Terence Flanagan (Dublin North East, Fine Gael)

I take this opportunity to congratulate the Minister, Deputy Dermot Ahern, on his move to the Department of Justice, Equality and Law Reform and wish him well in his new role. I welcome the opportunity to speak on the Fine Gael Private Members' motion before the House this morning and thank my colleague, Deputy Phil Hogan, for helping to bring this motion before the House.

The Fine Gael motion calls on the Government as a matter of urgency to put the office of the regulator — the national property services regulatory authority — on a statutory footing and give it proper powers and adequate resources to regulate both management companies and management agents. We want to see the annual service charge set in a fair and transparent manner, and the provision of a sinking fund to take care of the long-term maintenance issues should be made mandatory for every management company.

Company law should be amended to allow a name change from management company to owners' company as soon as the control of the management company is transferred from the developer to the owners. We are also calling on the Government to have developers transfer more quickly control of a completed development to the owners.

The reason we must bring this motion before the Dáil is simply the inaction of this Government on this issue. In 2002, the programme for Government put together by Fianna Fáil and the Progressive Democrats stated the Government would consider the introduction of legislation to regulate the establishment and operation of property management companies. Yet six years later this legislation has not been introduced and we are still talking about it.

The Government introduced a draft Bill in 2006 and also established the National Property Services Regulatory Authority to regulate management companies in July 2006. A director and staff were appointed then on a non-statutory basis and a budget of €700,000 has been allocated to this office in 2007, with €930,000 in 2008. No legislation has come before this House to regulate management companies. What we currently have is yet another quango where a director and staff have been appointed with a substantial budget but the office has no statutory powers to regulate the industry.

Today, problems continue with management companies because of the Government's slow-footed approach. Apartment owners remain unprotected as they have been neglected by this Government. Approximately 500,000 people live in apartments and mixed-unit developments. They are mainly young people, paying service charges on average of €1,500 per annum to approximately 4,600 management companies. This figure has increased almost threefold in the last six years alone. Multi-unit apartments and mixed developments are a feature of modern living and will continue to increase as we move towards higher urban densities and more environmentally sustainable living.

Property management companies in Ireland must be regulated, which is the basis of the motion before the House. We understand their necessity, as they exist to maintain common areas, as Deputy Hogan noted, such as halls, stairs, lifts and gardens, as well as areas which are accessible to everyone living in the building. They own the freehold of the common areas, which apartment owners are not always aware of. Apartment owners have a leasehold on the apartment they purchase.

In new developments the general practice is that a management company is incorporated by the developer or his solicitor before any units are sold. The vast majority of the management companies deal with apartment blocks, although it is also possible for them to be set up in housing estates. The management company collects a service charge from all owners in the complex and is responsible for providing a sinking fund to cover repairs and long-term expenditure. Management companies may manage the operation of the development themselves or employ a management agent to undertake responsibilities.

Over the past number of years it has become apparent there are many problems in this area with management companies which must be dealt with. In my own constituency of Dublin North-East, apartment owners are contacting my office on a daily basis highlighting the problems they have with management companies. As a result of the huge volume of phone calls and correspondence relating to this matter, it was necessary for me to hold a public meeting recently on the issue. At this meeting, owners of apartments voiced their strong concerns about the fact that the Government has not regulated the sector. They also highlighted that it is a free-for-all with some management companies and management agents ripping off their owners.

Some of the problems associated with management companies include confusion among the public regarding the terms "management company" and "management agent". There is an information deficit among homebuyers as to their rights and responsibilities. Many people feel they were ill-advised by their solicitor or estate agent about management companies and agents when they signed their contract for their new apartment.

There is a lack of transparency with some management companies which do not hold annual general meetings. Some of the ones that hold such meetings do not inform all their members about the meeting. There is a failure of some management companies to provide the members of their management company with financial information. For example, this might relate to the income and expenditure accounts relating to the performance of the company.

There is no transparency on service charges and the calculation of the charge. Management agents charge different rates. Some of these rates are good, while others are extremely bad. There is no value for money and there is a difference in the level of rates. The rate one pays depends on where one's home is located.

Service charges in Dublin ranged between €400 and €4,000 per annum. They are normally set at a low level initially as a method of enticing prospective buyers and higher charges are normally imposed in subsequent years, with no come-back for the homeowner. Service charges have been used to rectify snagging problems with developments, which is wrong. Some management companies have not established sinking funds and this will cause difficulties for apartment complexes in the future.

There is a lack of information regarding the importance of service charges. The law is that people cannot sell their apartments until all outstanding service charges are paid. This is not explained to those who wish to purchase apartments. There is a lack of information for homeowners and, as a result, these individuals blame their management agents for the problems affecting their complexes and do not pay the service charges. Ultimately, this has a knock-on effect on the owners of apartments because the value of their investments deteriorate.

In many instances, the control of management companies is not handed over to owners until the last unit has been sold. Some developers remain on as directors for many years. This prevents owners from electing the directors of their choice. In theory, a developer is supposed to leave the development when all units are sold and hand over charge of the management company. However, this is not happening in practice. In addition, complaints boards, to which residents can voice their grievances about their management companies or agents, are not being established.

