Management companies for apartment blocks
The Multi-Unit Developments Act 2011 regulates the ownership and management of the common areas of multi-unit developments. The Act provides that before a developer sells any units:
- An owners' management company must be set up, and
- The common areas of the development must be transferred to the owners' management company
A multi-unit development is a development of at least 5 residential units that share facilities, amenities and services. Multi-unit developments can also be known as managed estates.
In practice, the majority of multi-unit developments are apartment blocks, but groups of houses that share common facilities and have an owners’ management company are also covered by this term. The Multi-Unit Developments Act 2011 also details some rules for developments with between 2 and 4 residential units. And to a certain extent, the Act applies to mixed commercial and residential developments.
What are common areas in a multi-unit development?
The Act defines common areas in a multi-unit development 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 those within and serving only one unit in the development
- Other areas that are from time to time provided for common use
What are a developer's obligations in a multi-unit development?
Before any unit in a multi-unit development can be sold, the developer must:
- Establish an owners’ management company
- Transfer the common areas of the development to the owners' management company at the developer's expense
- Enter into a contract with the owners' management company which outlines the responsibility of the developer to the owner’s management company and vice versa. The contract should deal 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 still has the right to be in those common areas in order to complete them. The developer must have a valid insurance policy for all risks relating to their use 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.
What is an owners' management company?
An owners' management company manages the common areas in a multi-unit development. 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. Conveyancing is the legal work involved in buying or selling property. If the unit is sold or transferred to another person, the membership of the owners’ management company automatically transfers to the new owner. It is not 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 an owners’ management company
Owners’ management companies must comply with the specific obligations imposed by the Multi-Unit Developments Act 2011. They must also comply with company law, which plays an important part in determining the rights and responsibilities of owners, as members of the owners’ management company.
The main piece of company law in Ireland is the Companies Act 2014. This Act covers matters including general meetings, directors’ duties, company record-keeping, annual returns, and financial statements. The main obligations of an owners’ management company are detailed below.
Since August 2020, owners’ management companies can carry out some of their functions online. Virtual general meetings are allowed and members can vote online. This change was introduced so that companies could continue to hold general meetings during the COVID-19 pandemic. It is provided for in the Companies (Miscellaneous Provisions (Covid-19) Act 2020, and will remain in place until at least 31 December 2020. The Housing Agency has published a guide with general information for owners' management companies about COVID-19.
The governing document of the owners’ management company is called the constitution. It sets out the rules for the internal governance of the company, and its provisions must be in line with company law. Every owners' management company must have a constitution.
Generally, directors of owners' management companies are members of the company, and have been elected by the wider membership of the company. In most cases, a director’s term is limited to 3 years. However, a serving director can be appointed or elected at annual general meetings to serve for further terms, provided that this is not prohibited by the company’s articles of association (part of the company constitution) or other governing documents.
Register of members
You automatically become a member of an owners’ management company when you purchase a home in a multi-unit development. The owners’ management company must give anyone who buys a residential unit a share or membership certificate.
The company must update the register of members with the buyer’s details. The register of members is a list of the names and addresses of all of the members of the company. It is required under company law and must be kept at the company’s registered office and made available for public inspection. The members must keep the company informed of any relevant changes. If a unit is let to a tenant, the owner must provide the owners’ management company with the tenant’s details. Read more about landlords’ rights and obligations.
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
- 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 be held reasonably close to the multi-unit development unless 75% of the members of the company agree otherwise.
Due to the COVID-19 pandemic, virtual general meetings have been allowed since August 2020. This provision came in under the Companies (Miscellaneous Provisions (Covid-19) Act 2020, and will remain in place until at least 31 December 2020.
The company must also file annual returns with the Companies Registration Office (CRO).
The company must set-up an annual service charges scheme to pay for:
- The maintenance, insurance and repair of common areas within its control, and
- The provision of common services (for example, refuse collection, security, gardening) to unit owners
The initial charge can 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 cannot 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 can only be given if 65% of the units are sold and can only come into effect 3 years after ownership of the common areas has been transferred to the owners’ management company.
Unit owners must 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. Under the 2011 Act, if the owner is letting out their unit, they can pass the management fees onto their tenant. However, the landlord and tenant must agree this in advance, and in practice this is quite unusual.
Since March 2018, under design guidelines for new apartments planning applications for apartment developments must have a ‘building lifecycle report’. This report aims to ensure that new developments are properly managed into the future. It should include an assessment of the long-term running and maintenance costs of an estate. The report may be useful to the owners’ management company as it should show the measures the developer considered to manage and reduce running costs for the benefit of residents. It will also help the owners’ management company to calculate the annual service charge and the sinking fund contribution.
The owners’ management company must establish a sinking fund within 3 years of being transferred ownership of the development. The sinking fund is used for spending on refurbishment, improvement or maintenance of a non-recurring nature in a multi-unit development. Unit owners must make contributions to the sinking fund (including developers in the case of unsold units). The 2011 Act provides that the amount to be contributed to the sinking fund is €200 annually per unit, or such other amount as the members agree. Contributions to the sinking fund must be held in a separate account.
The owners’ management company can 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 can be made by the company before the sale of the first unit. If a unit is let to tenants, one of the terms of the letting should state that tenants must observe the house rules. You can download a template of house rules from the Housing Agency’s website.
The company may not enter into contracts with providers of goods and services which are to last for more than 3 years.
You can apply to the Circuit Court for an order to enforce any rights or obligations imposed under the Act. This includes the owners’ management company, a unit owner, a trustee under a will or other settlement, a tenant and the developer. The Court, instead of making an order, may direct the parties to attempt to solve the matter by mediation.
What is a property management agent?
A property management agent is hired by an owners’ management company to provide services to manage an estate, for example, refuse collection, repairs and maintenance. Generally, people living in a multi-unit development have more contact with the agent than with their owners' management company, as the agent looks after the day-to-day running of the estate. The roles of the owners’ management company and the property management agent are separate, and the details of the relationship between them are set-out in a contract or letter of engagement.
The agent follows the instructions of the board of directors of the owners’ management company and is accountable to them for the standard of services provided. An agent can be involved in the management of a number of different estates and can work for a number of different owners’ management companies. Agents are regulated by the Property Services Regulatory Authority and must hold a license.