Dick Roche (Wicklow, Fianna Fail)

I move amendment No. 1:

To delete "now" and to add at the end of the motion "this day nine months".

I wish to share my time with Deputy O'Connor. I hope to do the decent thing and I am taking the unusual step of proposing an amendment to postpone the acceptance of Second Stage of the Bill for a nine-month period. I had hoped to move this as a reasoned amendment outlining in the amendment the basis for doing so, but I understand that is not possible.

I agree with the general sentiment that this is an area that requires change and specific attention. However, with the best will in the world, it does not achieve this and I will try to explain why and the reason I seek to postpone Second Stage. First, the Law Reform Commission is examining the issue of the regulation of these companies and is expected to report in the near future, which I will encourage. Second, the Minister for Justice, Equality and Law Reform is developing proposals for a national property services regulatory agency and, third, I consider that legislation will most appropriately be developed in the light of this ongoing work. There are issues which need to be addressed with regard to management companies in Ireland but I am not convinced that the Bill in its current form will address those issues. I do not say this with the intention of putting down the author of the Bill. I accept the sentiment, but the Bill has some fundamental flaws which I will outline.

Apartment living has multiplied in Ireland in the past 15 years or so. As the Fine Gael Bill accepts, there is a need for management companies in modern apartment complexes. There is also a need to ensure that people's hard earned investment in their home is protected by ensuring that the structure and external fabric of the building is maintained.

It is clear that the law in this regard in Ireland has not kept pace with the increase in high density living we now see. Countries with long-standing apartment living have a more sophisticated approach than we have. That is why the Government has asked the Law Reform Commission to examine this issue. It is also the reason the Minister for Justice, Equality and Law Reform is developing proposals for a national property services regulatory authority. The Government does not oppose the thinking behind this Bill. We are happy to work constructively with all interested parties to review current arrangements, but there are some fundamental problems.

I understand the Bill was only printed over the weekend and the House has not had the opportunity to review all its provisions. However, from an initial view there are problems in its approach in some regards. If we passed it, I do not think Fine Gael would get any marks for regulatory impact analysis. To rush this Bill and get an unsatisfactory result would be a disservice to apartment dwellers and would be counter-productive to what we intend to do in the area. It is for those reasons that I propose to postpone the Bill.

There are a number of serious questions about the approach proposed in this Bill, including the level of bureaucratic involvement it implies, which I will outline in more detail. The proposal that the private residential tenancies board, PRTB, should be involved in regulating the relationship between property owners and managing agents would not be appropriate and would seriously detract from the PRTB's role with regard to landlord and tenant matters in the private rented accommodation. We must remember the reason the PRTB was established was to operate the new landlord and tenant system in the private rented sector. Therefore, it would be inappropriate to give the board this additional role.

The whole area of property management is complex, involving a number of different dimensions and issues, including the role of developers, managing agents and their relationships; the role and responsibilities of management companies; the role of the new property services regulatory agency; practical issues such as the standard of maintenance, level of and increases in management charges; the application of conveyancing law and practice in this area; issues relating to the operation of owner-controlled management companies and requirements of company law in that context; and linkage, in some cases, between planning conditions and provisions relating to management companies in purchase contracts. I am less than happy with the way some local authorities have operated in this area.

The Bill before us, as drafted, is not capable of capturing all these different, complex and interrelated elements. We would do people a disservice by not incorporating these diverse issues in legislation we produce. In its current format the Bill would not deal with a number of key issues that give rise to problems. I will return to this issue.

The Government will address the problems on a number of fronts, particularly in the context of the upcoming report from the Law Reform Commission. My Department and the Department of Justice, Equality and Law Reform will jointly prepare a report for the Government on the work done to date on this issue.

The legal issues involved are generally outside my area of responsibility. However, I am concerned, both from the perspective of my Department's housing role and the need for householders to get a fair deal, to promote practical action to tackle the problems we have come across. The solutions to problems in this area do not depend entirely on statutory action. Many, indeed most, of the difficulties that have come to light are attributable to what might charitably be termed shoddy practice on the part of certain interested parties. Deputy Connaughton spoke wisely on this and pointed out that some of the information on conveyancing given to clients leaves much to be desired.

Property owners in multi-unit structures must be put in a position which will allow them to ensure that their management companies operate effectively and in the common interest. There are many instances where unit owners have been prevented from taking effective control of the management entity. There also tends to be an information deficit in this area, which is inimical to the effective operation of management arrangements, particularly through the control of those arrangements by the owners. We will address these deficiencies through legislation where necessary and in the meantime through practical measures.

The legal profession also has a key role in protecting home buyers from abuses. Conveyancers need to be vigilant in ensuring that the rights of buyers are fully safeguarded from inappropriate obligations or excessive costs in house purchase contracts, particularly where buyers feel pressurised in the context of a rising property market. I hope that the legal profession as a whole will be able to help raise the level of protection further and I will expand on this later.

