Trevor Sargent (Dublin North, Green Party)
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Ba mhaith liom mo bhuíochas a ghabhaíl leis an Cheann Comhairle as cead a thabhairt dom an cheist thábhachtach seo a ardú. I welcome the Minister of State, although I was hoping the Minister for the Environment, Heritage and Local Government, Deputy Roche, might attend. The issue I wish to raise, relating to management fees, will grow and will need serious consideration by the senior Minister.

The front page of The Irish Times today states that child care costs are rising at five times the rate of inflation according to the Central Statistics Office. The Minister of State can imagine how difficult this is in itself. On top of that, many first-time buyers are being landed with management fees. People have contacted me on this issue from practically all of the towns in Dublin North. I have no doubt this is a countrywide problem, as other Deputies to whom I have spoken will indicate.

One resident in a house states:

I am a resident at Barons Hall, Flemington, Balbriggan. I am writing to appeal to you to take action on a national level for the plight of residents like myself who are being forced to pay fees to cowboy companies. I, like all other residents who live in this area, am disgusted at the idea of paying out management fees for basic services that are not done and which should be done by the council anyway. I, like others, never found out about management fees until signing for my house. By that stage it was either sign or lose the house.

Smith Property Management, on behalf of the builders, Pat Neville Developments, are trying to extract €250 a year from householders for the most basic of services, such as cutting grass and cleaning the area, which they do not even bother doing. Other estates in Balbriggan do not pay management fees and have these basic services provided by the council. This is tantamount to discrimination.

Management companies are completely unregulated and it seems they can charge what they want and provide any type of service they think they can get away with. I am asking you to take up this case with the Department of the Environment and Fingal County Council. This is a problem which will not go away without political intervention. I am a law-abiding, tax-paying citizen and I have always paid my bills on time, but I feel so strongly about this situation I have refused to pay.

I have written to the management company and their reply was lame. The bottom line is that they should be outlawed and properly regulated for apartment owners.

That householder may well come to find that if the house is sold, he will be landed with an enormous accumulated fee. That is where the Government is favouring a type of extortion by not regulating such companies and allowing the sector to grow and get worse.

I mentioned a charge of €250, but they can vary. At a recent public meeting in Balbriggan I heard of charges of between €200 and €1,500 per year per home or apartment. This would be hiked up every year. One management company published accounts stating that €133,000 in fees were collected, of which €23,000 was spent on administration and only €6,000 on maintenance. This brazen profiteering is only happening because the Government is starving local authorities of staff and finance while failing to legislate what is in many ways corruption and extortion out of existence.

I ask the Minister of State not just to take on board legislation. That could be done quickly and we have found that out this week. It is firstly a matter of awareness. I urge the Minister of State to ensure that awareness is raised in the public mind of the possibility of management companies coming in at the point of sale of a house like wolves in sheep's clothing. In England there is a right to manage other types of documentation based on the Commonhold and Leaseholder Reform Act 2002. We do not have the type of documentation or awareness in this country because we do not have as much a tradition of living in apartments as other countries.

People are therefore being ambushed. The Government is standing idly by and I question how irresponsible that is. For example, Fingal County Council does not put too fine a tooth on the matter when it states with regard to management companies:

The current model, unregulated by a lack of any controlling primary governing legislation, is open to abuse. The most common is where a developer holds a controlling interest either by some clause in the management company structure or by controlling a significant number of properties by retaining ownership (renting, not selling them).

Under section 180 of the Planning and Development Act 2000, as long as the management company is in situ, people cannot hold a plebiscite. As long as the developer holds one of the properties, the estate is allowed to continue on with a management company. Money is being demanded from people, and this is in many ways extortion. A number of recommendations have been made by Fingal County Council on primary legislation. One such recommendation states that matters that can be controlled by legislation are a prohibition on developers withholding the handing over of control for a prolonged period, and the introduction of a formula to calculate reasonable contributions to prevent the imposition of excessive management charges at the outset.

The necessary regulations are not in place and the Minister of State is standing idly by while extortion takes place. I urge him to regulate this activity and to promote awareness of the situation so that people are not ambushed into paying those charges. He should act on this without waiting for the Law Reform Commission. He should act on receipt of its report but, in the meantime, people are being drained of resources they scarcely have. If the Minister of State had to pay the charges he would do something about it.

Batt O'Keeffe (Cork South Central, Fianna Fail)
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I thank the Deputy for the opportunity to address this important issue.

Many public representatives are aware of problems experienced by some apartment owners——

Trevor Sargent (Dublin North, Green Party)
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And householders.

