Leo Varadkar (Dublin West, Fine Gael)

I welcome the fact that we are having a debate on the Bill. At a rough count there are approximately 600,000 people in management company developments, there are 4,600 management companies altogether and 400 different management agents. In my constituency of Dublin West at least 7,000 of the 32,000 housing units are covered by management companies. I include areas such as Tyrrelstown, Ongar, Hollystown, the former Phoenix Park racecourse, Diswellstown, Farmleigh, the Waterville area around Blanchardstown hospital and some of the apartments around the Blanchardstown centre.

I know a little bit about the subject myself as I live in a management company development and pay management fees. Management companies can apply to many different types of development. There are apartments, gated housing, un-gated housing and mixed developments, not just in terms of a mix of houses and apartments but in terms of developments that are partially commercial and partially residential.

The legislation is overdue. There was a commitment to it in the programme for government of the first Fianna Fáil Government in 1997 but it was not done. Much work has been done by the Fine Gael Party, the Labour Party and the Law Reform Commission, the National Consumer Agency, the Office of the Director of Corporate Enforcement and also the Apartment Owners Network. The legislation is very much needed for a number of reasons. There has not been a clear law up until now. In many cases developers controlled developments through golden shares or through provisions which allowed them not to have a proper AGM until all the units were sold. There is also the fact that many charges are unfair. AGMs are often held improperly. In many cases there are not sinking funds or, as in the case of my development, the issue of unpaid fees for the past ten years arises. There is also the fact that there are still concerns over the completion and transfer of developments.

I am not convinced that the Bill as drafted is adequate. It has been watered down and amended in the Seanad. Reading through the Seanad debate I found it difficult to understand exactly what the amendments were about and their significance. I very much endorse Deputy Terence Flanagan's call for a new explanatory memorandum to the Bill.

I organised a public meeting which was an interesting thing to do where I presented to people who live in management company developments in my area what was in the Bill and asked them what they thought of it and what should be in it. My contribution is based on that. There are many good things in the Bill. As I am time constrained I will not mention them but there are some areas about which I have concerns and would like clarification in the Minister's response, or if not then at least at some stage. The first issue relates to the one unit, one vote provision. That seems to have been slightly changed in the Seanad but I do not fully understand what happened in that regard. Perhaps someone might explain how that has been changed. I would like to know in particular whether the provision will apply retrospectively and if it will apply to existing management companies. Will it apply to them or if it will only apply to new developments that have yet to be built? That is crucial for everyone who currently lives in an apartment development. I would also be interested to know how it affects the master lease rules in existing developments.

Deputy Rabbitte proposed that it should be one member, one vote. I can see problems with that as well. If someone owns, for example, three apartments in a development he or she is paying three times as much in fees and therefore to a certain extent that would give him or her greater voting rights but there might be a mechanism to prevent any one owner or developer having a controlling interest of greater than 50%. That can be done in a different way. What should be in the Bill, but which is not, is a proper system for the dissolution of management companies. Management companies have been dissolved in Castlecurragh in my constituency but this involves a very difficult process. There should be a proper system for achieving this.

There should be a proper system for the separation of management companies. In mixed developments, management companies for the apartments should be separate from those for the houses, if there should be one for the Houses at all. There is no proper system of separation. Separation can be achieved but it is extremely complicated. It involves splitting the folio and title, closing one company and establishing two or three new ones in its place. There needs to be a better system to achieve this. From reading the transcript of proceedings in the Seanad, I believe the legislation now applies to mixed developments. Perhaps this can be clarified.

What is the position on agents? There are a number of cases in Dublin 15 in which management companies have not filed annual accounts or, in some cases, have been struck off or are close to being struck off, yet their agents are still sending bills on their behalf. Will this be addressed in the Bill?

I agree with Deputy Shatter's proposal that we should allow owners of management companies to use the small claims court procedure to pursue debts. It is very hard and expensive to pursue debts. There should be a specific provision on solicitors' obligations, including the obligation to inform buyers of houses or apartments in management company developments as to what they are doing. Many people tell me they did not understand what they were buying into and that their solicitor did not explain it. When I heard this on the first few occasions, I did not really believe it, but now I have heard it too many times not to believe it. This needs to be addressed in the legislation.

Solicitors should be obliged to inform the management company of a change of ownership. There have been a number of cases where management companies have not been informed when apartments have been sold, resulting in the sending of bills to people who are no longer the owners.

The completion of developments comprises a difficult area. In the case of a traditional housing estate, the council determines at the time of taking charge whether the development has been built in accordance with the plans. If it has been, a bond is paid. This system does not work because the bonds are so small. They are trivial in Ireland by comparison with those in the United Kingdom. There are many developers who are happy enough to forego their bond knowing full well that completing the development properly would cost a lot more. I hope the Minister for the Environment, Heritage and Local Government will consider this in his reforms and increase significantly the bonds developers must pay so they will not be worth losing, thus incentivising them to finish their jobs.

The system is complicated in multi-unit developments because they are not taken in charge. Who determines whether the development has been completed according to the plans? In theory, the local authority should do so but this does not really happen because the developers do not request the refund of the bonds because they are so small. What happens is that the developer transfers ownership of the common areas to the management company, which it then controls. Nobody ever checks before the transfer that the development has been completed in accordance with the plan. Consequently, management companies comprising residents often find out they are the owners of common areas transferred to them by developers without having had a say in ensuring those areas were checked for snags and completed. This is not covered in the legislation in so far as I interpret it.

If a management company is struck off, a six-year period must elapse before it can return to the register. This is good. It is not clear where the sinking fund goes when a company is struck off, nor is the fate of the common areas clear. Does a sinking fund that has accumulated transfer to the Minister for Finance if a company is struck off and cannot be recovered?

Provisions are required on charging interest. Management companies or their agents should have to give notice before charging interest.

According to the first draft of the Bill, a €200 sinking fund was to be imposed on everyone. This would be difficult in some cases. It would be very appropriate in some cases but not necessarily in all cases. I know of some developments - in the Waterville area of Dublin 15, for example – in respect of which the developers left behind very large sinking funds worth from €40,000 to €100,000. There is no reason to charge people €200 on top of their existing management fee in such circumstances.

The owners of houses in mixed developments often pay a small management fee of only €150 or €200. To add an extra €200 to this would be unreasonable. A sinking fund is for long-term repairs that may be required to apartment buildings, not houses. I am not clear whether this was addressed in the amendments in the Seanad.

Will there be provisions for the bonding of sinking funds? I am very concerned about management companies and agents collecting huge sums in sinking funds that are not regulated at all. I am concerned that such funds, where they exist, could be dipped into or invested inappropriately. There should be a system in which sinking funds would be bonds. I look forward to hearing the Minister of State's response to my queries and requests for improvements.

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