This Memorandum refers to the Apartment Developments' Management Reform Bill as introduced in the Northern Ireland Assembly on 15 November 2010 (Bill 4/10)

APARTMENT DEVELOPMENTS' MANAGEMENT REFORM BILL

Explanatory and financial memorandum

INTRODUCTION

1. This Explanatory and Financial Memorandum has been prepared by Mr Kieran McCarthy MLA in order to assist the reader of the Bill and to help inform debate on it. It does not form part of the Bill.

2. This Memorandum needs to be read in conjunction with the Bill. It is not and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause or Schedule does not seem to require an explanation or comment, none is given.

BACKGROUND AND POLICY OBJECTIVES

3. The objective of this Bill is to address current inadequacies in the laws governing aspects of the ownership of certain types of private properties which comprise part of multi-unit developments (including privately owned apartments and so-called ‘Townhouses’).

4. The question of whether or not there are inadequacies in the current laws applicable to certain aspects of the ownership of properties within multi-unit developments was debated by the Assembly on 9 November 2009. On that occasion the Assembly resolved:

“That this Assembly notes that the regulations on multi-unit development management companies are not currently adequate and calls on the Executive to introduce new legislation that will govern the way in which they operate.”

5. There are significantly more than 42,000 private dwellings (including apartments and so-called ‘Townhouses’) (hereinafter: ‘ units’) that are part of private multi-unit developments in Northern Ireland. Such multi-unit developments contain designated Common Areas. Purchasers of such private dwellings in multi-unit developments [herineafter ‘ Owners’] contract to pay for the maintenance of such Common Areas as part of their unit purchase transaction. Yet, in a large number of documented cases, the Common Areas are not being maintained to a standard commensurate with such unit Owners’ reasonable expectations.

6. Many Owners have attempted to use aspects of contract law, consumer protection legislation, land law, and company law to address problems such as those outlined above. But for a variety of reasons, it has proved practically impossible for Owners to find appropriate legal remedies to the expensive, stressful and, ultimately, in the absence of appropriate regulation, inevitable difficulties many of them find themselves in.

7. It is worth noting that while such typical problems as outlined above affect several hundred multi-unit developments already, many hundreds more are susceptible to them because of the absence of appropriate regulation concerning key aspects involved in their sale and ongoing maintenance.

CONSULTATION

8. In excess of 3000 individuals and organisations have been consulted prior to the publication of this Bill. Over one hundred discussions and follow-up meetings were held with key stakeholders on the issues which proposals for law reform in this area has thrown up.

9. There was very strong support, especially among Owners and certain multi-unit development management agents, for law reforms along the lines included in this Bill

OPTIONS CONSIDERED

10. One option considered was to adopt provisions from the jurisdiction of England and Wales’s Commonhold and Leasehold Reform Act 2002 (hereinafter “The 2002 Act”). The 2002 Act was introduced after several failed legislative attempts to deal with problems in the jurisdiction of England and Wales which bear a passing similarity to problems in Northern Ireland such as those outlined in paragraphs 5-9 above. The 2002 Act introduced a ‘Right to Manage’ and the first new form of land tenure in England and Wales - Commonhold – for many centuries. Having consulted on the appropriateness of adopting this framework to address the problems experienced by Owners in Northern Ireland, it was concluded that this Act, however, is not an appropriate model to adapt to local circumstances in Northern Ireland.

11. Alterations to existing regimes of regulation of, for instance, companies or consumer protection were also considered. As indeed was the establishment of an ombudsmen service to decide questions at dispute between Owners and multi-unit development management companies. The question of whether or not the Assembly has a role in promulgating legislation to help owners bind together into a representative organisation was also considered and ultimately rejected. Further consideration was given to setting up a specific regime to regulate apartment management agents. However, after consulting widely on these questions, it was determined that a Bill that addresses the fundamental structural issues, such as the timing of conveying legal title to the Common Areas, was necessary. A multi-agency approach including legislation such as this Bill together with many other initiatives will be required to deal with the problems identified.

OVERVIEW

12. The Bill has 23 clauses and a Schedule.

13. Clause 1 defines terms used within the Bill.

14. Clause 2 ensures that in the case of future apartment developments’ developers shall transfer ownership of the common areas to such developments’ Owner Management Companies (OMCs).

15. Clause 3 ensures that in the case of completed apartment developments’ developers shall transfer ownership of the common areas to such developments’ OMCs within 6 months.

16. Clause 4 ensures that in the case of an apartment development which has not been completed developers will actually transfer ownership of the common areas to such developments’ OMCs within 6 months.

17. Clause 5 obliges developers to complete developments in accordance with planning permissions, notwithstanding the obligations imposed in Clauses 2-4 inclusive.

18. Unit owners automatically become members of apartment developments’ OMCs under Clause 6.

19. Clause 7 reserves rights of access to a developer for the purpose of completing such developments.

20. Clause 8 ensures members of apartment developments’ OMCs have votes of the same weight.

21. All OMCs are obliged under Clause 9 to conform to certain requirements regarding annual general meetings and annual reports.

22. All OMCs are obliged under Clause 10 to introduce schemes of annual service charges which are in conformity with certain requirements.

23. Under Clause 11 all OMCs are obliged in Clause 11 to establish sinking funds for the purpose of funding major irregular reparations of the apartment developments’ common areas.

24. Clause 12 obliges apartment development OMCs to set out the basis for payments requested under Clauses 11 and 12.

25. OMCs, under Clause 13, are given the right to recover monies due to them under Clauses 11 and 12.

26. OMCs power to make, and the rules governing, the proper creation of ‘house rules’ are outlined in Clause 14. The Department of Finance and Personnel is also enabled to make regulations regarding such house rules by this clause.

27. Clause 15 enables certain parties specified in Clause 16 to make applications to the court to enforce obligations contained within the Bill.

28. Clause 17 confers jurisdiction over disputes to the County Court.

29. Mediation conferences for parties specified in Clause 16 are provided for under Clause 18, while C lause 19 provides for the submission of a report of the mediation conference to the parties to the application and to the court.

30. Clause 20 transfers the benefit of any warranties and guarantees related to the construction of the development to the OMC and obliges the developer to provide certain documents pertaining to the development to the OMC.

31. Clause 21 places restrictions on an OMC’s ability to enter into certain contracts.

32. Property management agents acting on behalf of OMCs either already in existence or to come into being are restricted under Clause 22 from acting in certain capacities as regards the administration of OMCs duties and the exercise of such OMCs rights.

33. Clause 23 provides for the short title and commencement of certain sections of the Bill.

34. The Schedule contains a list of documents which the developer is required to supply to the OMC under Clause 20 of the Bill.

COST IMPLICATIONS OF THE PROPOSALS

35. This Bill will ensure that existing financial liabilities and obligations arising from multi-unit ownership are more clearly identified and provides for the creation of appropriate mechanisms for ensuring that the ongoing costs associated with multi-unit ownership are fairly and responsibly managed. Enacting this legislation will have limited financial implications.

EQUALITY AND HUMAN RIGHTS IMPLICATIONS

36. The provisions of the Bill are compatible with the provisions of the Human Rights Act 1998.

37. The provisions are believed to be consistent with equality of opportunity.

LEGISLATIVE COMPETENCE

38. The member in charge of the bill, Mr. Kieran McCarthy MLA, had made the following statement under Standing Order 30:

“In my view the Apartment Developments’ Management Reform Bill would be within the legislative competence of the Northern Ireland Assembly.”