Batt O'Keeffe (Cork South Central, Fianna Fail)
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——and it is right that we should look for equitable solutions. Because of the legal complexities affecting these issues, the Government has sought the expert assistance of the Law Reform Commission, whose report is now at an advanced stage. Resolving the various difficulties has implications for a number of legislative codes including measures relating to company law and conveyancing. The Government will consider the recommendations in the Law Reform Commission's final report, including the need for any new legislation in this area.

Trevor Sargent (Dublin North, Green Party)
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Will it act in the interim?

Batt O'Keeffe (Cork South Central, Fianna Fail)
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Insofar as abuses of the sort referred to, involving developer-controlled companies, may exist this is likely to arise from the developer retaining some units in a development and, as a result, maintaining control of the management company which should properly transfer to the owners of apartments soon after the development is completed. The resolution of management problems should be largely in the hands of the homeowners via the management companies of which they are members. However, a source of problems at present seems to be the manner in which developers can retain effective control of management companies indefinitely. This seems to derive from the fact that standard conveyancing practice and company law provisions allow for developers' nominees on management companies to outvote owners if the developer retains a single unit in the development.

Trevor Sargent (Dublin North, Green Party)
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The Minister should refer to section 118 of the Act.

Batt O'Keeffe (Cork South Central, Fianna Fail)
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Legislative action to address this would involve conveyancing and company law, which are outside my Department's area of responsibilities. However, it would clearly be desirable to have the recommendations of the Law Reform Commission in that regard.

Property owners in multi-unit structures should also realise that there is a primary onus on them to ensure that their management companies operate effectively once control of the company has transferred to them. There can also be an information deficit in this area, which is inimical to the effective operation of management arrangements. One basic source of difficulty 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 in this area. As an immediate practical step to address this information deficit, my Department is co-ordinating the provision of clear and concise general information, particularly for home buyers. This will issue very shortly.

The legal profession also has a key role in protecting home buyers from abuses. Conveyancers are to be generally complimented for the way in which they have adapted conveyancing practice to facilitate the huge growth in the development and sale of apartments. They 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 the legal profession as a whole will be able to help raise the level of protection further in conjunction with the construction industry.

It is also open to the construction industry, on a voluntary basis, to take action to address some of the key sources of difficulty. They do not need to wait to be forced by legislation to take action to address some of the inadequacies and shoddy practices that have come to light. This action could involve the agreement between the industry and the legal profession of standard guidelines and documentation relating to house purchase conveyancing and contracts, based on appropriate principles. Issues that could be dealt with in this way might include the appropriateness of charges, transfer of control to unit owners, developers' responsibilities pending taking in charge by local authorities and maintenance of adequate sinking funds. My Department is exploring with the construction industry the scope for practical action in this regard pending any necessary changes to conveyancing and companies legislation in light of the LRC report.

Local authorities must also play their part and, in particular, avoid adding to complexities or uncertainty in the context of applying planning conditions relating to management arrangements. My Department is pursuing this aspect with planning authorities. However, the issue of planning conditions relating to management companies is not a totally straightforward one. The Planning Act allows the attachment of these conditions, recognising that management companies have been traditionally set up for the maintenance of apartment buildings and their attendant private grounds.

Trevor Sargent (Dublin North, Green Party)
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They hold houses now.

Batt O'Keeffe (Cork South Central, Fianna Fail)
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It has been made plain that it is not appropriate to attach planning conditions regarding management companies in the case of traditional housing estates, with their own front and back gardens. I also consider that it is appropriate that planning authorities should take in charge the public roads, no matter what type of residential estate is in question. However, the traditional housing estate is, in many areas, being replaced by the mixed estate, which may contain apartments, duplex houses and terraced houses, with shared facilities such as car parking and gardens. High specification paving, lighting and landscaping are frequently features of such estates. Genuine questions arise as to whether it is appropriate that all these facilities be taken in charge and maintained at public expense. Many of these facilities are replacing the traditional gardens, which, in a conventional housing estate, would fall to be maintained by the residents rather than the local authority.

Depending on the circumstances, it may be appropriate in the case of these newer estates for a management company to be in place to maintain facilities on behalf of the residents. In some cases the residents of such estates may have purchased their homes on the basis that the development remain a private one and not be taken in charge by the local authority.

My Department published a booklet last December entitled: Housing Policy Framework: Building Sustainable Communities. This sets out an agenda for an integrated package of policy initiatives on matters that included supporting higher densities and compact urban settlement through design innovation in the creation of new homes, new urban spaces and new neighbourhoods. In line with this, my Department is updating the residential density guidelines. It will be appropriate to examine further the issues of taking in charge and management companies in this context.

Trevor Sargent (Dublin North, Green Party)
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The Government needs to end extortion.