Local authorities must also play their part. In particular they must avoid adding to complexities or uncertainty in the context of applying planning conditions relating to management arrangements. My Department is pursuing this aspect with local authorities. Local authorities have taken a diverse range of actions and we will make it clearer to them what we expect in this regard.

A basic source of difficulty in the area is the general lack of information and understanding about the need for and role of management companies and the rights and obligations of home owners. As an immediate practical step to address this information deficit, I have asked my Department to co-ordinate the provision of clear and concise general information, particularly for home buyers. In the past ten years alone over 100,000 apartments have been built.

Apartment complexes have special management and maintenance needs because of the extent of shared or communal elements involved. Interdependence is an inherent feature of apartment living. This necessitates a range of rights and responsibilities with a mechanism for upholding, enforcing and where necessary, reconciling these, in the interest of all the owners and residents. The fact that most apartment buildings accommodate different tenures, and in some cases a mix of residential and commercial use, adds a further level of complexity.

Arrangements for managing and maintaining the communal elements of private apartment complexes are generally addressed through management companies. The appropriate practice is that shortly after the sale of all units in an apartment complex is complete, control of the management company is transferred from the developer to the owners of the individual units. The legal requirements relating to membership of these companies and associated obligations are brought to bear through the conveyancing process.

A cause of confusion in this area is misunderstanding of the role of "management companies" and "managing agents", because we tend to use the two terms interchangeably. It may be more meaningful to regard management companies as "ownership" companies or vehicles. On the other hand, property managing agents or management service providers are commercial entities engaged by management companies to carry out day-to-day operations. These agents appear to be a key source of problems and complaints from apartment owners, particularly regarding levels of fees, quality of service and accountability.

Problems have arisen from a range of factors, including failings on the part of developers or managing agents, poor administration of management companies, often due to inadequate participation by apartment owners, refusal of some owners to pay charges and the fact that some requirements under company law do not appear to be well suited to the circumstances of apartment management companies. These are complex issues which must be dealt with systematically.

The proposed new national property services regulatory authority is intended to regulate these operations. It will have the function of licensing, regulating and dealing with complaints about property management service providers or agents. The group which recommended the establishment of the regulatory authority also recommended that agents be subject to oversight by the authority, to vetting and complaints procedures and that managing agents should contribute to a fidelity fund to be operated by the authority. This addresses some of the core issues raised by Deputy O'Dowd and will be a most important development because it is clear the operation of managing agents is a major element of many of the problems that arise with regard to property management.

Another major source of potential difficulties arises at the stage when the buyer of a house or apartment signs the contract to purchase. It is at this point that the obligation to become a member of the management company and make relevant financial contributions tends to arise. A key issue in this context is control of the management company. A fundamental source of current problems is the fact that house buyers can be obliged to sign contracts under which they have obligations, including hefty charges, with regard to management companies, but have no guarantee that they will be able to influence the operation of these companies because developers can use artifices to retain effective control of management companies. They do this, of course, because there is a profit for them in so doing. This seems to derive from the fact that standard conveyancing practice and documentation allows a way for developers, if they so wish, to retain control of these companies indefinitely by keeping ownership of at least one unit in the development. A specific time limit must be set for the transfer of control of the management company from developers to the owners of units. Deputy O'Dowd pointed out that the basic conveyancing instrument was established long before communal living became common.

A number of other issues arise with regard to conditions in house purchase contracts relating to management arrangements. The level of management charges is a particular focus of complaint. Provisions relating to management arrangements must provide for the reasonableness and adequacy of charges.

The allocation of responsibilities and associated costs between developers and management companies and their members seems to be a source of particular difficulty. This issue is not, nor could it be, properly dealt with in this Bill. The effectiveness or otherwise of the operation of the management company after control passes to the owners of units is another important issue which must be dealt with in comprehensive legislation.

It is precisely because there is a complex interplay of different legislative codes and differing practical and legal issues in this area that the Government requested the Law Reform Commission to convene an expert group to examine all of the issues that arise in the case of multi-unit structures. The commission's consultation paper is likely to be published by the summer. I expect this report will address the various issues to which I have referred. Another very important matter that will be addressed in the report is mechanisms to deal with situations where problems have already occurred, whether through defects or inadequacies in conveyancing documentation or problems with the constitution or operation of management companies. Obviously if we are to have an even playing field, we must address the deficiencies which already exist, in addition to putting controls in place for the future.

The Government will consider the recommendations in the Law Reform Commission's final report, including the need for any new legislation in this area. Without pre-empting the commission's recommendations, it seems likely some provisions in conveyancing law will probably be needed to deal with some of the problems that have come to light with regard to property management arrangements.

I am very conscious of problems being experienced by apartment owners and am determined to do everything in my power to resolve them. However, the solution to all of these problems will not be achieved by way of a very short Bill, however well intentioned it may be. If we were to take this particular step, as outlined in the Bill, we would not be doing anybody a service. That is why I am suggesting the delay of nine months.

