Dáil debates

Friday, 23 October 2015

Management Fees (Local Property Tax) Relief Bill 2015: Second Stage [Private Members]

 

10:05 am

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I wish to commence the Second Stage debate on the Management Fees (Local Property Tax) Relief Bill 2015. Essentially, the Bill is an amendment to the Finance (Local Property Tax) Act 2012 to make provision for a partial - I stress the word "partial" - exemption of property tax payable by a relevant owner whose property is located in a managed estate on which the owner of said property is liable to the payment of management fees and to provide for related matters.

Many people are living in managed estates paying management fees who must also pay local property tax. We understand the reason the local property tax exists. The essence of the local property tax is to provide funds to local authorities to carry out work they should do. However, in many estates nowadays there is a management fee to be paid. These could be housing estates, apartment complexes or a joint housing and commercial development, although the Bill has nothing to do with the commercial aspect of the estates. Some of these estates are quite big, with up to 900 dwellings as well as shops, a local pub, a pharmacy and child care facilities. The latter elements pay commercial rates rather than the local property tax. We will talk about that issue another day. The Bill relates specifically to people living in these estates who are subject to management fees.

Management fees became very popular a few years ago when local authorities began to include a condition in planning permission granted by them whereby there would be a management company to manage the public areas in an estate. It was probably a short-cut way for local authorities to avoid taking on the future liability of dealing with the open areas in some estates, as well as roads, footpaths, lighting and community facilities. In the past, this would have specifically included water and sewerage facilities also, for which local authorities previously had responsibility. Local authorities still deal with those matters, but now they act merely as agents for Irish Water. We will not get into a debate on Irish Water today because that is a separate issue.

People are paying management fees to companies to manage their estates and carry out work that in the normal course of events would be managed by local authorities if the estate was fully taken in charge. Such people are paying on the double for access to roads, footpaths, lighting and other public services in the immediate area, which could include pedestrian crossings and the maintenance of roundabouts. I do not suggest for a moment that people should not have to pay their management fees or the local property tax. The purpose of the Bill is to grant a partial exemption to those who are currently paying on the double. People understand the management of their estate and the fees they pay, whether they live in houses or apartments. We believe there should be a recognition that people are paying on the double, and to that end we propose a partial reduction in the local property tax equal to one third of the management fee, one third of the local property tax, or €100, whichever is the lower amount. Under the proposed legislation, nobody would ever gain more than €300. People who are in properties valued at €1 million with big management fees attached – some developments charge up to €2,000 – and whose local property tax is very high would not get an extra benefit because it is restricted to a maximum benefit of €300. That is the essence of the Fianna Fáil approach to all taxation and expenditure. The benefit should be geared towards people on lower and middle incomes and should not be skewed in favour of those at higher income levels, as has been the norm in all budgets in recent years from the Fine Gael Minister of State across the floor. In capping the benefit at €300 – most people would not be in that bracket – we specify that people would have to prove they had paid their management fee by producing receipts. Many management companies have difficulties collecting their income. A receipt of payment could accompany the payment of the local property tax and ensure a reduction of one third of the management fee. If the management fee was €450 then the reduction would amount to €150, and if the management fee was lower then the reduction would be less. If the value of a house in a development was under €100,000, for which the local property tax would be €90, it would get a reduction of only €30, which is one third. People in a house valued up to €150,000, the local property tax on which would be €225, would get only one third of that, approximately €75. For those in a house or apartment valued at up to €200,000, for which the local property tax would be €315, would get a reduction of only €105.

Based on data available from the Central Statistics Office and local authorities - I accept it is not an exact science - the best information we have been able to establish is that such a measure would be of benefit to approximately 200,000 dwellings in the private sector. It would not even be confined to the private sector, because local authorities have houses in some estates which they were given under the Part V arrangements for developments. That is another issue that is covered in the Bill. We estimate that the average saving per person would be approximately €86, based on people whose property tax is in the region of €300 to €400 and who have a lower management fee. Some people would save a little less if their property tax was lower, and others would save substantially more, but nobody would have a saving greater than €300. We estimate that the measure would cost approximately €17 million in a full year.

We published this legislation during the course of the year. I thank in particular my Dublin colleague Senator Darragh O’Brien for his work on the Bill. He met many people in his constituency in the greater Dublin area who raised the matter with him. They see the injustice of having to pay twice in the form of management fees and the local property tax. He instigated the Bill and he wants to speak on the issue in the Seanad, but because it is a money Bill it must first be introduced in the Dáil. I introduce the Bill essentially on his behalf. I acknowledge his good work.

However, the issue does not just affect the Dublin area; it affects every provincial town. Off the top of my head I can think of one large estate in Portlaoise, Kilminchy, which has between 600 and 700 houses and apartments. There is also a commercial area, which has nothing to do with the issue in hand. Management fees are payable there. I can think of housing estates in Mountmellick and Portarlington where management fees are payable also, and where people are liable for the local property tax. The issue is not just a Dublin issue; it mainly affects cities but it does stretch into every provincial town, especially in areas where local authorities insisted as a condition of planning permission that a management fee would be charged by a management company.

