Multi Unit Developments Act 2011 Governance and Management in Existing and Future Multi Unit Developments 5 April 2011

Multi Unit Developments Act 2011 “An Act to Amend the Law relating to the Ownership and Management of the Common Areas of Multi Unit Developments and to Facilitate the Fair, Efficient and Effective Management of Bodies Responsible for the Management of Such Common Areas and to Provide for Related Matters”

Multi Unit Developments Act 2011 Application Entire ACT applies to Multi Unit developments with greater than 5 Units Schedule 1, details the sections that apply to developments of between 2 and 5 units Schedule 2 relates to Managed Housing estates i.e. Where the structure does not form part of the common areas Applies to mixed use developments subject to a fair and equitable treatment of service charges, sinking fund and voting rights

Multi Unit Developments Act 2011 Transfer from Developer to Owners Management Company Operation of Owners Management Company Dispute Resolution

Transfer of Common Areas to Owners Management Company Act divides Multi Unit Developments that have yet to have the freehold conveyed into two categories 1. Future Developments or Development where a residential unit has not previously been sold (Section 3) 2. Multi Unit Developments where units have been sold.

Future Developments (Section 3) Future Developments (Section 3) Before First Unit is Sold : Owners Management Company (OMC)Must Be Established at expense of developer “Relevant Parts” must be transferred to OMC Certificate of compliance with Fire Safety Certificate from “Suitably Qualified” person Contract Between OMC and Developer must be executed to detail and confirm:  Confirmation that development will be completed in accordance with all relevant statutory requirements  Completion of common areas  Release of any Retention  Dispute Mechanism regarding completion  OMC must have separate legal firm advising on the contract at the expense of the Developer

Existing Developments The Developer must arrange for transfer of ownership of relevant parts within 6 months. Developer must transfer common areas of substantially completed estates within 6 months without retaining beneficial interest Owners Management Company officers are obliged to join in transfer of units to purchasers. Obligation to complete common areas remains with developer Upon completion of Development Stage, developer must furnish documents contained in Schedule 3 Membership of OMC shall pass with Unit. Developer retains right to pass over conveyed areas to enable completion Developer will indemnify and insure and maintain safe access Unit Owners / Owners Management Company will not obstruct developer

Determination of Beneficial Interests As soon as the development stage has ended the developer shall make a statutory declaration for the benefit of the OMC that the legal and beneficial interests stand merged. Such declaration shall be made with the consent of a mortgagee or owner of a charge Where the development stage has not ended, but 60% of owners in the development or relevant part of it request the transfer of the beneficial interest, the owner of same must do so or show cause. An OMC can effect essential repairs to ensure the safety and effective occupation or peaceful enjoyment of occupation, subject to conditions. Developer must deliver Schedule 3 documents on determination of Beneficial Interest S31(2)

Schedule 3 Documentation Confirmation that development has been completed Certification confirming that any financial contributions for planning have been paid. Safety File As Built Structural Drawings As Built Services Drawings O & M Manuals for plant and equipment Warranties & Guarantees Test records for drainage, water pipe and heating pipe work Schedule of Plant & Equipment and expected useful life of same Title documents for common areas and reversion Stamped & Registered counterpart Leases OMC statutory books

Operation of Management Companies Company Structure Annual Meetings Annual Service Charges Sinking Fund House Rules

OMC Structure New developments will have equal voting rights Voting Rights in Mixed Use Developments shall be apportioned in a manner that is fair and equitable New developments Management Companies will have “OMC” in the name In existing Management Companies anyone enjoying greater voting rights than one per unit is only entitled to use them if granted authorisation to do so by the Circuit Court The Circuit Court must be satisfied that the voting rights have a fair and just and economic reason to be exercised. No Director can be appointed for a fixed term longer than 3 years and any existing appointment will be extinguished after three years.

OMC Annual Meetings Hold a meeting once per annum for purposes which include consideration of Annual Report Annual Report to contain accounts, insurance, fire safety details and disclose any connected party transactions 21 Days notice and Annual Report issued 10 days prior to meeting Meeting to be held within reasonable proximity and at a reasonable time

OMC Annual Service Charges Annual Service Charge shall not be levied unless considered at a General Meeting of members Annual Estimate must detail expenditure categories The Estimate can be altered with the approval of 60% of members The Estimate can be disapproved by not less than 75% of members All owners, including the developer is under an obligation to pay all service charges levied Service charges will be calculated on a transparent basis and equitably apportioned