It takes time to have new legislation drawn up and enacted, particularly in complex areas like this. Even though legislative action is not likely to arise primarily in my area of responsibility, I am determined to ensure any practical action that might help improve matters in the short term will be actively pursued.

Something of a side issue to the question of management arrangements has emerged in terms of a small number of local authorities imposing planning conditions requiring the establishment of management companies. This matter has been raised in parliamentary questions by Deputy Catherine Murphy and others and is one which also concerns me. Concern has been raised that some conditions have been drafted in a way, or applied in circumstances, that may permit uncertainty, at the very least, about the responsibility of developers to complete residential developments and to maintain and repair infrastructure.

Provisions of the planning laws should not be used to transfer responsibility for public infrastructure, such as roads, footpaths, sewers, water mains and public lighting in housing estates to the residents, although I have a suspicion that some local authority officials may have that at the back of their minds. Last January the Department issued a circular letter to planning authorities reminding them of their responsibilities under the Planning and Development Act 2000. It also reiterated that the existence of a management company to maintain elements of common buildings should not be used to frustrate the taking in charge of estates. The majority of planning authorities do not attach conditions to planning permissions requiring management companies to be set up, although a number do and I will be encouraging local authorities to discontinue this inappropriate practice.

While the legal framework is an important element, insufficient awareness on the part of owners as to how apartment complex management arrangements work and a lack of appreciation of their own responsibilities and powers has contributed to problems. The maintenance and management of private apartment complexes is ultimately the responsibility of the apartment owners, just as any house owner has to take responsibility for his or her home. In the apartment complex context, this is catered for in a communal way through management companies but it must be stressed that ultimately control of these companies must rest with the apartment owners and not a third party which is using them as a source of revenue. If there are problems with the way a company is operating, it is primarily the responsibility of the owners, who are the company, to have these addressed.

Legislative measures to ensure timely transfer of control of management companies to owners and to enable these to operate effectively will be considered in light of the Law Reform Commission report. I expect the report will also address the need for consumer protection provisions such as requirements on developers to provide information and guidance to prospective buyers. I encourage buyers of apartments to ensure their solicitors examine carefully any clauses in contracts dealing with management arrangements and obligations. There is a particular onus on conveyancers to help protect buyers from any exploitation in this context. It would be desirable, in advance of any legislation, if a rigorous approach could be taken across the profession against inappropriate, even if not strictly illegal, contractual clauses relating to management companies to help squeeze out bad practices.

Under the Government's proposals, regulation of managing agents will be the responsibility of the new national property services regulatory authority. Legislation is being drafted to provide for the establishment of the authority and to detail its regulatory regime. I do not know what this will contain ultimately, but I expect it will provide for a much better level of control than that proposed in the Private Members' Bill.

I unreservedly agree with the need to make adequate provision for a sinking fund so sufficient funds are available to carry out major renovation. However, as I have stressed, it would be unwise to proceed with legislation without the benefit of the Law Reform Commission's recommendations as such issues require specific attention under law. I am suggesting the agreement of standard clauses in relation to sinking funds and other clearly identified matters for inclusion in all conveyancing documentation.

The Private Members' Bill seems to suggest that managing agents should be responsible for the provision of information on the rights and responsibilities of residents and on how management companies work, to the management company members. As managing agents are employed by management companies, is it appropriate to give them the role of educating their employers?

The Bill is predicated on the assumption that property management agencies are an inevitable feature of all apartment buildings. This is not the case as smaller complexes tend not to employ managing agents. Management companies of some larger complexes, whose owner-members are active, may decide to contract the required services directly and not utilise an agency. Is it wise for the legislation to be specific on these functions?

How would the Bill justify making the Private Residential Tenancies Board, whose mandate relates to private rented accommodation, responsible for the regulation of managing agents and their relationships with owners of apartments and the management companies of which they are members? How would such a proposal fit with the auctioneering review group recommendation, with which the Government agrees, that the proposed national property services regulatory authority should have responsibility for regulation of managing agents? How would it ensure such a major change would not undermine the role of the Private Residential Tenancies Board and the important functions it is performing in the private rented sector? How would the board be in a position to address property management issues on behalf of apartment owners related to aspects of conveyancing and company law?

The proposed functions are not appropriate to the board and would divert it from its core task of implementing and taking forward much-needed reforms in the private rental sector. It is essential that the board is allowed to continue its key role, which is still in the course of development, of providing a means for upholding the rights of tenants and supporting a professional approach by landlords. To divert the board from these functions would take from this important work. It would be unfortunate given that little attention was paid in the past to the sector, which is what the Residential Tenancies Act sought to redress.

The promoters of the Bill can ponder on these questions. I will be interested to hear views on these matters in the course of the debate and on how the entire range of issues relating to management of multi-unit structures can be effectively and comprehensively addressed.

I am reluctant to oppose the Bill as I have sympathy with its main objectives. However, the Bill as presented is deficient. That is why I am suggesting this approach. Members will know that my approach is based on good will towards the Bill and on an anxiety to resolve the problem.

See this speech in context