Mediation: New Work Opportunities for Mediators
Date: July 19th, 2010 | Filed under: Blog, Mediation & Company Law Articles | Tags: ireland, mediation, mediatorThe new Mud’s Bill has now passed all stages in the Seanad and has gone to Report Stage in the Dail. It’s a whole new corporate governance code for apartment management companies and housing schemes and its inevitable that this new legislation, expected to be enacted in December 2010 and will present interesting new opportunities for those in a position to take on this new work.
The Multi Unit Developments Bill 2009 contains just 31 sections of new law, it’s subject to change and the latest copy of the Bill can be found here:
http://www.oireachtas.ie/viewdoc.asp?fn=/documents/bills28/bills/2009/3209/b32b09s.pdf
It is estimated that there are over 500,000 residents in Ireland today living in apartments or multi-unit developments. Complaints on apartment management company disputes account for most made to the ODCE.
Recent amendments made to the Bill in the Seanad now makes it very clear that the common areas extend to internal and external common areas in a multiunit development. It’s also crystal clear from what was said in the debates that the Department of Justice don’t intend spoon feeding people with regard to these new regulations and this will lead to a considerable knowledge and skills deficit in this new emerging area of law.
The “OMC”
The Owner’s Management Company, the New name for apartment management companies. This will tie in with the new company legislation that will eventually allow your typical apartment management company convert to become an OMC
This new legislation will give a very clear definition as what is meant by the definition of the common areas. Sometimes there is a perception that the common areas are just the gardens and hallways, however, this new definition highlights the full extent of the areas held by the management company, thus reinforcing the requirement to keep the management company in good standing at all times and that it is very much in the interests of all the members of the management company to ensure that a system of good corporate governance is in place for the management company.
We all know this is not the case and just look at the number of motions in the Chancery 2 list on a Monday morning seeking to have apartment management companies restored to the register because the directors haven’t bothered to keep the Company in good standing. This new legislation will send out a clear message that things have got to change in this area, there is a lot work to be done and a real lack on the ground of people to advise just what has to be done over the next 12 months.
There will be a strict requirement on developers to transfer the common areas over within six months of the commencement of the legislation! What happens if the developer is in liquidation, receivership, examination, the common areas are vested with NAMA, insolvent, gone away or simply unconscious about their obligations under this new law?
The directors of these apartment management companies will take on numerous new obligations and responsibilities with regard to annual general meetings, service charges, collecting a sinking fund, house rules in addition to their obligations under the fifteen different companies acts 1963 to 2009! Very very few directors have this expertise or the enthusiasm to read themselves into the new regulations.
Who would want to be a director of an apartment management company in 2011? However, that said, the whole system of apartment living will collapse if residents, investors, landlords or developers don’t step in and take responsibility.
Whilst the legislation is relatively short at thirty one sections to date, it’s a very technical piece of new law and it needs careful consideration and study by company directors and their advisers.
So where are the work opportunities? Section 21 broadly provides that if you have a problem and are seeking to enforce any rights under the new legislation or a rule of law, you can make an application to your local Circuit Court! Unfortunately, there is a lot of disharmony at present with the whole system of apartment management companies and it’s inevitable that there will be a raft of new applications made under this new legislation.
However, Section 24 provides that the court of its own motion or upon the request of any party applying to the Circuit Court may direct that the parties to the application meet to discuss an attempt to settle the matter by way of a mediation conference. The apartment management company is essentially a glorified residents association and it’s highly likely that the courts will first refer these cases out to suitably qualified mediators who will seek to facilitate the parties with the resolution of their disputes and the courts will only get involved when all else has failed.
GETTING YOUR HANDS DIRTY
Mediators say that there’s not enough work out there and in particular getting experience.The new Mud’s Bill is a great opportunity to get your hands dirty straight away mediating or acting as an advocate in apartment management company disputes! It may not be the most well-paid mediation work but it’s work and if you can successfully help the parties through these mediations then you should be just about ready to take on the toughest mediation assignments out there! Apartment management company disputes are not easy but it’s great experience and experience is what you need if you’re going to add ADR to your practice. Clients will only select mediators who have experience or radiate that confidence of having been there and done that!
