Multi-Unit Developments Act
Application
The Multi-unit Developments Act provides for mandatory rights and obligations in relation to residential multi-unit developments. It applies to residential apartment blocks, where the structural parts and the internal and external common areas are, of necessity, managed in common. It applies to housing developments, with private facilities such as open spaces, roads, lighting or other facilities. It applies to mixed commercial and residential developments and with some residential element.
See the sections on the legal structures used in relation to multi-unit developments. The Multi-unit Development Act applies both to new, post (1st April 2011) developments and to pre-existing developments. Differing requirements apply to new schemes and to existing schemes. It overrules existing residential management schemes to a significant extent.
The Multi-unit Developments Act applies to a “multi-unit” development. This is a development on which there are buildings comprising units, where amenities and facilities are to be shared and where the development contains at least five residential units. In the case of developments with between two and five units, certain obligations in the legislation apply. Special provisions apply to mixed-use multi-unit developments, with commercial units other than a creche within the development.
Key Concepts
The obligations apply to a “developer”. This is a person who carries out or arranges the development or construction of a multi-unit development. The “common areas” in a development, are those parts of the development intended or designated as common areas. It may include structural parts of a building, entrance halls, landing, staircases, access roads, footpaths, amenities, architectural features, common facilities, pipes, drains, wires and other service lines.
The developer has a certain degree of freedom in relation to the designation of common parts. However, he may not exclude part of the development which is necessary for the use and enjoyment of the development by the residential owners. Where the development is being carried out in phases, the obligations apply to the common parts for each phase. These are the parts necessary for the enjoyment or peaceful occupation of the unit.
All multi-unit developments must have an owner’s management company. This is registered with the Companies Registrations Office for the purpose of taking over the common parts. It must be designated as an “OMC”.
A residential unit is a house, apartment, flat or other dwelling with self-contained facilities. It also includes a childcare facility which is not intended to share amenities and services with commercial units in a development.
Different Categories of MUD
The legislation distinguishes between different types of multi-unit development. More limited provisions of the Act apply, to where there are between two and five residential units. These apply largely to the operation of the owner’s management company.
Most, but not all provisions of the Act, apply to developments where all units are resident, but the structural or part of the structure in which they’re situated does not and was not intended to form the common areas of the development. Where this is the case, the provisions apply only to the actual common areas designated or intended.
Another category of development is housing developments, where external services such as roads, parks, facilities, open areas and services are to be transferred to an owner’s management company, rather than taken over by the local authority. In this case, some provisions do not apply.
Mixed-use developments are subject to the Act. Wholly commercial developments are not subject to the Act. Only the common areas, either exclusive to the residential units, or common to both the commercial and the residential units, must be transferred to the OMC. Common areas, which are exclusive to the commercial units, need not be transferred although, the terms of the agreement, may otherwise provide. It may not be possible to separate the common parts enjoyed by the residential and commercial units, in which event the Act will apply.
Separate management companies may be established to deal with commercial and non-commercial parts and for separate classes of residential parts. There are provisions requiring an allocation of voting rights. In a mixed commercial / residential development, there may be different classes of voting rights provided that the allocation is fair and equitable. This would depend on the respective level of services enjoyed by the respective party. In the case of commercial units, the level of use might be higher because of customer traffic, and a greater proportion of the cost might be referable to them in that case.
Transfer of the Common Parts
One of the key obligations in legislation is the obligation on the developer to transfer the common parts and the reversion (i.e. the landlord’s interest under the lease of the units) to the Owners’ Management Company. This obligation applies to the developer and to other parties who have rights to the common areas.
A distinction is drawn between developments in which residential units have been sold prior to the commencement of the Act and those where the first sale takes place after the commencement of the Act. The obligations in relation to the transfer of the common areas vary depending on whether and how many residential units had been sold in the development when the legislation commenced on 1st April 2011.
Where no units had been sold as on the above date, the full obligations of the legislation apply. It applies both to entirely new developments and to developments constructed or partly constructed development on that date, in which no units had been sold on that date. Different provision was made for where a residential unit had sold prior to that date, but less than 80 per cent of the units in the development had been sold. Further and different provision was made where more than 80 per cent of the units had been sold on that date.