OMC Sinking Fund OMC must establish a sinking fund for the refurbishment, improvement and non recurring maintenance of the multi unit development OMC can spend Sinking Fund to procure “Advice from a suitably qualified person” relating to refurbishment, improvement of non recurring costs The Amount shall be € or other such sum agreed by a meeting of members The Developer will be obliged to contribute for all unsold units The OMC shall commence the scheme within 3 years of the first sale or 18 months from the enactment of the Bill, whichever is the later Must be held in a separate account in a manner that identifies it as a sinking fund

OMC – House Rules An OMC can make house rules relating to the effective operation and maintenance of the development that shall be binding on owners, tenants, servants, agents and licensees House rules must be consistent with lease House Rules must be consistent with the objective of advancing the quiet enjoyment of the development and be fair and equitable House rules must be considered and approved by a general meeting Approved House Rules must be issued to all owners 21 days in advance of meeting Any letting shall oblige tenants to observe title documents and house rules The reasonable cost of remedying any breach of house rule can be recovered by the OMC from the offender

OMC Other An OMC that has been struck off the Companies Register can be restored within six years on submission of relevant annual returns Developer must transfer the benefit of any guarantees or warranties An OMC cannot enter into contracts for a period greater than 3 years or contains a penalty for terminating after a period of 3 years OMC can effect essential repairs of parts not in its ownership

Dispute Resolution The Developer, OMC or any member can apply to the Court for an order to enforce the Act or relating to any matter allowable under the Act Such orders can include; An order to alter the legal documents Voting rights Disintegrating the OMC into multiple OMC’s Apportionment of funds between Sinking Fund and Service Charge Transferring the common areas to the OMC Directing the Developer to complete the Development Dispute Resolution

Owners Management Company All unit owners are members with equal voting rights and entitled to become directors OMC can engage a Management Agent to carry out day to day functions of the OMC Management Agent Engages with Unit Owners in collection of service charges, responding to queries / complaints regarding services and other occupiers Receives instructions from Board of OMC regarding services and implementation of Lease obligations and OMC Policy. Reports to OMC on activities Unit Owners Must pay Service Charges and Abide by Terms of Lease and properly constituted House Rules. Must Bind their tenants to do same Can be elected Director or Secretary Can vote at meetings, report issues to OMC / Agent. Expect services from OMC per Lease Agreement Tenants Contract is with Unit Owner and Resident No Contractual Relationship with OMC or Management Agent Most Management Agents will take reports of issues from Tenants Tenants should make their Unit Owners Aware of any Issues with OMC or Agent OMC – Management Agent

Dispute Resolution No Annual Service Charge can be issued after 1 April 2011 without being considered at General Meeting Approval of Service Charge Scheme must detail the amount to be levied Existing House Rules must be ratified to be enforceable If No Sinking Fund Scheme is agreed at a General Meeting the OMC must charge € per unit at the next financial year Preparation of Annual Report for Annual General Meeting MUD Act 2011 – Impact

Old AGM Agenda: Minutes of Previous AGM Matters Arising Consideration of Financial Statements Resolution to Authorise Directors to fix the remuneration of the Auditors Election of Directors Any other Business New AGM Agenda: ◦Minutes of Previous AGM ◦Matters Arising ◦Consideration of Annual Report ◦Consideration of Financial Statements ◦Consideration of Budget for coming year ◦Consideration of Sinking Fund Scheme ◦Approval of House Rules ◦Resolution to fix the remuneration of the Auditors ◦Election of Directors ◦Any other business MUD Act 2011 – Impact for OMC AGM’s

Dispute Resolution As House Rules, Service Charges and Sinking Funds must be considered at General Meetings, minute recording is vital. Any orders under Section 24 by the Circuit Court must be applied. Law Society expected to issue revised requisitions on title to reflect changes. MUD Act 2011 – Record Keeping

Dispute Resolution Chartered Accountants Ireland to issue a new “Property Management Company Procedures for Quality Audit 2011 (Republic of Ireland) Toolbox Management Agent is Related Party Auditor to be provided with:  Budget as approved at General Meeting  Method of Apportionment with documentary evidence  Sinking Fund Scheme as approved at Annual General Meeting  Insurances and Qualifications of Agent  Contract between OMC and Agent  Controls regarding expenditure  Copy of Main Supplier Contracts and detail of parties (Agent or OMC) MUD Act 2011 – Impact on Audit of OMC’s

Dispute Resolution Act Applies to Developers and Owner Management Companies Service Charges to be agreed at General Meeting Sinking Fund to be agreed at General Meeting or charge € 200 House Rules to be agreed at General Meeting or not enforceable All Developments will be handed over by 30 September 2011 or law is broken No weighted voting rights from 1 April 2011 Schedule 3 delivery could pose a problem and create opportunity for OMC’s Summary