Olivia Mitchell (Dublin South, Fine Gael)

That is correct. I am delighted to support the Bill brought forward by my colleague, Deputy O'Dowd, whom I congratulate on his prescience in spotting this as a growing issue, long before it came to everybody else's attention. It is impossible for those of us who represent urban constituencies to avoid realising the extent of the problems caused partly by the explosion of apartment buildings but also by the management companies who proclaim to represent the owners of new apartments. As Deputy O'Dowd said, one fifth of all building nationwide is apartments. In Dublin the rate is between 40% and 50%. In my constituency the number of houses being built is only a handful while the number of apartments represents 80% to 90% of all building in the constituency.

Apartment living is becoming the norm, particularly for this generation of young home buyers. They consider themselves lucky to be able to get on the property ladder by getting an apartment. They do so without any Government attempt to regulate the management of the common areas or to provide rights or protection for people living in group developments or to control the activities of property management companies and to regulate what management companies do.

There is a panoply of protections for traditional home owners but the unfortunate new generation of apartment owners have been left completely without protection. The difficulties that have arisen are a revelation to all of us. None of us anticipated the problems that would arise when virtual strangers come together and share not only a common space but a common legal obligation to each other and to the group. There is an old saying that good fences make good neighbours. Unfortunately, in the case of apartments, there are no good fences, physical or legal, to protect home owners. I say that in the full knowledge that apartment living can be extremely successful but only if we work to ensure the owners and those who live in proximity to them are protected. One thing that will destroy an area is apartment blocks falling into disrepair and that is a real danger unless we move quickly.

The typical scenario for many young home owners seeking to buy an apartment is that they pay their booking deposit and many months pass before they sign the contract. It is only when they come to sign the contract that they discover there is a management company clause. Many have no idea what is a management company. At that stage it is too late to pull out. They have to sign up and often have to pay two years of management company fees without having the implications of signing up explained. When closing sales, there is an onus on solicitors to make it absolutely clear to the membership of the management company what it means, including the responsibilities and the liabilities. In many cases the responsibilities are that one pays up for a number of years to a management company long before one receives any benefits and before any of the rights become apparent. If one happens to be the first tenant into a large development one pays for several years for the prettification of the area, the fountains, wooden features and so on, which sell the apartments for the developer. Meanwhile the tenant is living on a building site and paying for his profit.

The director of corporate enforcement has reported a significant increase in the number of complaints about management companies. They fail to hold annual general meetings and to report to the members on the company's finances and operating performance by failing to provide them with copies of the financial statements and a director's report and to adequately disclose to members potential conflicts of interests in circumstances where the directors also provide services to the management company. There is a huge blurring of the role of the developer in terms of developer as the management company and developer as a property management company. There is a huge conflict of interest that is indefensible and will have to be sorted out.

If the directors of the management company, as opposed to the property management company, do not fulfil their duties, if they lose interest or if they stop paying, they could be struck off the company's register. When home owners try to sell their apartments they discover they must have an operating management company. Without a management company they cannot sell their property. That can be set up again but it involves additional legal costs.

During the previous discussion of this matter, I indicated that responsibility for advising buyers of their rights and responsibilities at an early stage falls to their solicitor. I pointed out that in many cases solicitors' fees are paid for by developers. While this may reduce costs for young couples who regard it as a bonus, there are other ways of reducing the costs of a solicitor who is dealing with many similar apartments. When I raised this with the Law Society it neatly avoided the issue by indicating it would be illegal for solicitors to act for both parties to a purchase, which is not the case. Solicitors act for the unfortunate buyers but their fees are paid by the seller. This practice creates a clear conflict of interest which does not serve homebuyers. In addition, it reflects badly on solicitors who should move to change it before it is changed for them.

When people become disillusioned, encounter problems or their management fees increase they stop paying and the sinking fund becomes used up. The danger then is that apartments will fall into disrepair, people will become totally disillusioned with the concept of apartment living and a property problem will emerge in all urban areas.

I support the Bill and ask the Minister to consider doing likewise. The way in which management companies currently operate serves developers, county councils because their costs are reduced and the companies themselves which have been given a new lease of life and wonderful business opportunity. Those who are supposed to benefit — the homebuyers — are not served.

See this speech in context