New Development
The development stage runs from when the first unit is made available for sale, until completion.
The developer cannot undertake any residential sales until
- an owners’ management company (OMC) has been established at the expense of the developer;
- ownership of the common parts and of the reversion in the residential unit has been transferred to the OMC;
- a certificate has been issued as to compliance by a qualified person that the common part has been constructed in accordance with building regulations and fire safety certificate;
- a written agreement has been entered between the management company and the developer setting out the rights and obligations of the developer and management company relating to completion of the common area works, compliance and proof of compliance with planning permission building regulations with provision for dispute resolution;
The parts to be transferred are those which are necessary for the proper use and enjoyment of the unit. The obligation to transfer the relevant parts of the common parts, includes rights of access, easements, amenities and other rights necessary for the use and enjoyment of the property. The owner of the relevant parts concerned must take all steps within his powers as are necessary to ensure each owner of a unit in the development enjoys those rights.
The developer must ensure that the owners’ management company obtains independent legal advice in relation to the agreement in relation to the transfer of the common areas. This seeks to avoid a conflict of interests.
Transfer of Beneficial Ownership
Notwithstanding the transfer of the common areas and the reversion of the sold units, the beneficial interest in the area is to be reserved to the developer and its owner, including its mortgagee. The developer retains effective beneficial ownership. Legal ownership passes “upfront”. Beneficial ownership passes on completion of the development.
Once the development stage has ended, the developer or owner must complete a statutory declaration to the effect that beneficial ownership in the common areas and the areas reserved have ceased and merged with the legal interest in the OMC. The owner’s management company becomes the legal and beneficial owner at that point in time. Provided the owner’s developer’s mortgagee has consented, which consent can’t be unreasonably withheld, the effect is to vest the beneficial interest in the common areas and reversions in the management company
Once 60 per cent or more of the owners of the residential units call on the developer to vet the beneficial ownership of the common areas, this is also to happen, unless the developer demonstrates good cause as to why he should not transfer at that time.
Where a residential unit had been sold prior to 1st April 2011, the developer was obliged to transfer the common parts and the reversion by 1st October 2011. As in the above case, the beneficial ownership was retained by the developer pending completion of the common areas. They transfer upon completion of a statutory declaration
Where prior to 1, April 2011 more than 80 per cent of the units have already been transferred, the developer was obliged to transfer the common areas by 1st October 2011. The beneficial interest was not reserved to the developer. This in effect required that the developer transfers unsold units to a nominee or retain them itself, while transferrin the common parts and facilities to the owners’ management company
Post Transfer
Where the common parts are transferred or are deemed to be transferred, the management company is obliged, at the developer’s request, to join in a conveyance to a purchaser of a unit or to the developer’s nominees. If the management company fails to do so the developer may apply to the Circuit Court for an order requiring it to do so.
The developer remains liable to complete the development in accordance with planning and building control legislation. Notwithstanding transfer of the common areas, the developer is to retain rights to cross over the common areas necessary to carry out works for the development on for any adjoining development. The developer is to indemnify the OMC in relation to any acts or omissions arising in these works. The developer is obliged to maintain adequate insurance with an authorised insurer in relation to all risks associated with the developer’s use and occupation of the development.
In carrying out the completion of the development, the developer must take reasonable steps to minimise inconvenience and must ensure that access to the development is maintained in a safe manner. The management company is not to obstruct the developer in exercising its right or in completing the development.
Once the developer completes the development, it is obliged to furnish the management company with certain documentation. This includes opinions on compliance with planning and building regulations in respect of the entire development, all planning, fire safety and other consents, receipts for financial conditions, equipment warranties, as-built drawings, test records, original title documents, counterpart leases for each unit together with all financial and management records and account.
Voting Rights and Directors
The Multi-unit Developments Act makes mandatory provision in respect of management company voting rights. Unitholders have automatic rights on acquiring their apartment. On sale, the rights and obligations associated with membership vest in the purchaser automatically without, a share transfer. The management company is obliged to comply with company law and maintain a register of members. Owners are obliged to provide their details and details of any tenant or occupant to the OMC.