The issues outlined must be taken into account, particularly the plight of apartment dwellers in some areas. We estimate that the average saving per person would be €86, which is a modest amount.

We are only on Second Stage, and I do not know the timing of the legislation or when it will pass through the Oireachtas. If it is through the Oireachtas before the general election, we would be happy to implement it. At this point it is not, and I have no indication that it will be on the Statute Book in 2016. If we had had clearance from the Government, we would have had it in our budget proposals. In the absence of a commitment from the Government to support this, it would have been wrong to include it in a budget submission because the legislation would not be in place. It will be in our manifesto for the next general election and will be implemented as soon as possible, if Fianna Fáil is leading a government after the election.

Other issues also come into this debate. A partial or complete exemption should be introduced for those affected by pyrite. A restricted number of unfinished housing estates are exempt from the local property tax. When the household charge came in first, I recall that between 40,000 and 50,000 houses were exempt from it in the first year. When the local property tax was introduced, it was cut by 90% to approximately 5,000 houses. It is a very restricted list at this stage, which does not reflect the reality on the ground. There are many estates in which works are not yet completed. The definition of an unfinished estate that would allow it to qualify for an exemption from the local property tax is exceptionally restrictive. If the footpaths to the front doors of the properties on an estate are not finished, the whole estate is deemed unfinished. However, estates that have problems with water and sewerage schemes or other public services might not be considered unfinished and, accordingly, get no exemption. We need to re-examine the definition of an unfinished estate. We also need to examine the issue of estates that have not been taken in charge.

Apartment dwellers have been hit very hard by the Government with the local property tax based on the value of their apartments, as well as management fees. They have also been hit by water bills. It is unfair that the Government introduced a system whereby people would be charged for water when it knew that several hundred thousand dwellings, namely apartments, could never have a water meter installed. It is not possible to install a water meter in some apartment blocks and one cannot put a water meter inside everybody's apartment door. The logistics of this were never adequately considered by the Government. Everyone living in an apartment pays the local property tax and pays management fees to the management company but also has to pay the maximum amount in respect of water services. If they had a meter, they might have a much reduced water bill because water usage by an apartment might not be as much as that of a house. There is no question, for example, of an apartment owner having a hose to wash the car, water plants and look after a garden. Many apartment dwellers might not use their full allocation. However, Irish Water has no mechanism to ensure apartment dwellers can get a reduced bill because it cannot install water meters in apartment blocks.

What does the Government have against those who live in apartment blocks? I do not know why it has singled out that particular group specifically. It has singled them out for the local property tax, which is fine, but the Government knows that anyone who lives in an apartment block that was built over the past ten or 15 years pays a management fee, and this was not taken into account. It puts the water bill on top of that and ensures they have to pay the top rate with no possible reduction if they have a lower water usage. This leads us on to the broader issue of what exactly the Government has against people in apartment blocks.

The purpose of this legislation is to help people in apartment blocks and estates where there is a management company. Many of the estates can comprise detached, semi-detached or terraced houses. Some of these houses are even owned by local authorities, which got them under Part V arrangements for social and affordable housing. The council is paying the property tax because it is the owner, but also the management fee to the management company. Due to the lack of consistency in thinking this through, one can have the ridiculous situation of a local authority paying the management fee to a management company to manage the roads in an area that the local authority should have taken in charge. The more one thinks about it, the more one can see the merit in allowing some partial reduction in the local property tax. No one is suggesting a full reduction. However, a maximum reduction of one third should be allowed if it is higher than the equivalent proportion of the management fee, and subject to a maximum cap of €300. I hope the Government will accept this legislation and allow us to tease out the difficulties on Committee Stage.

Comments

JOHN COWHIG
Posted on 1 May 2016 6:24 pm (Report this comment)

Some clarification is required with regard to Kilminchy housing estate in Portlaoise mentioned by two local TD's in this debate.
The management company in Kilminchy was set up as a planning condition for the estate by Laois County Council. Every residential home owner in the estate becomes a member of the management company when they purchase a home.

The management company has responsibility and will only ever have responsibility for managing the 'common areas' of the estate.

The local authority is responsible and always will be for the roads, footpaths, public lighting and other services as areas are taken in charge by them.

At present a large part of the estate but nowhere near 90% is taken in charge.

There are no developers left responsible for the areas as yet not taken in charge who remain in business. The management company which represents all the home owners have requested in writing that the local authority take all these areas in charge.

Kilminchy is the largest housing estate in County Laois with 716 residential properties. There are approximately 13 Acres of grassed 'common area' within the estate managed by the company and the annual management fee for 2015 & 2016 was set at €100.

As far as I am aware in all private estates and even in local authority estates the local authority do not cut grass or maintain common grassed areas.

I for one am glad that the management company exists in Kilminchy because otherwise the estate would be a mess with home owners property prices suffering. Instead the estate continues to climb the tidy estates table and should break into the Premier Division for 2016.

With regard to Kilminchy and the LPT, home owners who pay management fees only pay to maintain common areas. The LPT through the local authority is not and never will be used to fund maintenance of these areas.

John Cowhig

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