Ivana Bacik (Independent)

Like Senator O'Toole, I will not press my amendment at this point given that the Minister indicated he will review this. However, the Law Reform Commission's analysis of the 5% concept is persuasive. I re-examined the detail of its recommendation. It points out that the 5% gives a significant inducement to a developer to complete a development in a timely manner to a standard which fulfils the expectations of the certifying architect. In paragraph 4.41 of its report, the Law Reform Commission recommends that once the snagging and certified completion of the development has been achieved satisfactorily, the owners' management company should then be obliged to transfer the 5% balance to the developer. It also recommends that of course where developments have been fully completed prior to sale of the final units, the purchaser would pay the 100% directly to the developer at the closing of the sale.

Apart from the obvious point about the inducement provided by the 5% and the delay in receiving the full price pending the satisfactory completion of the development, the Law Reform Commission identified three key benefits of the provision. As Senators Coffey and O'Toole pointed out, the practical implementation of the recommendation would be straight forward because the operation of the proposal is broadly analogous to the system used by local authorities and developers with development bonds. It is already in operation in the public sector and therefore developers have experience of operating this type of scheme.

The proposal would be of particular benefit to unit owners because it would counter their "knowledge deficit", in the language of the Law Reform Commission. It pointed out that the hand-over of the 5% balance by the unit owners, in other words the consumers, on satisfactory completion would mark an important milestone in the life cycle of the development. It would emphasise to apartment owners that they would have control over the owner's management company and over ownership interests in common areas in the structure of the development. This is significant given the complaints we all hear from apartment owners. The third key benefit of its recommended system pointed out by the Law Reform Commission is that where a developer has not properly snagged a development on completion, there would be a fund available for the purpose of completion. To answer Senator O'Donovan's point, the Law Reform Commission also went into great detail on the tax implications of the proposal and expressed concern that the recommendation would be tax neutral. The key benefit this recommendation has over the measure proposed by the Minister in amendment No. 63 is that it is pre-emptive, that it does not require the consumer to have to take any further action. It envisages this being a part of the process of completing a sale where the development is not yet completed and the units are being sold. It seems an eminently practical solution but if the Minister has a better one then we are happy to hear to it because we are all working in the interests of the consumer in this regard. The amendment has a good deal of support from the Law Reform Commission, architects and engineers. I urge the Minister to consider it again on Report Stage.