Each residential unitholder is to have one vote of equal value. No other persons are to have votes. This does not apply to developments where residential units had been contracted to be sold prior to 1st April 2011. It applies to mixed, commercial and residential development subject to a fair and reasonable apportionment of rights. The management company must be referred to as the owners’ management company in all documentation or as the “OMC.”
In the case of developments where a unit was sold prior to 1st April 2011, the developer’s retained voting rights and other voting rights in breach of the above principles will not apply, unless the Circuit Court authorises the voting rights to be used. Therefore, for practical purposes, the above rules apply to multi-unit developments, whether or not units have been sold before or after 1st April 2011.
A director may not be appointed for a term more than three years after 1st April 2011. He is deemed to vacate office in the third anniversary of the legislation, subject to the possibility of being reappointed by the members. The owner’s management company itself cannot enter into contracts, such as with management agents for periods of more than three years
Obligations of OMCs
Every owner’s management company is obliged to prepare an annual report in compliance with companies legislation and must hold a meeting at least once a year to consider it. At least 21 days’ notice must be given of the annual meeting. A copy of the annual report must be given at least 10 days prior to that date. The meeting must take place within reasonable proximity to the development itself unless 75 per cent of members agrees otherwise in writing.
The annual report must contain;
- a statement of income and expenditure;
- a statement of assets and liabilities;
- a statement of funds in the sinking fund and the contribution;
- a statement of the amount of service charge and the basis of a charge
- the projected annual charge for the period;
- planned capital and nonrecurring expenditure;
- the insured value of the development;
- annual insurance premium;
- name of the insurer;
- summary of principal risks;
- particulars of fire safety equipment and arrangements for maintenance,
- contracts in force between the OMC on any directors or persons connected with them.
The management company is entitled to make house rules to be approved at the management company general meeting. This may relate to the operation and maintenance of the development. It must be for the purpose of enhancing the quiet and peaceful enjoyment of the development. The rules are to be binding on owners, tenants, occupiers and employees. They are to be consistent with the lease and other scheme documentation.
Service Charge
The management company must establish and maintain an annual service charge scheme for the purpose of the management, maintenance and insurance of the common areas and shared services. It may not be levied unless it has been first considered by the general meeting held for such purpose. Where the estimated charge and budget is not approved by the 75 per cent present and voting, the charge will not apply but the previous year’s charge will apply until a new charge is approved.
The service charge is to be broken down between gardening and landscaping, cleaning, waste management, repairs, general maintenance, insurance, security services, legal services, accounts and other expenditure. Developers must not recover costs properly attributable to the original development through the service charge. They remain the responsibility of the developer. The developer remains responsible for service charge on unsold units.
Where the developer has failed to carry out works, then on certain conditions, 75 per cent of the members of the management company may authorise the service charge to be used for the purpose of carrying out such works.
Each owner must pay all service charges levied. This includes the developer in respect of unsold units. The obligation to pay arises after the first sale. The service charge and sinking fund contribution may be recovered as a contract debt. The service charge need not be equal, but it should be apportioned between units on a fair and equitable basis. This should be tailored relative to the development.
Each management company must establish a sinking fund to cover exceptional expenditure of a non-recurring nature. This must be done within three years of the transfer and sale of the first unit or 18 months after the legislation commenced. Each unitholder is to contribute €200 or such other amount as may be agreed at the general meeting. Unitholders and developers are obliged to pay the contribution. The contribution may be recovered as a contract debt.
Enforcement
An application may be made to the Circuit Court for orders to enforce any rights or obligations under the legislation. The court has discretion when satisfied that a right is being infringed, to order compliance. A developer may be obliged to comply with the obligations in the Act, notwithstanding any restriction in the scheme of documentation.
The Circuit Court may have its own motion, or at the request of any party, require parties to undertake mediation in order to discuss and attempt to settle the dispute. The chairperson is to report to the court as to whether the mediation took place and if not, why it did not take place. Where it did take place, there is to be a statement as to whether a settlement has been reached and, if so, the details of the settlement. If no settlement has been reached, the report is to set out whether or not the outcome is due to the conduct of one or more parties to the mediation. The court may take account of the report in allocating liability for costs.
There is a new mechanism for restoring owners’ management companies which have been struck off within the previous six years. Outstanding returns must be filed with the Companies Registration Office. An application to the High court application is not necessary.