Fergus O'Dowd (Louth, Fine Gael)

I move: "That the Bill be now read a Second Time."

One of the major issues facing Irish society, particularly in urban areas, is how we deal with modern developments, especially multi-storey, high-rise apartment complexes. That is a significant problem around the country. The intention of this Bill is to address the significant issues involved and to put in place a regulator for the management and control of all apartment management companies. My colleagues will give many examples from their constituencies of houses and apartments being built but not maintained, and in appalling condition. The residents cannot deal with the issues because the management company may have gone bust, cannot be found, or is not accountable.

Accordingly, this Bill is important. I am sorry the Government did not see fit to support it. The Government has failed to recognise the need for action in this area for many years. In 2002, the programme for Government stated the Government would consider the introduction of legislation to regulate the establishment and operation of apartment complex management companies. In response to a parliamentary question in May 2003, the then Minister for Environment, Heritage and Local Government stated the regulation of apartment complex management companies was "still under consideration" and that he had "no immediate plans to set guidelines on fees". The Government motion tonight would set progress back for a further nine months, during which time we will continue to have these problems around the country.

Apartment living has become a way of life for people in recent years. As the Celtic tiger roared into life, and demographic changes put pressure on the existing housing stock, high-density apartment blocks allowed for cheaper, high quality housing that allows many young people on to the property ladder. The census of 2002 shows that more than 110,000 households, almost 9% of the total, live in apartments. This translates as more than 200,000 people, highlighting the fact that it is often single people and couples without children who reside in this type of housing. Since then, evidence suggests this trend is continuing. In the three years from 2002 to 2004, more than 42,500 flats and apartments were completed, a fifth of all new housing.

This is a live issue for thousands of people. There are serious problems regarding apartment complexes throughout the country which many residents feel powerless to address. These problems relate primarily to common areas and the failure of builders and managing agents to maintain them while simultaneously charging very high management fees that increase year on year, often with little or no provision for a sinking fund that is necessary to cover the very high costs that occur every few years when major refurbishment is needed.

These fees can often be higher than two months' entire mortgage payments, and very often, residents are a total loss as to what they are paying for. Non-payment is not an option as that would lead to a debt being placed on the property that would have to be cleared before a property is sold. Residents have no State agency to complain to and with an increasing number of non-resident investors in the apartment sector, it is often difficult to spur the necessary number of residents into action. Urban councillors and Deputies have no shortage of horror stories regarding apartment blocks. Gardens not landscaped, unpainted walls, broken lifts, crumbling brickwork, sporadic refuse collection and broken fixtures and fittings are becoming very common. It is for this reason we are highlighting the specific issue of apartment management companies and their agents.

However, I am very aware that those living in houses and housing estates, which are not apartment complexes, are also burdened with management companies and fees. I understand Fingal County Council, for example, has a significant number of planning conditions with regard to management companies managing traditional housing estates. There is great uncertainty among the community, which is being unsettled as a result, and people are very unhappy with the situation. Many of our traditional housing estates, when properly constructed by the developer, would normally be taken over and run by local authorities. However, under the current regime in some county councils, such estates will never be taken over, and those councils thus avoid their responsibilities. Clearly, there is an issue about funding those councils to ensure they can continue to maintain public open spaces, footpaths and lighting in these traditional-type housing estates when they have passed all stages and are ready to be taken over by the local authority.

I have had a great deal of correspondence from solicitors, companies and people who live in housing estates, particularly around the city of Dublin. I receive an increasing number of letters, representations and e-mails in this regard. One solicitor has brought it to my attention that the Law Society construction industry contract is defective. It is in the form which was originally established for the sale of houses and in that respect has stood the test of time, but it has not been altered to deal with the sale of apartments. Because an apartment owner only owns the apartment and not the building, the contract is deficient. An apartment owner has redress against a builder if there is a defect in the apartment itself, but if there is a defect in either the internal or external common areas, or if there is likely to be a defect in the structural parts which will not manifest itself for some time, the apartment owner has no redress at all.

For example, if the internal common areas of an apartment complex are painted with poor quality paint, there is nothing the apartment owner can do about it. If the roof is defective — a flat roof may last about 12 years, after which it must be replaced — the cause of the defect is poor workmanship, but the apartment owner cannot do anything about it. This issue can be dealt with by the Law Society and the Construction Industry Federation producing a building contract for apartment owners. Fine Gael believes this is essential.

