MULTI-UNIT DEVELOPMENTS (MUD) ACT 2011 AN OVERVIEW

Society of Chartered Surveyors Ireland 38 Merrion Square, Dublin 2, Ireland Tel: (0) SIOBHAN ODWYER Chair of the Property and Facilities Management Group of the Society of Chartered Surveyors Ireland Working in the industry since 1988 ODwyer Property Management Involved in lobbying for reforms and regulation within the industry Delighted to be here to talk to you today!

MUD ACT 2011 AGENDA Introduction Background Application General Scope What it means to Consumers Q & A

MUD ACT 2011 INTRODUCTION 1 st April New Legal framework Seeks to address: Problems relating to the ownership and management of the common areas of both existing and new Multi-Unit Developments To facilitate the fair and effective management of bodies responsible for the management of such common areas To provide for related matters

MUD ACT 2011 BACKGROUND – THE NEED FOR REFORM New form of Housing – limited legal framework Limitations within the conveyancing and estate documentation Limited process for completion and handover Limited regulations for the Owners Management Company (OMC) Compliance deficiencies in our planning/construction legislation Limited enforcement recourse for defects/failed completions / snagging Booming economy obscured the issues Limited public comprehension Adverse media - failed to grasp complex issues Public complaint stimulated reform – Law Reform Commission (LRC), Office of the Director for Corporate Enforcement (ODCE), National Consumer Agency (NCA)

MUD ACT 2011 WHO IS IT APPLICABLE TO? Existing and future Multi-Unit Developments (MUDs) MUD - not less than 5 units with shared amenities Mixed-Use Developments – MUDs including commercial units Private housing estates which have an OMC structure

MUD ACT 2011 GENERAL SCOPE 1.Obligations for the compulsory vesting (transfer) of the common areas 2.Obligations of the developer upon completion of the development 3.New remedial mechanisms for dealing with disputes - Circuit Court 4.New regulations for reporting,service charges, and sinking funds 5.New powers and obligations of the Owners Management Company (OMC)

MUD ACT DEVELOPERS OBLIGATION TO TRANSFER OWNERSHIP OF COMMON AREAS Developers must transfer ownership of common areas in: i.Existing MUDs* - within 6 months (by 30 th September 2011) ii.Future MUDs– before the sale of any unit *2 Types of Existing MUDs: -Partially sold = 80% or less sold by 1 st April Substantially sold = 80% or more sold by 1 st April 2011

MUD ACT 2011 (i) EXISTING MUDS S.4 requires common areas to be transferred within 6 months of enactment, i.e. by 30 September 2011 Partially sold (< 80% ) - Transfer subject to the reservation to the developer of the beneficial interest - e.g. Developer right to alter and OMC entitled to receive same suite of documents as for future new developments Substantially sold (>80%) - Conditions are unclear - no beneficial interest is reserved to the developer

MUD ACT 2011 (ii) FUTURE MUDS An OMC must be established Common areas must be transferred to the OMC before any sales Separate form of contract between OMC and developer Separate legal representation for the OMC Developer retains beneficial interest and obliged to complete Pre Occupation - Fire Certification Upon completion of the developer stage, a prescribed and comprehensive set of documents to be handed over

MUD ACT OBLIGATIONS OF THE DEVELOPER UPON COMPLETION Conditions for the extinguishment of the developers beneficial interest Development Stage – the period which begins when the first unit be made available for sale and ends after the construction works and ancillary works have been completed Law society - formula to fix the end of the development stage similar to any construction contract including arbitration clause The Developer makes a statutory declaration that the legal and beneficial interests stand merged The declaration requires the consent of any Mortgagee or Owner

MUD ACT Confirmation that the development has been completed in compliance with statutory requirements 2.Certification confirming that any financial contributions for planning have been paid 3.Safety file 4.As built structural drawings 5.As built service drawings 6.O&M manuals for plant & equipment 7.Warranties & guarantees with the benefit transferred to the OMC 8.Test records for drainage, water pipe and heating pipe work 9.Schedule of plant & equipment and expected useful life of same 10.Title documents for common areas and reversion 11.Stamped & registered counterpart Leases 12.OMC statutory books Delivery of a schedule of documentations for the estate including:

MUD ACT NEW REMEDIAL /DISPUTE MECHANISMS Circuit Court – exclusive jurisdiction Application can be made seeking enforcement of any obligation under the Act An owner/OMC in an existing development is empowered to apply for a Court Order directing the developer to complete the development including the common areas (Section 24) Other matters might include: Legal documentation/voting rights Fragmentation of the OMC into multiple OMCs Apportionment of funds Court may direct the parties to engage in mediation (broader rules)

