MULTI-UNIT DEVELOPMENTS (MUD) ACT 2011AN OVERVIEW

www.scsi.ie

Society of Chartered Surveyors Ireland38 Merrion Square,Dublin 2, IrelandTel: + 353 (0)1 644 5500Email: info@scsi.ie

SIOBHAN O’DWYERChair of the Property and Facilities Management Group of the Society of Chartered Surveyors Ireland

•Working in the industry since 1988•O’Dwyer 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

• 1st April 2011 - 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 (MUD’s)

• MUD - not less than 5 units with shared amenities

• Mixed-Use Developments – MUD’s 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 2011

1. DEVELOPERS’ OBLIGATION TO TRANSFER OWNERSHIP OF COMMON AREAS

Developers must transfer ownership of common areas in:

i. Existing MUD’s* - within 6 months (by 30th September 2011)

ii. Future MUD’s– before the sale of any unit

*2 Types of Existing MUD’s:

- Partially sold = 80% or less sold by 1st April 2011

- Substantially sold = 80% or more sold by 1st April 2011

MUD ACT 2011

(i) EXISTING MUD’S

• 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 MUD’S

• 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 2011

2. 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 2011

1. 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 2011

3. 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 OMC’s• Apportionment of funds

• Court may direct the parties to engage in mediation (broader rules)

MUD ACT 2011

FAILURE TO TRANSFER BY 30th 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 2011

4. 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 2011

5. 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

SINKING FUND

SERVICE CHARGES

HOUSE RULES

REPORTING

MUD ACT 2011

THANK YOU !

www.scsi.ie

Society of Chartered Surveyors Ireland38 Merrion Square,Dublin 2, IrelandTel: + 353 (0)1 644 5500Email: info@scsi.ie

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