Pat Rabbitte (Dublin South West, Labour)

With the agreement of the House I wish to share time with my colleagues Deputies Jack Wall and Emmet Stagg. I thank the Government for agreeing to complete Second Stage of the Bill tonight because of the unconscionably long time we have waited for it. Tens of thousands of people are waiting for this Bill to become law and in this regard I am grateful to the Minister and the Government for rostering it this evening, even if it has proved inconvenient for several colleagues on all sides of the House who wished to contribute to the debate.

Multi-unit developments are a new model of accommodation in Ireland. These developments comprise apartment complexes but also commercial units, usually retail outlets on the ground floor, and duplexes or town houses. These have proliferated in urban Ireland in particular during the past decade, sometimes driven by tax incentives. For example, it is claimed that in the Dublin area these developments accounted for 56% of all housing units built in 2006 rising to 62% in 2007. Nationally, these complexes amounted to 25% of all dwellings completed nationally in 2007. If these figures are correct they are hugely significant.

For more than five years the Labour Party has been persistently campaigning for regulation and for statutory powers to address some of the very serious problems that have been encountered by often unsuspecting buyers. It is true that the issues are complex but it is indefensible that it has taken until 2010 to bring this Bill into Dáil Éireann. Acute difficulties are being experienced by many owner-occupiers at present. Some complexes are badly in need of refurbishment where no sinking fund has been provided and all of this has been exacerbated by the number of developers who have gone bust or who are simply unamenable.

The difficulties facing many owner-occupiers are very serious. Some of these complexes are of poor quality construction and were never approved by building control inspectors but were self-certified at the height of the boom by developers or their architects. In many cases, the management agent is connected to the builder and the builder controls the management company. In some cases, annual service charges are excessive and lack transparency and, in a number of cases, are exploitative. Services for which fees are levied are not being delivered in some cases. Often, there are no sinking funds. For example, I am aware of a survey of 27 management companies which found that after ten years half of these have no sinking fund. Often, there is no disputes resolution machinery. What happens where the developer has walked away leaving the complex unfinished? What happens in cases where complexes are only partially occupied? Many young purchasers were unaware, and appear not to have been apprised by their solicitors, that their contract of purchase effectively wedded them to the management company. As the law stands, a dissatisfied lessee has no practical redress.

In summary, an extraordinary list of problems is being encountered by the predominantly young population who are the owners in these multi-unit developments. Many struggle to repay the mortgage but find themselves obliged to shoulder hefty annual charges as well. During the past decade, the Government has been very relaxed about the accumulating difficulties. While the Celtic tiger roared, the Government focussed on the developer and the taxes coming in rather than the difficulties confronting the consumers, that is to say, the young owners. In the worst cases of abuse, it may be too late now to rescue those worst affected. In 2005, the Labour Party published its own guidelines for young dwellers in these complexes. However, the existing law is not up to the challenge and the residents of every development are dependent on the willingness and co-operation of their management company, and often the developer, to ameliorate the difficulties being encountered. In some cases, this was forthcoming up to a point; in others, it was not. Since the crash, this position has worsened.

Having said that, I am bound to acknowledge that there are some positive measures in the Bill. I compliment the Minister and his officials for taking on board many of the changes advocated by the Labour Party, home owners in multi-unit developments, the National Consumer Agency and, most especially, the Law Reform Commission. Further changes require to be made and I hope the Minister will be open to taking these on board as the Bill progresses. It would be a pity, as is said, "to spoil the ship for a ha'p'orth of tar".

The LRC noted that completion of developments was an issue and highlighted that the current enforcement provisions under the Planning Acts are not sufficient. Subject to scrutiny on Committee Stage, it appears section 5 addresses this defect. However, a further defect under the planning laws relating to the taking in charge provision is not addressed in the Bill. The LRC advocates a development bond that would indemnify the planning authority and hold the developer accountable. The Apartment Owners Network endorses this approach, which incentivises the developer to complete the development to standard. The commission notes that development bonds are usually an enforcement mechanism of last resort. The 2008 circular from the Department of the Environment, Heritage and Local Government stipulates:

It is a matter for the planning authority to determine both the level of security and the type of security that will be required for each residential development. The amount of the security, and the terms on which it is required to be given, must enable the planning authority, without cost to itself, to complete the necessary services to a satisfactory standard in the event of default by the developer.

Unfinished estates have been a running sore in this country for years. The straightforward requirement that developers finish estates to specification before getting planning permission to move onto a new estate has consistently and repeatedly been resisted by Fianna Fáil because of that party's unique link to the builders. The Minister should agree to a bond, at least in the case of these complexes.

I refer the Minister to exchanges between the Royal Institute of the Architects of Ireland, RIAI, and his Department. I received a letter from a prominent officer of the RIAI, in which he states:

On 17 June, architects' and engineers' representatives met for the first time with the Department of the Environment, Heritage and Local Government (DEHLG) about the Bill. The DEHLG has now adopted a proactive stance on foot of the referral to the DEHLG by the Department of Justice of the issues of compliance and completion of developments: see the DoJ letter to the RIAI which is the last attachment herewith.

The tone of our meeting (and of several 'phone contacts) with the DEHLG has been very positive. But so far as the Bill itself is concerned, there appears to be no Government move towards putting into the Bill [either of the propositions his body advanced]. [For example, he gives priority to the following:]

1. The 5% retention recommended by the Law Reform Commission:- this draft LRC provision is supported by architects and engineers with experience of apartment developments; both those working in local authorities (who know at first hand the problems with social and affordable housing units) and those working for housing developers. This 5% retention would provide for privately managed areas of MUDs a parallel to the bonds already provided for in the Planning Acts to guarantee completion of publicly managed ... areas of MUDs;

The officer makes a number of other points but I cannot understand the Minister's resistance to the notion of the bond. Never has a bond been more badly needed than in this crisis created by the difficulties in multi-unit developments?

