Eamon Gilmore (Dún Laoghaire, Labour)

The idea of management companies ordering and maintaining residential developments and charging for these services is not new. In the past, however, it was a practice mainly associated with private apartment developments and with some small expensive and exclusive housing developments mainly in what were known as the gated communities.

Normal housing estates, however, did not have management companies or charges. These estates were usually designed, constructed and completed to a standard which the local authority required for taking in charge. In the planning permission the local authority set the road widths and standards, the amount of open space, the quality and location of public lighting etc. and the developer was obliged to complete the development to that standard. As we know, some developers failed in their obligation to complete satisfactorily housing estates. This problem has already been addressed by a Labour Party Private Members' Bill, which passed Second Stage in this House last spring and for which I am still awaiting a date for the Committee Stage in the select committee. I take this opportunity to ask the Minister to facilitate the taking of that Committee Stage which, apart from dealing with the issue of unfinished housing estates, might also provide an opportunity to legislate for the management company problem which this motion addresses.

In the case of apartment developments, matters were usually a bit more complicated. Common areas within apartment buildings, parking areas, whether within the building or within its curtilage, public lighting, small open spaces and the planting around apartment buildings often did not lend themselves to being taken in charge by a local authority. The solution which was arrived at was that the developer would establish a management company, in many cases comprised of the owners of the apartments, and it would have the responsibility for the care, maintenance and management of the common areas. The apartment owners would pay an annual charge to the management company for these services. In the main, this practice was confined to apartment developments only. It did not apply to housing developments, except in the small exclusive, usually very expensive, private housing developments, where the house owners were opting for the privacy and exclusivity which the management company and management charges gave them. In both cases, the purchasers of both the apartments and houses in these small developments were paying for privacy and exclusivity.

In recent years, however, the practice has grown and widened. First, apartments now constitute a much bigger proportion of residential development. Apartments are increasingly becoming the typical first home for many first-time buyers, except in the big urban areas. Therefore, the use of management companies and the imposition of management charges is no longer an option being voluntarily exercised by the purchasers of these dwellings, but it is being imposed on them by the developer and, in some cases, by the conditions set by the planning authority. Second, many residential developments are now mixed, containing a variety of dwellings from apartments in multi-dwelling blocks, duplexes, maisonettes, town-houses in courtyard settings to the standard semi-detached and detached dwellings.

In these mixed housing schemes, common areas and services, including roads, open spaces, planting, parking and public lighting do not fit easily into the model which local authorities set for taking in charge purposes. I want to give an example of this type of development which I received today. It refers to a development on the western side of this city. It reads that the development comprises of a mix of houses, duplex units and apartments. The total number of dwellings on the estate is 320. The management company is a guaranteed company, without a share capital, which was incorporated in 2003. Each owner of a unit in the estate has a €1 share in the management company. However, the developer and his associate remain directors until the estate is completed and until the last unit is sold. Once the last unit is sold, new directors can then be elected to the management company. If the owners are in agreement, new management agents can be appointment to oversee the day-to-day running of the company. I will return to the issue of selling the last unit.

Some developers have concluded that they can finish housing estates to a different and often lower standard than that required by local authorities if they opt out of the taking in charge process. They can do so by setting up a management company for the housing estate which will either directly charge for the services or appoint an agent for the carrying out of these services which will charge for them. These services should normally be provided through local authorities. It benefits developers in a couple of ways. First, the developer saves on development costs by not having to comply with the standards usually set by local authorities for road widths, amount of open space and so on. It can be a nice little earner for the developers because some operate the condition that they will transfer the directorships of these companies once the last unit is sold. If, however, they retain a single unit in the development, they retain effective control of the management company and in addition to having charged the house buyer whatever enormous amount they charged for the dwelling, they can then continue to charge for management services on an unregulated basis for as long as they want.

Some local authorities now find it convenient to not only facilitate developers to opt out of taking in charge but encourage them to do so and in some cases make it a condition of the planning permission. The unfortunate house buyer is now faced with a pincer movement between the developer seeking to maximise gain on one hand and a local authority that already feels it has too many kilometres of road and acres of open space to manage and that wants to get rid of further responsibility in that regard by letting the developer establish a management company. That saves the local authority from incurring costs in maintaining and developing these services.

The result is a recent major growth in the amount of housing and the number of privately maintained and managed housing estates for which the householder is paying a charge. There are a number of problems with all this. The house buyer, having paid a high price for a home, has to indefinitely pay a private management company for services which should be delivered through a public authority. In many cases — I know this from experience in my constituency — where management companies have been used for apartments and supposedly exclusive developments, management companies collapse, leaving nobody in charge of maintaining and managing common areas in apartments and housing developments. This can give rise to problems of neglect, dereliction and difficulties with insurance and liability.

As a result of developments not conforming to the taking in charge standard, issues of renewal and repair arise early and more frequently. The fancy cobblelock that has been set down instead of normal road surfacing becomes uneven and broken, a water pipe crushes, the fussy planted feature becomes overgrown and the ground level public lighting needs to be rewired and upgraded. The cost of all this work falls on the management company and ultimately back on the householder. The new house buyers who find themselves faced with a management charge will also find themselves faced with the capital cost of renewing water, sewerage and roads — services which are being provided in some cases to a standard below that which the local authority allows. In the course of time, purchasers of homes in privately managed estates will find that they are liable not only for the annual charge for the routine maintenance of these services, but also for the capital costs of repairing and renewing them.

When the householder wishes to sell the house or apartment, there will often be complications with conveyancing. Solicitors inform me that there are many difficulties facing those in privately managed estates when they try to sell their property.

Local authorities are reluctant to take in charge housing developments which had been the subject of management companies because they have not been built to the taking in charge standard, the maintenance of services may have been indifferent over the years and these are additional costs associated with the development. The original developer has benefited financially by building a housing scheme to a standard below that required by the local authority and the local authority will be unwilling, understandably, to pick up the cost ten or 15 years later. The growing use of management companies in housing development is costing householders today, storing up future costs and conveyancing difficulties in the future and creating a future headache and cost for local authorities that at some point will have to step in to clear up the mess.

The whole issue requires urgent attention. At the last general election the Labour Party committed itself to legislating in this area if we were returned to Government. We were not and the problem has continued to grow. Our motion tonight, however, calls on the Minister to take three lines of action. He can immediately stop future housing schemes being developed to below taking in charge standards, stop the setting up of management companies——

See this speech in context