Thursday, 28 September 2006
I first raised this matter on 29 September 2005 and highlighted the misuse of management companies in traditional housing estates. I was surprised by the reply to that debate. It was very clear that the information I had placed on the record was news to the Minister. I gave the Minister my evidence and followed it up with a priority question which was afforded to me by my Independent colleagues. The Minister was quite clear in his reply that management companies were not to be used by local authorities to sidestep their responsibilities in taking estates in charge.
I am interested in finding resolutions to the many problems that have been highlighted to me since first raising this matter. I have always accepted the need for management companies in the context of apartment blocks. The regulation of these ranges from good to appalling. I received a phone call yesterday from someone who took up occupancy of an apartment under the affordable housing scheme earlier this year. The person received a bill for €900 from the management company yesterday and is being asked to contribute towards a sinking fund for a lift. However, there is no lift in the apartment block in question and the person is being asked to contribute towards public lighting and public liability insurance in the overall estate, which is a mixed development.
Initially, most management companies' directors are friends or relations of the developer of the scheme. On completion of the last dwelling, the shareholders, in other words the owners of the apartments, are supposed to be called to a meeting at which a new set of directors should be elected by the shareholders. These meetings are either not being called or, where they are being called, there is often reluctance to take on responsibility for what is in effect a company governed by company law.
I typically find that a minimum of one third of the bill charged by a management company is for administrative purposes, even in the early stages. In Kildare, quite a number of the dwellings that will be provided under Part V of the Planning and Development Act 2005 will be apartments, some of which will be of the social and affordable variety. There are already problems in that the council is telling residents to contact their management company and very often, they do not respond. It is not clear how the council will be represented on these management companies and the person or persons representing the council will need to be sufficiently competent in company law or problems will arise for it. I ask that this issue be considered seriously.
Consider those living in housing estates where a management company was or is mandatory. Conditions of this kind are sometimes attached to the planning permission but many are conditions of sale. Not only does the developer want to make a killing on the price of the house but he wants the residents to pick up the tab for all the maintenance obligations until the estate is taken in charge. While it appears local authorities no longer impose these conditions, which is very welcome, management companies continue to be imposed as part of a condition of sale in many locations. This needs to be addressed in legislation.
In some locations, including my own, there is a considerable backlog. Kildare has front-loaded the taking in charge of estates where a planning condition was imposed requiring a management company. However, it depends on the estate being finished satisfactorily. Some local authorities, particularly those in areas with continuous and rapid development, are concerned with the costs they will incur when large numbers of estates are taken in charge. While they might have large capital receipts that will go towards the provision of infrastructure, there is a serious problem with the revenue accounts. That needs to be factored into the local government fund if the problem is to be resolved properly.
The staff embargo also needs to be considered. Restrictions are such that where a development control unit is put in place, it is done at the expense of other sections of the council. In the case of Kildare, there seems to be an ever-increasing list of unauthorised developments and the price is being paid for it.
The Office of Corporate Enforcement is receiving large numbers of complaints about management companies not being run properly. I constantly get calls from people asking if they should go along to the annual general meeting and whether they should allow the developer to walk away. The planning conditions attaching to a development are often not complied with. Residents cannot see what they are paying for. A number of initiatives have been suggested and a consultation paper is expected shortly. The National Consumer Agency is to produce an information document, but it depends what is in it. The amendment to company law expected later this year seems to be piecemeal in comparison with the extent of the problem, which requires legislation in its own right.
I reply on behalf of Deputy Roche, the Minister for the Environment, Heritage and Local Government.
I thank the Deputy for raising this matter. I accept there is much concern about the management of multi-unit developments. Many of the issues in the area involve several different parties in the public and private sector. I know the Department of the Environment, Heritage and Local Government is actively engaging with those parties. The Department looks forward to the publication by the Law Reform Commission of the consultation paper on the management of multi-unit structures. It is expected shortly and will be followed by a final report that will enable the Government to consider what legal measures must be taken in the area.
In the meantime, several developments have taken place regarding this matter. Planning authorities traditionally required, as a condition of planning permission, that a management company be established for apartment developments. In response to concerns that planning conditions requiring management companies were being inappropriately applied to other residential estates, the Department of the Environment, Heritage and Local Government carried out a survey of county, city and borough councils in late 2005 and early 2006. It found that planning authorities had been attaching planning conditions requiring management companies in mixed developments of apartments and houses, but generally only to the apartment elements. Regarding estates comprising houses only, planning authorities had occasionally attached such conditions, but only in very specific circumstances, for example, holiday home or gated developments.
The Department issued a circular letter to planning authorities on the matter in July 2006. It states that a management company should not be conditioned by a planning authority for a "traditional" housing estate, that is, estates of houses with individual private gardens, except in very specific circumstances, for example, if a particular service or facility is provided for residents' use only, such as a playground. The Department has also advised planning authorities that they should attach planning conditions to the ongoing management of shared facilities only in circumstances where they judge that they are clearly required for the benefit of residents of an estate.
A previous circular issued in January 2006 had already reminded planning authorities of their responsibilities under the Planning and Development Act 2000 regarding the taking in charge of such estates.
The question of who should be responsible for the maintenance of certain shared facilities in the newer type of mixed estate, that is, whether and to what extent planning authorities should take those in charge or what responsibilities residents should have for maintenance, requires further consideration.
The Department has therefore established a working group representative of the interests involved to look further at those matters. Its first meeting is being held today.
The property services regulatory authority will have the function of licensing, regulating and dealing with complaints relating to managing agents. These are commercial firms engaged by management companies to carry out day-to-day management and maintenance. The authority will also have a public information function regarding property management. The authority and its functions will be provided for in legislation currently being prepared by the Department of Justice, Equality and Law Reform. I understand an implementation group and a director designate are already in place.
The National Consumer Agency is to publish a report on the issue of management charges very shortly and also intends to publish a consumer information document, which should help reduce the information deficit.
The Law Reform Commission, LRC, has already recommended certain changes to company law to avoid problems for management companies regarding company law requirements. Proposals for the amendment of company law are expected to be made to the Government later this year, and the Minister expects those to include certain changes relevant to management companies.
The Minister is conscious these are matters of great concern, and every effort is being made to address them in the most appropriate manner.