Denis O'Donovan (Fianna Fail)

I welcome the Minister to the House and this Bill, which is not before its time. As with Senator Regan, I compliment the Law Reform Commission for much work done in the background, the Minister and his staff. We are entering uncharted waters as 20 years ago this was unheard of. As a result of the Celtic tiger and the building and development boom, we have a substantial amount of multi-unit developments and not only in Dublin. We sometimes believe this is restricted to the capital but it also applies to developments in Cork, Galway and most towns and some villages around the country.

The Bill proposes to provide a statutory framework for several issues, including the obligatory establishment of an owners' management company and the transfer of common areas to same prior to the sale of any units, or within six months of the section coming into force in the case of existing completed or incomplete developments. What is important is that it applies not only to work in progress but also to existing developments.

The Bill provides for regulation of the internal governance of owner management companies, providing one vote of equal value per unit, the obligation to hold an annual general meeting and the furnishing of each member with an annual report which will include details of, among other things, the assets and liabilities of the company and statements on service charges, sinking funds and insurance details. That is very important because it means each owner in a 50-unit apartment block, whether student apartments or otherwise, has an equal vote. The Bill also provides for the sinking fund, which is very important. It also covers insurance and so on. There are many owner management companies working within the law and doing very good work but, unfortunately, there are many others which are not complying with the regulation which the Minister is putting on a statutory footing.

Service charges, sinking funds, insurance, etc. will be calculated on a fair and transparent basis. The sinking fund will be spent on maintenance or improvements of a non-recurring nature, which is important. I am aware of a block of apartments in which the developer was locked in, as it were, with the builder. In addition, 10% or more of the occupiers were friends or had family links with the developer and they took charge of the apartments with an iron fist. They were student apartments and in the first semester, the developer, through his agents and the so-called company which was not owner representative, collected the fees for the first part of the year but when there were problems in the summer, autumn and winter, there was no sinking fund. In this instance, there was severe flooding caused by a problem with drainage and most of the ground floor apartments were damaged. Some of the students left and there was chaos. However, at all times, the developer was in control of the agency and the so-called management company. As a gesture to placate people, he held emergency general meetings of the company, of which he gave three or four days' notice. For those with an investment apartment and who were living in Kerry or Donegal, the chances were that the meeting was over before they got to it.

That is the type of thing which has been going on. That is why this legislation is critical to regularise this area. It was like travelling down the Zambezi River in a canoe in that one did not know where one was going to. This area had to be properly regulated and what the Minister is doing here is of critical importance to the future management and the legal transfer and ownership of such apartments.

Senator Regan said 4,600 owner management companies are registered in Ireland, which is a phenomenal number. A decade ago, there were probably not even 50 such companies. That indicates where we are.

An important plank of this legislation is the making of house rules by agreement of the members of the owners' management company in furtherance of the effective operation, maintenance and enjoyment of the development. Some of these work very well. Nearly 20 years ago a colleague of mine in Cork was involved with a small development in the city. The owners managed and regulated rent collection, services, maintenance and so on and they met twice a year. It worked out relatively well and if there were hiccups, there were ways to get over them.

Another important part of the legislation is that there is a court-based system of dispute resolution which promotes mediation as a means of resolving disputes. It is important that is being placed on a statutory footing. One can look at different models throughout the world, although I know the Law Reform Commission looked at the situation in New South Wales in Australia. Traditionally, in countries such as Holland and Belgium tenants lived in apartments and the notion of owner occupancy and long leases, which we have in Ireland, was not very prevalent.

The legislation provides an extended period from one to six years in which the owners' management company struck off the companies register for the non-filing of annual reports can be restored to the register. That is significant.

One might believe we are falling behind what is happening elsewhere but I recently came across a complaint from constituents about an investment in holiday apartments in the south of France. These were very well-off people who had a few bob to invest. Rogue companies were set up at the end of November with the plan of letting the holiday apartments. In February or March, when the companies had received the deposits, they vanished with them. The owners had neither agents nor deposits and were left with a mess. These holiday apartments cannot be fully let now with the decline in tourism. Apparently, this happens quite frequently because I contacted the French embassy for advice and guidance for my constituents. Problems are not unique to Ireland; there are problems in other parts of Europe as well. The Minister is doing a wonderful job in putting this on a statutory footing.

The Bill will transform the regulatory environment of management companies, impose new obligations on developers and empower apartment owners in various ways, for example, in regard to voting and the resolution of disputes. For at least ten or 12 years, some developers have made much money from developments. They had all sorts of means of fleecing owners, many of whom were once-off investors. They used the service charge as a sinking fund or to complete snag lists, maintenance or whatever. Local authorities required service charges to be imposed for very good reasons, including providing parking, footpaths, lighting and ducting for various services. Many developers made significant profits but they were not happy with that and tried to skim off some of the money intended for other purposes.

This is significant legislation which, once and for all, will ensure an arms-length relationship between developers, the issues of common ownership of parts of properties and owners. As soon as a development is complete or part complete, the owners will take charge of the development and free themselves from the bonds and shackles of the developer who will probably want to complete the development and make as much money as quickly as possible. It was a sinister follow-on in those cases where developers wanted to have their cake and eat it when it came to agency fees, collecting deposits and so on. In the apartment block I referred to earlier, one building was used as a commercial laundry, owned by the developer. After several years it was discovered electricity for the launderette and other buildings owned by the developer was being sourced from the apartment block. It shows what people will do when they can manipulate the system.

I thank the Minister for introducing this legislation and wish it a speedy passage.