Has the Multi-Unit Development Act 2011 been a success?

Introduction

The Multi-Unit Development Act 2011 was commenced with effect from 1 April 2011. The Act was introduced to seek to address problems relating to the ownership and management of the common areas of both existing and future developments which contain a multitude of units. The Act also seeks to facilitate the fair and effective management of bodies responsible for the management of those areas. Given the Act has been now been operative for a number of years has it been a success?

Benefits

It is clear that the body of the Act itself has introduced a number of legal measures which are of benefit. For example:-

• In new developments (i.e. those commencing post 1 April 2011) a developer cannot transfer an interest in a residential unit unless various conditions have been complied with.
• For older developments (i.e. where units had been sold pre 1 April 2011), the Act prescribed a six month timeframe within which the common areas should be transferred to the OMC.
• Purchasers of residential units automatically become members of the OMC on the acquisition of that unit and only residential units have voting rights in the OMC with one vote attaching to each residential unit.
• The OMC must now implement a fair and equitable service charge structure and the service charge budget shall not be levied unless it has been considered in general meeting.
• A sinking fund must be established to deal with certain expenditure incurred.
• The OMC has the right to effect essential repairs on parts of the development which are not in its ownership where those repairs are necessary for the safe occupation of a unit and can seek to recover that expense from the person who was responsible for the work.
• The benefit of any warranties and guarantees received by the developer in relation to the MUD shall automatically transfer to the OMC.

Overall Impact

It is clear that the position of an OMC is now a lot stronger than prior to the implementation of the Act. It is appropriate to examine the benefits under the following headings:-

1. General Governance
2. Members of an OMC now have clear transparency and more input to the management of the OMC. Voting rights are now prescribed as is the ability of the members to consider the service charge budget prior to its implementation. In addition, the obligation to provide for sinking funds means that in theory an OMC will have a fund available to meet a contingency.
3. New Developments
4. From a conveyancing perspective the benefits of the Act are more clearly visible in new developments. We are now seeing that where residential developments are being constructed that the common areas are being transferred to the management company at the outset and the relevant documentation as required by the Act is being furnished.
5. Old Developments
6. Whist the Act does impose an obligation to have common areas transferred to the OMC for pre-MUD Act development within six months from 1 April 2011, from the writer’s experience this obligation has largely not been complied with. In many cases developers have become insolvent, banks or other vulture funds have taken possession of developments and compliance with this provision does not seem to be a priority. One of the main failings of the Act is that a sanction for non-compliance with this section was not imposed. Furthermore, the Law Society has indicated that the non-transfer of common areas to a management company in such developments in compliance with the Act is not a blot on the title and therefore conveyancing of such units occur normally at present notwithstanding the non-compliance with this requirement.

Conclusion

The Act does clearly enhance the position of the OMC and its members. The onus does however lie upon the OMC and its members to ensure that the rights conferred by the Act are being respected and complied with. This requires an OMC and its members to be familiar with the Act and to fully obtain the benefits of the Act members must become actively involved in the management of the OMC.

Of course there are many OMC’s experiencing difficulty in collecting service charges and may just be solvent. In such cases the suggestion of establishing a sinking fund of any significance or indeed bringing actions to enforce rights under the MUD Act may not always be an option due to lack of funds. That said the Act is certainly a step in the right direction.

For further information on this topic, please contact Brendan Sharkey on bsharkey@reddycharlton.ie