Ivana Bacik (Independent)

I move amendment No.15:

In page 6, between lines 45 and 46, to insert the following:

"(3) On closing of a unit sale prior to completion of the development, the developer shall pay 5 per cent of the purchase prices to the owners' management company which shall hold such sum in trust for the developer until the development is completed.".

This amendment was tabled during Committee Stage proceedings when Members had a full debate. This amendment has been discussed and debated at length. It is supported strongly by both the Royal Institute of the Architects of Ireland, RIAI, and by the Apartment Owners Network. It considers the problem of unsatisfactory completion of complexes or individual units and calls for the developer to pay a retention of 5% of the purchase price to the owners' management company to hold such sum in trust for the developer until the development is completed. The idea is to include an additional protection for the consumer. I acknowledge there has been discussion following the Committee Stage debate and note the Minister stated during that debate that he had some sympathy for the point raised and would reconsider it before Report Stage. However, I cannot discern an amendment tabled by the Minister on this subject although I note amendment No. 21 tabled by Senator Regan is similar.

The idea of such a retention of 5% originally was proposed by the Law Reform Commission but the interdepartmental group did not accept its recommendation as it was feared the builder simply would raise the price of apartments by 5%. As a result, this ultimately would not give any security or safeguard to the consumer and would actually contribute to rising prices. As the Minister has acknowledged, given the change in the property market and falling property prices, this fear has been diminished. The RIAI took some expert advice on the issue of the effect a 5% retention would have. The advice the institute received was that it would not necessarily raise prices and that were the price to increase, it would only be because what was being acquired was a qualitatively better property than one sold without the 5% retention. Therefore, a rather complex issue arises in that by including a clause such as this, a dwelling then comes with a greater assurance because many of the problems pertaining to completion that now are being experienced by purchasers would have been resolved by the vendor before the sale of the apartment was finally completed. I also have been informed that the straightforward view that additional costs incurred by the producers of new residential property are passed directly onto purchasers is not supported by the literature. Consequently, there is some contradiction of the generally held and intuitive view that the 5% retention would contribute to an increase of 5% in the purchase price. In any event, the Minister himself accepts the market now is very different from the property market that was in place when the interdepartmental group ruled out such a clause.

On balance, the Labour Party certainly considered the safeguards this clause would offer to the purchaser would outweigh any other negative effect and given the current market, I doubt whether there would be such a negative effect. I will be interested to hear what the Minister has to say, given that on Committee Stage he indicated he would revert to Members on Report Stage in this regard. I believe he then stated it would be helpful to go back to the interdepartmental group and the National Consumer Agency for their opinions on the matter at this changed time. I believe I am correct in stating the interdepartmental group reported two years ago and of course in the intervening two-year period, there has been an enormous economic downturn and the property market has changed out of all recognition. Therefore, the concerns raised by the interdepartmental group are no longer in any way as strong. While I will be interested to hear the Minister's views, I am disappointed he has not accepted this amendment at this point.