In larger developments there can be a substantial time lag between the time the first purchaser completes a sale and the last apartment is completed. In some of the substantial developments this time lag can be between three and five years. Who provides the services in the interim and on what basis are fees calculated? Sometimes the builder will provide a service without charge, or may appoint a managing agent to provide the services. Either way the builder should be obliged to provide a set of audited accounts to each apartment owner at the end of the financial year. If these accounts are audited, this will give reassurance to an apartment owner. Auditing of accounts with regard to apartment schemes is low in terms of intellectual application and carries a nominal fee. Indeed the standard is depressingly low. The only way to correct this is to impose severe penalties on auditors who fail to provide a fully audited set of accounts.

Managing agents also cause a great deal of anxiety and we need to be much more pro-consumer in the code of practice for managing agents. There is no organisation of managing agents — anybody can become one. We have very good ones and some very bad ones. There is no accountability or control over how they handle moneys. They can maintain service charges in the same account in which their own moneys are held. That is not good enough, which is why this Bill wants all these people and companies regulated. The general standard of services provided by managing agents is substantially below that of services provided by agents in similar disciplines.

There are problems relating to the kind of people in apartments. In some cases, apartments are being rented to drug dealers, for supply and for prostitution. Apartments are also being used as private restaurants. Rubbish can be left decaying for weeks outside complexes, attracting vermin. There are many problems relating to who deals with drug dealers in an apartment complex, and how one gets them out. These are serious social problems. Regrettably and unfortunately, many of our apartment complexes are fast becoming modern slums. It is an appalling fact but it is true. Unless and until they are regulated and managed properly, these problems will continue.

The Bill is quite short because what we want is a regulator for apartment complexes. We would be happy if this regulator were also to regulate management companies of traditional-type housing. The Private Residential Tenancies Board already has the know-how in dealing with problems of residents, particularly in rented dwellings. The board should set out the guidelines that are necessary to ensure these regulations work for everybody. This is regulation with a light touch that leaves important decisions to those who know what they are doing. All we seek to establish are the parameters of regulation, not the detailed regulation and for this reason we see no reason for anyone to oppose it.

The key part of the Bill is section 3, paragraph (l), which provides that the Private Residential Tenancies Board would be instructed to develop a code of practice for management companies and their agents. This code of practice is sadly missing. The code of practice should include the key essential element of transparent management fees. Fees should be set for the first three years of a new complex at a level that ensures managing agents can meet the established minimum standards for that period. If there is no service there should be no payment. The management fee should not be fully payable until management agents are in place and the various services can be provided. Many builders demand payment of the first year's management fee before the keys are handed over to the new owners. We get letters from people throughout the country who complain that when they go to buy a property the management fee is thrown in at the last minute. The sum of €500 may not appear to be a huge amount on a deal of €250,000 until one has to pay it every year. Not enough care and attention is devoted to their needs.

An important issue is the sinking fund provision. A sinking fund is money for payments that will arise when redecorating and other large scale refurbishment have to be done. It is emerging that many managing agents set the annual fee without any provision for large scale refurbishments that must be carried out every few years. This leaves residents with a shortfall and a choice of paying several thousand euro at once or else living with a decaying physical environment. Neither scenario is tolerable. Under the terms of the Bill only those managing agents who strictly adhere to this code of practice will be allowed to trade.

The Bill also refers to the need for proper information. The nature of this business is to make it difficult for residents to get the full picture even though in many cases the balance of power rests with them. It is vital that individual apartment owners who rely on collective action to get things done are given all the information they need. It is vital also that they have someone to turn to if confused or unsure about how to proceed. At present there is nobody whom they can consult. If our Bill is passed there certainly will be somebody whom they can consult. The key issue is the regulation of this whole area by an existing body.

Given the complex legal nature of management company arrangements it is vital that consumers get the necessary protection they deserve. We have received reports that those residents seeking to change management agents have been put at a disadvantage because new agents insist that a binding contract be signed without a probation period during which the level of service can be assessed. Residents should have the right to insist on a one-year probationary period before deciding to commit to any managing agent for a longer period.

That is the core of our case. Other speakers on our side will elaborate and bring their personal experiences to bear. It is time for the Government to act. I accept and acknowledge that the Government set up a judicial committee whose report is one year over due. It is time for us to act. Our proposals are sensible and realistic. We would be happy to accept any amendment the Government or other parties may put forward. We in Fine Gael think it is time to take action on all these apartment complexes, some of which are in an appalling state. The Minister needs to intervene in the way planning permissions are granted by local authorities for traditional type housing. That is a critical issue. We need action and we need it now.

See this speech in context