MUD ACT 2011 FAILURE TO TRANSFER BY 30 th SEPTEMBER? Not a criminal offence OMC/Member can petition circuit court to complete and transfer Court order to transfer Criminal offence if not complied with Query regarding the sale of apartments

MUD ACT NEW REGULATIONS FOR REPORTING, SERVICE CHARGES AND SINKING FUNDS Annual reporting required detailing: Income and Expenditure Assets & Liabilities Annual Service Charges Sinking Fund Planned Expenditure on maintenance and repairs Details of the Insurance cover Fire Safety details Contracts including any connected party transactions Statutory footing on Members meeting: once per annum with 21 days advance notice Held within reasonable proximity and at a reasonable time Obligations are in addition to Companies Act 1963 – 2009

MUD ACT 2011 NEW REGULATIONS: SERVICE CHARGES OMC must: Establish a scheme for annual service charges Set the initial service charge - calculated in a transparent and fair manner (basis of calculation outlined) Outline details and categories of expenditure Ensure service charge is approved by members 75% of members present or by proxy may disapprove the proposed service charge All owners legally obliged to pay In the case of unsold apartments developer legally obliged to pay Unpaid fees may be recovered as a simple contract debt Funds must not be used to defray developers expenses Excess funds may be diverted to the sinking fund Proper records of expenditure for auditing purposes required

MUD ACT 2011 NEW REGULATIONS: SINKING FUND OMC must: Establish a Sinking Fund for specific purposes All owners will be obliged to pay Developers will be obliged to pay for unsold units The contribution shall be 200 or such other agreed sum agreed by the members Contributions to the Sinking Fund must be held in a separate bank account Sinking Funds shall apply to traditional housing estates which have an OMC The Fund must be established within 18 months (September 2012) if an existing development 3 years for a future new development

MUD ACT NEW POWERS AND OBLIGATIONS OF THE OMC Equal Voting Rights (one vote of equal value to each unit) will only be permitted Greater voting rights in existence may not be exercised Directorships for a fixed term longer than 3 years are not permitted Existing directorships of a term longer than 3 years must be extinguished (But, they can be re-elected) An OMC cannot enter into contracts for a period greater than 3 years OMC can effect essential repairs of parts not in its ownership A struck off OMC may be restored within six years (previously one year) OMC must be in the name of the Management Company

MUD ACT 2011 OBLIGATIONS OF THE OMC: HOUSE RULES New house rules may be made Must be consistent/fair and reasonable Must be circulated in advance and approved by the members Landlords must oblige their tenants to observe the house rules The rules may make provision for the recovery (by the OMC from any person) of the reasonable cost of remedying a breach

MUD ACT 2011 WHAT ALL THIS MEANS FOR THE CONSUMER consumer TRANSFER OF COMMON AREAS VOTING RIGHTS NEW LEGAL RECOURSE OMC CONTROL & OBLIGATIONS SINKING FUND SERVICE CHARGES HOUSE RULES REPORTING

MUD ACT 2011 THANK YOU !

Society of Chartered Surveyors Ireland 38 Merrion Square, Dublin 2, Ireland Tel: (0) Dating back to 1895, the Society of Chartered Surveyors Ireland is the independent professional body for Chartered Surveyors working and practicing in Ireland. Working in partnership with RICS, the pre-eminent Chartered professional body for the construction, land and property sectors around the world, the Society and RICS act in the public interest: setting and maintaining the highest standards of competence and integrity among the profession; and providing impartial, authoritative advice on key issues for business, society and governments worldwide. Advancing standards in construction, land and property, the Chartered Surveyor professional qualification is the worlds leading qualification when it comes to professional standards. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining the Chartered Surveyor qualification is the recognised mark of property professionalism. Members of the profession are typically employed in the construction, land and property markets through private practice, in central and local government, in state agencies, in academic institutions, in business organisations and in non-governmental organisations. Members services are diverse and can include offering strategic advice on the economics, valuation, law, technology, finance and management in all aspects of the construction, land and property industry. All aspects of the profession, from education through to qualification and the continuing maintenance of the highest professional standards are regulated and overseen through the partnership of the Society of Chartered Surveyors Ireland and RICS, in the public interest. This valuable partnership with RICS enables access to a worldwide network of research, experience and advice.