Many management agents have no experience of the requirements under company law requirements and they operate in an industry that is unregulated. Some management companies fail to complete annual returns and this may result in their being struck off the companies register and apartment owners being unable to sell their properties.

I recently received an e-mail from a constituent regarding some of the problems she has encountered at the apartment complex in which she lives. It states:

I moved into my apartment in December. Unfortunately, from the moment I moved in, myself and the other residents have been faced with on-going problems. The complex itself is still under construction so there have been many teething problems for example, flooded carpark, lifts not working, lights not working and even a sewage leak. I appreciate that these types of problems are to be expected (with the exception of the sewage leak), as the complex is brand new. However, my main worry is the access to the complex. We can access the complex through the underground carpark or by using the pedestrian walkway. The pedestrian walkway is a long wooden manbuilt tunnel, which I feel is very unsafe — particularly at night. I would never use the walkway at night on my own . . . . it's dark, very long and you have no idea who could be waiting for you at either end. The walkway is also very secluded. I really feel that this walkway is very dangerous — in the day time and especially at night. The other option is to go through the underground carpark.

At the moment, if I do go out in the evenings, I have to stay in my parents or friends houses as I simply can't access my home in a safe way. Taxis can only drop residents off at a side road leading up to the complex. Then residents can either access the carpark using their swipecard and walk across the deserted (and flooded) carpark or worse, risk the pedestrian walkway. As I'm sure you can imagine, neither of these options appeal me. I'm too scared to try either.

My friends came to visit recently and used the pedestrian walkway, which leads to the gates of the complex. When they reached the end of the walkway, they found two young men there and they were drinking. This is exactly my point — this area is completely hidden from the main road. Anybody could be waiting for you and you literally have nowhere to go. Unless you turn back and run the length of the walkway.

I have contacted the builders about this and have asked them what plans they have once the complex is complete but my request for information has been left unanswered. My family, friends and even taxi drivers are in utter shock when they see how we have to access our homes.

There is security on complex but I never see any security guards at night. In fact two cars were stolen from our carpark recently. I also saw three teenagers climbing over the complex wall (they used ladders the builder had left out, so it was very easy for them) and they walked straight to the stairs that leads to the carpark.

The builders are obviously unconcerned about the obvious dangers in the complex.

This is just one example of the problems people are experiencing with their management companies on a daily basis.

Another constituent contacted me by e-mail and outlined the issues in respect of which no one is willing to provide them with assistance. All this person wants is answers but unfortunately these have not been forthcoming from the builder, the management company or the management agent. The e-mail to which I refer states:

I purchased my apartment off the plans in Oct 2006 and finally got my keys in Dec 07, but to be honest I really didn't know what I was buying.

I am very happy with my property however the development itself is in an awful state. Myself and a number of neighbours have been in constant contact with our management company over issues we are having but we have been passed back and forth between the management company and builders each other claiming the other is responsible for dealing with our queries.

There is also NO visitor parking in or around the development.

Our underground car park has also been flooded since we moved in December, every time there is the slighted drop of rain we are flooded, although I think the builders are trying to rectify this. But if you [had] seen the state of the place you would be shocked.

My other major grievance is that the external walls of our apartments these have been left unfinished. When I snagged my property I brought up the state of the external wall and I was told like my neighbours that these would be finished at a later date as there was still building going on around us and this work would be completed when development is finished . . . I have mentioned this to our management company who have now informed me that this is not the case that they think our apartments will be left this way.

I have tried to contact the builders to ask them but have had no luck. When we [saw] the show apartments the external walls had either nice red brick or [were] painted a cream colour while our apartments have [a] rough grey concrete finish. Its really horrible and basically just looks unfinished. If we bought our property based on the show apartments surely our homes should be completed to the same standard.

At the minute we have paid expensive management fees of €1,500 but no one seems to want to help us.

This is one further example of the problems with which a regulator might deal. We are seeking that such a regulator be appointed.

It should be acknowledged that much work has been completed in this area by the Law Reform Commission, which has commissioned reports on the need for the regulation of management companies and agents. Dublin City Council must be commended on taking the lead in this area by producing two reports, namely, Successful Apartment Living, parts 1 and 2. The city council also established an apartment owners forum to discuss the problems people living in apartment complexes experience on a daily basis.

The Director of Corporate Enforcement also produced a report entitled The Governance of Apartment Owners' Management Companies. He is responsible for taking action against directors who do not take their responsibilities seriously and is to be commended on the good work he is doing. In addition to the reports to which I have referred, the National Consumer Agency published a report on the property management sector in 2006.

I welcome the Government amendment to the motion, which commits it to publishing the property services regulatory authority Bill. The latter will provide for the establishment of a licensing system for regulating property management agents. The Government amendment indicates that this long-awaited legislation will be published during the current session. However, actions speak louder than words and we hope that the legislation will be forthcoming.

The Government must get real in respect of this issue. It must appoint a regulator and give him or her statutory powers and adequate resources. Young homeowners are struggling to make their mortgage repayments and are becoming increasingly aware of their outgoings. On average, these people are obliged to pay service charges of €1,500 per annum. That is a bridge too far, particularly because the money is going to an industry that is unregulated.

I hope the Minister will take on board the points I have made. I also hope he will appoint a regulator and provide him or her with statutory powers.

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