ACCREDITED MEDIATOR STATUS
If you’re not already accredited as a mediator, have a look at the link below for scholarship opportunities. This is a great opportunity to take the training for free that otherwise might cost between €3000 or more.
http://www.cpdseminars.ie/mediation-scholarships/
A Short Summary of provisions in the Bill
Section 1 is a standard provision containing definitions of terms used in the Bill. ‘‘Multi-unit development’’ means a building, or part of a building, which is divided into units of which not less than 5 are designed and intended for residential use. ‘‘Unit’’ means a unit designed for use and occupation as an apartment, flat or other dwelling.
Prohibition on the sale of apartments unless common areas have been transferred to the “OMC”
Section 3 imposes new conditions on the sale of units in new multi unit developments. Subsection (1) provides that a unit in a new multiunit development shall not be sold unless an owners’ management company has been established at the expense of the developer and ownership of relevant parts of the common areas have, subject to subsection (6), been transferred to that company.
Section 4 deals with existing multi-unit developments which have not been completed. It provides that in cases where units in a multiunit development have been sold prior to the coming into operation of this section, the developer must transfer ownership of the relevant parts of the common areas to the owners’ management company within 6 months.
Developers obligation to transfer common areas to the “OMC”
Section 5 deals with completed multi-unit developents. It obliges a developer to transfer ownership of the common areas of such completed developments to the relevant owners’ management company within 6 months of the coming into operation of the section.
Section 5 makes it clear that the transfer of ownership of common areas does not relieve a developer of his or her responsibility for completing the development in accordance with the Planning and Development Acts and the Building Control Acts.
Automatic membership
Section 8 provides that whenever ownership of a unit in a multiunit
development is sold or assigned, membership of the relevant
owners’ management company shall transfer to the purchaser without
the need to execute a transfer or have it approved by the directors
of the company. The owners’ management company will be
obliged to furnish the purchaser with a share or membership certificate
as soon as practicable following notification of the change of
ownership. It must also ensure that the register of members is
updated and comply with other relevant requirements under the
Companies Acts.
Consequences of transfer of common areas
Section 9 outlines the consequences of transfer of common areas
in a multi-unit development. It provides that the developer shall
retain rights to pass and re-pass over such areas in order to complete
them. There must be a valid insurance policy in place in respect of
all risks relating to the developer’s use or occupation of the multiunit
development and the developer must also indemnify the owners’
management company against claims made against it in respect of
acts or omissions by the developer in the course of completion works.
Section 10 is intended to deal with cases in which ownership or
responsibility for the maintenance and management of a part of a
multi-unit development which is commonly held by the owners’ management
company is held instead by an individual unit owner. In
such cases, the unit owner and the company may agree to the transfer
of ownership of that interest and responsibilty to the company.
Subsection(2) provides that any such agreement will be subject to
approval at a general meeting of members of the company. Subsection
(3) provides that where either party considers that consent to
the transfer is being unreasonably withheld, they may make an application
to the court under the dispute resolution mechanism in section
18 (see below).
Section 11 provides that where a multi-unit development has been
completed, the owner of any beneficial interest in the common areas
(or reversion) must, as soon as practicable after completion, make a
declaration for the benefit of the owners’ management company stating
that such interest stands extinguished. Subsection (2) provides
that the declaration must be made with the consent of any mortgagee
or owner of a charge on the property and that the consent may not
be unreasonably withheld. Subsection (3) contains conditions in
relation to such consent.
Section 12 provides for the possible extinguishment of beneficial
interests where a multi-unit development has not been completed.
Subsection (1) provides that where 60 per cent of the unit owners
request the beneficial owner to make a statement that the beneficial
interest stands extinguished, such owner shall make that declaration
unless good and sufficient cause is shown (subsection (4) provides
that good and sufficient cause can include a reason that the granting
of the declaration would interfere with the completion of the entire
development). Subsection (2) provides that any declaration shall be
made with the consent of any mortgagee or owner of a charge on
the land and that consent may not be unreasonably withheld. Subsection
(3) contains conditions in relation to such consent. Any dispute
as to whether good and sufficient cause has been shown as to why a
declaration should not be made under subsection (1), may be the
subject of an application to court under the dispute resolution mechanism
in section 18.
