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Management companies for apartment blocks

Introduction

The Multi-Unit Developments Act 2011 (pdf) came into effect on 1 April 2011. It 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. It also provides for some rules in relation to developments with between 2 and 4 residential units. It also 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. For existing developments where one or more units had already been sold, the developer had 6 months from when the Act came into effect – until 30 September 2011 – to transfer ownership of the common areas.

Rules

Common areas

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 which are from time to time provided for common use

New multi-unit developments

The Act places obligations on the developer of a multi-unit development before the sale of any unit in the development may take place:

  • An owners’ management company must be established. The common areas of the development must have been transferred to that management company. This must be done at the expense of the developer.
  • The developer must 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.
  • The developer must supply a certificate under the Building Control Acts from a suitably qualified person regarding compliance with fire safety in the development. The Minister for Justice and Equality has made regulations (pdf) specifying that suitably qualified people are architects, building surveyors and chartered engineers.
  • The developer is obliged to 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.

Existing multi-unit developments

In developments where a residential unit had already been sold but the common areas had not been transferred to the owners' management company, the developer was obliged to transfer ownership of the relevant parts of the common areas to the owners’ management company within six months of the date the Act came into effect – that is, by 30 September 2011 at the latest. The developer remains responsible for the completion of the common areas.

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

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. (In general, the transfer of membership of a company does require such formalities.)

The Act refers to the organisations which 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 which are incorporated as companies.

Long-term directors

In some existing developments, directors appointed by the developer are entitled to remain as directors for life. This is no longer possible since 1 April 2011 and directors in place on 1 April 2011 must cease to be directors by 1 April 2014 at the latest. All new directors will be limited to a term of 3 years.

Obligations of owners’ management companies

Owners’ management companies must comply with company law generally and with the specific obligations imposed by this Act. The main specific obligations of an owners’ management company to the members – the owners of the units – are as follows:

Register of members

The company must supply the buyer 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.

Annual report

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.

Service charges

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 which 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 three years after the transfer of ownership of the common areas to the owners’ management company. In the case of unsold units, the owner, including the developer, must pay the service charge. The service charge must be calculated on a transparent and fair basis and expenditure must be properly recorded.

Sinking fund

Within 3 years of the transfer of ownership to it (or 18 months in the case of existing developments, that is, by 30 September 2012), it 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.

House rules

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.

Long-term contracts

The company may not enter into contracts with providers of goods and services which are to last for more than 3 years.

Dispute resolution

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.

Further information

As well as the text of the Act itself, you may wish to read the Explanatory Memorandum (pdf) which was revised in March 2011 to take account of the many amendments made to the Bill on its passage through the Oireachtas.

Page updated: 27 March 2012

Language

Gaeilge

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