they could not afford to fight because they had such small teams. There is a bigger question here, but the really important aspect of reform is to ensure that somebody is checking that the correct steps are being taken and that there is some accountability. Accountability will not come from changing our law and then never enforcing it; it will come when people know that it will cost them money, or that they might be convicted and prevented from tendering for other work, or even sent to jail because of what they are doing.
That is the experience of other regulated industries. Members might consider how the Revenue Commissioners act. In California, for example, members will be familiar with the tragedy of the Berkeley balcony collapse. The company responsible for that had its licence revoked. The two individuals who were the owners of the company were personally sanctioned. They cannot get their licence back for, I think, five to ten years and in order to get their licence back to build again, they have to pay the $100,000 it cost to prosecute them. They publish a register of those on whom sanctions have been imposed. They publish names, naming and shaming as the Revenue does in Ireland. All of those things are important to demonstrate that the regulatory system can be enforced. If there are a few bad apples, one still has to be able to demonstrate that one has taken action against those few bad apples to make sure everybody else complies. Otherwise, there is a system where people know they will never be caught and will not have to pay out if they are caught. There are a hell of a lot of developers being sued at the moment in relation to all the apartments we are talking about and they will never have to pay out. They are essentially being sued because otherwise the plaintiffs bringing these actions might face problems of their own for not having sued them. Their names are on High Court litigation but they will never have to pay out for it.
Due to Covid restrictions, we have three minutes left in which we can remain in this room . I will try to wrap it up. I am conscious I did not get an opportunity to speak. We spent a lot of time discussing the legalities and remediation for this issue and possibly not enough time discussing the stress and tension it has placed on people who have lived with this issue for many years. Ms Holland's submission dealt with the worry when she is putting her daughters to bed. When one buys, rents or lives in a home, one expects to be able to live in a safe place and many people do not feel that way when they are affected by this issue. When one buys any product, it is CE stamped and there is rigorous testing done on it to give confidence that it is reliable, robust and suitable for purpose. People who have purchased into many of these apartment blocks have not been given the benefit of that.
I wanted to address section 35 of the Planning and Development Act. We will not have time to answer that now but perhaps Ms Ní Fhloinn, or somebody else, could give us a written submission on that. I refer to developers who have been found not to be compliant with planning conditions in the past. I am conscious of the line between planning conditions, fire regulations and construction oversight. Where there is an architect, a designer, a developer and a number of subcontractors on site, who is responsible for not complying with the planning conditions? Who has the ultimate sign-off on it and would that be the person who is responsible for non-compliance with that?
We are talking about historical issues. What comfort could people take as we look at apartments being built at present? There is an objective in the programme for Government for the large-scale construction that will be required and it will have to be high density and multi-use. What comfort can people take, looking at that, that we have learned lessons in this regard? Ms Ní Fhloinn or Ms Cottier could wrap up on that.
Ms Deirdre Ní Fhloinn:
I am happy to put in a submission in relation to section 35. I will make a short comment about it. As long as we have planning authorities and building control authorities operating in silos in their local councils, we will have these problems. It is ridiculous that one can apply for planning permission and the planning authority actively disregards what one has done on one's last development in terms of compliance with building regulations, as if such regulations are much less important than planning and planning regulations. I am happy to submit a note to the committee secretariat.
I thank Ms Ní Fhloinn. We would appreciate that. I have to wrap it up now. I thank Ms Cottier and all the witnesses who came in remotely for their time and for visiting the committee again. I noted down some actions but I cannot find them just now. We will be engaging with the Minister.
As for that timeline the witnesses referred to as being ambitious and tight, we will stick to it as best we can to try to rectify and remedy the situation for the representative groups. I thank the witnesses for their input.