Section 13 makes it clear that an owners’ management company
shall have a right to carry out repairs or maintenance on a part of a
multi-unit development which is not within its control where the
repairs are reasonably necessary to ensure the safe and effective
occupation or the peaceful enjoyment of occupation of any unit. Subsection
(2) provides that the owners’ management company may
recover the costs of carrying out such repairs or maintenance from
any person (including the developer) who had resposibility for carrying
out the repairs or maintenance.
One vote to each unit owner
Section 14 makes provision for voting rights in owners’ management
companies established after the commencement of the Act.
Subsection (1) specifies that one vote shall attach to each unit owner
in a development, while subsection (2) provides that each vote shall
be of equal value. Subsection (3) provides that the words ‘‘owners’
management company’’ — which may be abbreviated to ‘‘OMC’’ —
must be included in the name of any such owners’ management
company.
Numerous new obligations on OMC’s
Section 15 imposes specific obligations on owners’ management
companies. Subsection (2) outlines various matters to be addressed
in the annual report. They include details of income and expediture,
and assets and liabilities; the annual service charges and sinking fund
account; planned expenditure on maintenance and repair; insurance
cover and contracts entered into by the company. Advance notice of
the meeting must be given to each member 21 days before the meeting
and a copy of the annual report must be provided at least 10
days beforehand. The annual general meeting must take place within
reasonable proximity to the multi-unit development unless otherwise
agreed by 75 per cent of the members of the company. Subsection
(6) makes it clear that the obligations outlined in this section are in
addition to any other obligation or duty of the company under any
Act, statutory instrument or rule of law.
Service charges must be approved at the AGM
Section 16 provides that the owners’ management company must
establish a scheme for annual service charges to fund expenditure on
the maintenance, insurance and repair of common areas within its
control and for the provision of common services (security, legal,
accounting etc.) to unit owners. Subsection (2) provides that any such
charge shall be approved by a general meeting of the members of the
company, while subsection (3) outlines the categories of expenditure
which must be itemised in the scheme of charges. Subsection (4) provides
that in any case in which over 75 per cent of the members do
not approve the proposed charge, the existing charge shall remain in
place until adoption of a new charge. Subsection (5) provides that
where no service charge applied in the previous period, the directors
may determine a scheme to operate for a period of 4 months.
Subsection (6) provides that the service charge shall not be used
to defray expense on matters which are the responsibility of a developer
or builder unless over 90 per cent of the members vote in favour
of such use. Subsection (8) provides that where expenditure is
incurred under subsection (6), the owners’ management company
may recover it from any person (including the developer).
Subsection(7) provides that any approval of such expenditure is conditional on65 per cent of the units being sold and can only come into effect 3
years after the transfer of ownership of the common areas to the
owners’ management company. Subsection (9) places an obligation
on a unit owner to pay the annual service charge. Subsection (11)
provides that the annual service charge must be calculated on a transparent
and fair basis. Subsection (12) sets out conditions in relation
to the setting of the charge, while subsection (14) will permit any
excess to be diverted to the sinking fund. Subsection (13) requires an
owners’ management company to maintain proper records of expenditure
for auditing purposes. Subsection (15) provides that the Minister
for Justice, Equality and Law Reform may make regulations
regarding the class or classes of expenditure which may be the subject
of service charges.