In one development in my constituency, Hunterswood, the residents association made no progress dealing directly with the developer appointed management company board of directors regarding serious structural concerns they had. I made representations to staff of the building control section of the Local authority and their attitude was to encourage "residents to engage with the service agent and their management company" and that "as time goes on, increasingly maintenance matters arising will be dealt with whatever Management Company is in place". This reply indicates an attitude pervading local government that owner management companies should act in lieu of the local authority in ensuring builders complete managed developments to a satisfactory standard.

Against this background, the proposal by the Law Reform Commission for a development bond to hold the developer accountable is vital and I ask the Minister to have a rethink. Existing enforcement provisions are inadequate. In addition to the difficulties faced by home owners in unfinished developments, small contractors are also suffering where they have carried out work for developers but, in some cases, have not been paid. The bond could arguably serve the dual purpose of protecting both apartment owners and subcontractors.

The LRC also recommended that there should be a statutory prohibition on developers seeking payment of more than one year's service charges in advance. I cannot see where this is addressed in the Bill. I would like to hear the Minister on this point since, in my experience, most owner-occupiers find it difficult to pay one year's charges up front.

The LRC recommended that there be a statutory obligation on a developer to set up a management company by completion of the sale of the first unit at the latest. A purchaser should become automatically a member of the company at that stage. The Minister might confirm that this recommendation is adequately provided for.

Section 14 provides in respect of voting rights that "one vote shall attach to each unit in a multi-unit development". I accept this is in line with the recommendation of the LRC. However, I am not persuaded of the one vote, per unit system and, like the Apartment Owners Network, I advocate the one member, one vote system favoured in an earlier edition of the Bill. Where, for example, an investor owns multiple units, he will enjoy disproportionate influence and he could combine with other investors to take control of the management company. At the outset of the life of a complex, the developer will own the majority of the units and, therefore, will have effective control or, at a minimum, greater influence than the average owner-occupier. This could defeat a main objective of the Bill. They are not trading companies or for-profit entities but a vehicle to manage and maintain the living space of its members.

Developments with substantial unsold units pose a particular challenge to those dwellers who reside there. In such circumstances, if the Minister persists with his "one vote, one member"' system, the developer will have the majority of votes and thus will control the management company. Residents are naturally apprehensive about whether the receiver or perhaps NAMA may decide to sell unsold units to institutional investors in bulk rather than to individual home owners. What will happen in developments where the housing Minister has authorised long-term leasing, a most expensive and inappropriate solution for everyone except the developer and-or the bank?

The bigger long-term deficiency in the Minister's proposal is that it will impede the establishment of an adequate sinking fund for the type of maintenance and upkeep not envisaged in the annual service charge. Some of these complexes, unless maintained and repaired regularly, will deteriorate into unpleasant living environments. Again, the individual owner-occupier will be most concerned to maintain a congenial environment. The Law Reform Commission, LRC, recommended that no long-term contracts with management agents be made by management companies at the start of the development. This recommendation is not addressed in the Bill, nor is the recommendation for the creation of a regulatory body to keep records of the developments and units held over. Will the Minister set out why he chose not to provide for the LRC recommendation that breach of obligations should constitute a criminal offence? It was envisaged that the regulatory authority would be the prosecuting body. Any unit owner would be in a position to seek an order for enforcement of the developer's statutory duties from the Circuit Court and an award of damages to cover any loss suffered as a consequence of breach of statutory obligations.

The regulation of annual service charges is badly needed and section 16 appears to fairly provide for this. However, the requirement that the annual budget be approved by a general meeting each year could, in practice, be too onerous and too restrictive. There already will be a need for an annual general meeting and therefore an additional general meeting could be difficult in practice and not the most suitable for the detail involved in the preparation of the annual service charge. If the members do not approve of the performance of the directors in this or other regards, they can dismiss them.

In conclusion, I return briefly to the anti-social behaviour that is torturing so many communities and from the scourge of which multi-unit developments are not immune. Section 20 attempts to address this modern scourge and makes provision for house rules with the objective of "enhancing the quiet and peaceable occupation" of units generally. However, it is not evident how such house rules can be enforced. Section 20 (10), for example, enables a management company to "recover the reasonable costs" of a breach, but how does the management company deal with nuisance, all-night parties, obstructive parking, unsightly littering or dumping? The Apartment Owners Network argues for a monetary sanction and I can anticipate the difficulty associated with that proposal under our Constitution. However, I ask the Minister to seek the assistance of the Attorney General's Office before Committee Stage in devising some meaningful sanction. Otherwise, application and enforcement of the powers in section 20 will be meaningless.

The Bill shows no awareness of the environment in which we now live following the economic crash and the collapse of the construction industry. As developers go bust or AWOL and developments are left half finished or half occupied, will we have to fall back on the local authorities in some instances? Is it not likely that in some cases NAMA will have to do business with the housing authorities? In such circumstances, why should the common areas and public facilities not be provided by the local authority? Should the Bill not anticipate such eventualities?

In the Belfry Hall development in my own constituency the local authority required in the planning permission the construction of a playground in the development for the wider community, not merely the residents of Belfry Hall, and that it be the responsibility of the Belfry Hall management company to maintain and insure this public facility. The developer at Belfry Hall went into receivership and the first the home-owners who were elected to the board of the management company knew about this was when the local authority advised them to purchase public liability insurance for the playground. This is another example of what is happening at present.

I had hoped to make a number of other points on this but I wish to let my colleagues contribute.

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