Management companies for apartment blocks
Since 1 April 2011, the Multi-Unit Developments Act 2011 regulates the ownership and management of the common areas of multi-unit developments, and provides for the setting up of owners’ management companies to manage such areas.
A multi-unit development is a development in which there are at least 5 residential units and the units share facilities, amenities and services. In practice, the majority of multi-unit developments are apartment blocks, but the Act also covers groups of houses that share common facilities and have an owners’ management company. In addition, it for some rules in relation to developments with between 2 and 4 residential units and it applies to mixed commercial and residential developments to a certain extent.
The Act provides that an owners' management company must be set up, and the common areas of the development transferred to it, before the developer sells any units.
The Act defines common areas as including:
- The external walls, foundations and roofs and internal load-bearing walls
- The entrance halls, landings, lifts, lift shafts, staircases and passages
- The access roads, footpaths, kerbs, paved, planted and landscaped areas, and boundary walls
- Architectural and water features
- All ducts and conduits, other than those within and serving only one unit in the development
- Cisterns, tanks, sewers, drains, pipes, wires, central heating boilers, other than such items within and serving only one unit in the development
- Other areas that are from time to time provided for common use
Under the Act, before the sale of any unit in the development may take place, the developer of a multi-unit development is obliged to:
- Establish an owners’ management company. The common areas of the development must have been transferred to that management company. This must be done at the expense of the developer.
- Enter into a contract with the owners' management company which outlines the responsibility of each to the other and deals with issues such as compliance with statutory requirements, completion of the common areas (for which the developer remains responsible), retention money (usually, money retained by the company to ensure that the developer completes the project) and dispute resolution; the owners’ management company must have separate legal representation in the negotiation of the contract.
- Supply a certificate under the Building Control Acts from a suitably qualified person regarding compliance with fire safety in the development. The Multi-Unit Developments Act 2011 (Section 3) (Prescribed Persons) Regulations 2011 specify that suitably qualified people are architects, building surveyors and chartered engineers.
- Do all things that are reasonably necessary to ensure that the unit owner enjoys the rights and amenities necessary for the reasonable use and peaceful occupation of the units.
Transfer of common areas
When the common areas are transferred to the company, the developer continues to have the right to be in those common areas in order to complete them. The developer must have a valid insurance policy in place in respect of all risks relating to the developer’s use or occupation of the multi-unit development. The developer must also indemnify the owners’ management company against claims in respect of acts or omissions by the developer during completion works.
There is a general obligation on the developer to minimise inconvenience to the unit owners and ensure that access is available to them at all reasonable times.
Owners' management company
The owner of each residential unit is entitled to membership of the owners’ management company and is generally entitled to one vote. Where alternative arrangements are already in operation, these may be continued, provided they are just and equitable.
The owners' management company is part of the conveyancing procedure for the individual units. If the unit is subsequently sold or transferred to another person, the membership of the owners’ management company automatically transfers to the new owner. It will not be necessary to formally execute the transfer or have it approved by the directors of the company.
The Act refers to the organisations that manage multi-unit developments as owners’ management companies even if the organisation is not a company. For example, an unincorporated group or body may be responsible for the management but they are under the same obligations as owners’ management companies that are incorporated as companies.
Obligations of owners’ management companies
Owners’ management companies must comply with company law generally and with the specific obligations imposed by this Act. All directors are limited to a term of 3 years. The main specific obligations of an owners’ management company are as follows:
Register of members
The company must supply the buyer of a residential unit with a share or membership certificate and ensure that the register of members is updated. The members are obliged to keep the company informed of any relevant changes.
The company must prepare an annual report and hold an annual meeting to discuss the report. The report must include details of income and expenditure, annual service charges, the sinking fund account, planned expenditure on maintenance and repair, insurance cover and contracts entered into by the company. The members must be given 21 days’ notice of the meeting and be provided with the report 10 days before the meeting. The annual general meeting must take place reasonably close to the multi-unit development unless 75% of the members of the company agree otherwise.
The company must establish a scheme for annual service charges to pay for the maintenance, insurance and repair of common areas within its control and for the provision of common services (for example, security) to unit owners. The initial charge may be set without holding a meeting of the members but, in general, these charges must be approved by a general meeting of the members. If over 75% of the members do not approve the proposed charge, the existing charge must remain in place.
The service charge may not be used to pay for matters that are the responsibility of a developer or builder unless this is agreed in writing by 75% of the members of the company. This approval may only be given if 65% of the units are sold and can only come into effect 3 years after the transfer of ownership of the common areas to the owners’ management company.
Unit owners are obliged to pay the service charge (including developers in the case of unsold units).The service charge must be calculated on a transparent and fair basis and expenditure must be properly recorded.
Within 3 years of the transfer of ownership to it, the owners’ management company must establish a sinking fund for spending on refurbishment, improvement or maintenance of a non-recurring nature of the multi-unit development. Unit owners are obliged to make contributions to it (including developers in the case of unsold units). The Act provides that the amount is to be €200 annually or such other amount as the members agree. Contributions to the sinking fund must be held in a separate account.
The owners’ management company may make house rules for the effective operation and maintenance of the multi-unit development. These rules must be agreed by a meeting of members but the first set of rules may be made by the company before the sale of the first unit. Where a unit is let, it must be a term of the letting that it is subject to the observance of the house rules by the tenants.
The company may not enter into contracts with providers of goods and services which are to last for more than 3 years.
Any person affected may apply to the Circuit Court for an order to enforce any rights conferred or obligation imposed under the Act. This includes the owners’ management company, a unit owner, a trustee under a will or other settlement and the developer.
The Court, instead of making an order, may direct the parties to attempt to solve the matter by mediation.