OMC’s must establish a sinking fund
Section 17 provides that an owners’ management company must
establish a sinking fund for the purpose of spending on refurbishment,
improvement or maintenance of a non-recurring nature of
the multi-unit development and that unit owners will be obliged to
make contributions to it (directors of the company will have to certify
that expenditure is of a non-recurring nature and it must be
approved by the members). Subsection (4) provides that contributions
to the sinking fund will be made on the same basis as the
annual service charge. Subsection (5) provides that the amount of
service charge shall be €200 per annum or such greater amount as
may be agreed by the members. Subsection (6) provides that the
sinking fund must be established within 3 years of the transfer of
ownership of a unit in the devleopment or, where a development is
already in existence on the coming into operation of the section,
within 18 months of that date. Subsection (7) provides that contributions
to the sinking fund shall be held in a separate identified
account. Any disputes in relation to the sinking fund may be the
subject of an application to court under the dispute resolution mechanism
in section 21. Subsection (10) provides that the Minister for
Justice, Equality and Law Reform may make regulations regarding
the class or classes of expenditure which may be the subject of service
charges, the procedures to be followed in the setting of the contribution
and the levying and payment of the contribution.
Section 18 provides that the owners’ management company may
issue an aggregate request for payment under sections 14 and 15.
Such a request must outline the basis for the calculation of each
charge.
House Rules
Section 20 provides that an owners’ management company may
make House Rules for the effective operation and maintenance of
the multi-unit development. These Rules must be agreed by a meeting
of members of the owners’ management company. Notice of such
meeting must be given to members at least 21 days before the meeting
together with a copy of the draft rules.
When House Rules are made, a copy shall be given to unit owners
by the owners’ management company. Where a unit is let, it shall be
a term of the letting that it is subject to the observance of the Rules
by the tenants. The Rules may make provision for the recovery by
the owners’ management company from any person of the resonable
cost of remedying a breach of the rules.
The application to court
Section 21 establishes a court jurisdiction for the resolution of disputes
in multi-unit developments. Subsection (1) provides that a person
(as defined in section 22), may apply for an order to enforce any
rights conferred or obligation imposed under the Act. An application
under the section shall state the circumstance giving rise to it and
details of the order or orders requested.
Who may apply
Section 22 defines the persons who may apply for a court order
under section 21. They include the owners’ management company; a
unit owner; any trustee under a will, settlement or other disposition
of land by such owner; the developer; or such other person as the
court sees fit.
The Circuit Court Only
Section 21 provides that only the Circuit Court and specifically not the
High Court, will have jurisdiction to hear and determine an application
under section 21.
The mediation option
Section 24 provides that at the request of any party to an application
under section 21, the court may, at any stage during the course
of the proceedings, direct all parties concerned in the application to
meet in a mediation conference. Subsection (2) provides that where
a mediation conference is directed by the court, all parties must comply
with the direction.
Section 25 provides that the chairperson of a mediation conference
must submit a report to the court on the outcome of the conference.
A copy of the report must also be given to the parties to the application.
Where the court is satisfied that a party to the application did
not comply with a direction to engage in the mediation process it
may make an order as to costs.
Section 26 is a saver provision which provides that nothing in the
Act shall derogate from any power vested in any person or court, by
statute or otherwise and the powers conferred in the Act shall be in
addition to and not in substitution for any such powers.
New six-year period to restore in the CRO
Section 27 deals with the problems which arise when an owners’
management company is struck off the register for non-compliance
with reporting requirements. It provides for an extended period during
which such a company may be restored to the Companies Register.
The section provides that the period of one year is extended to 6
years in the case of owners’ management companies.
Section 28 provides that the benefit of any guarantees or warranties
relating to any materials used in the construction, repair or
improvement of a multi-unit development shall stand transferred to
the owners’ management company on the transfer of the land.
Section 29 places restrictions on owners’ management companies
entering into long term contracts with providers of goods and services.
Such companies will not be permitted to enter into contracts
for a period in excess of 3 years. In addition, any contract entered
into by the company cannot include a clause imposing a penalty on
the compnay if the contract is terminated after a 3 year period.
It is probable that this proposed new legislation may not be enacted until the last quarter of 2010 and accordingly we are looking at a commencement date of around June 2011, not a lot of time for all the relevant parties to get prepared and have procedures in place to deal with this new corporate governance code for the apartment management company.
This new Multi Unit Developments Bill 2009 is a great opportunity to make a name for yourself as a mediator, to get valuable practical experience and to Get Paid!
