multi unit developments act 2011 governance and management in existing and future multi unit...
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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)
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 € 200.00 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
Dispute Resolution
Owners
Manageme
nt 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
Manageme
nt 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 Owner
s
•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 € 200.00 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