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Multi-Unit Developments Act 2011
Multi-Unit Developments Act 2011
The Multi-Unit Developments Act 2011 was signed into law on 24 January 2011by President
McAleese. Two sections of the Act (Section 14 & 32) were commenced immediately. The
Commencement Order for the remaining sections of the Act were signed on 2 March 2011.
The Commencement Order establishes 1 April 2011 as the date on which the Act fully
comes into operation. There were significant changes made to the original Bill after
consideration by the Dáil & Seanad.
For the first time, we now have legislation that provides a statutory framework for the
operation and governance of multi-unit developments. Duties and obligations of developers
have been clearly defined. The rights and obligations of members have been established
and a framework for dispute resolution is provided for in the Act.
Application of the Act
The Act defines a Multi-Unit Development (“MUD”) as a development being land on which
there stands erected a building or buildings comprising a unit or units and that as respects
such units it is intended that amenities, facilities and services are to be shared and the
development contains not less than 5 residential units.
Parts of the Act also apply to residential housing developments, where there is a
management company structure and also to mixed use developments (e.g. those
developments that comprise of commercial and residential units.
The main provisions of the act include:
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Requirement to establish an Owner Management Company (“OMC”) for all Multi-Unit
Developments (“MUD”) at the expense of the developer.
Strict conditions for the sale of units and obligation for developers to transfer
ownership of common areas to OMC’s – The common areas must be transferred
within 6 months of enactment of this Act (i.e. by 1st October 2011)
New Regulations for Mixed Use Multi-Unit Developments
Automatic membership of the OMC
1 vote is attached to each residential unit
Requirement to hold annual meetings and prepare annual reports to members – The
format of these annual reports are defined in the Act
Establishment of a scheme of annual service charges & expenditure categories
Establishment of a sinking fund within 18 months of enactment of the Act (i.e.
by 1st October 2012)
Making house rules
Dispute resolution, mediation & rehabilitation of multi-unit development
Restoration of struck off OMC’s to Register of Companies within 6 years of strike off
Timeframe to comply
The Act gives a short time frame for developers and their advisors to comply with the new
provisions under the Act. These include 6 months to transfer the common areas into the
OMC; 18 months to establish a sinking fund and as soon as practicable establish a scheme
for annual service charges. For existing developments the key dates are:
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1st October 2011 – Common Areas must be transferred
1st October 2012 – Sinking Fund must be established
Memorandum & Articles of Association
Directors and advisors of Owner Management Companies should ensure that the
Memorandum and Articles are amended to reflect the new provisions contained in the Act.
These amendments may include:
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Redefining the Objects Clause & definitions as per the Act
Providing for the use of Proxy Votes
Automatic Membership of OMC
The Merging of Beneficial & Legal Interests
The new Voting Rights
Rules regarding Directors Appointments
Approving the Annual Reports
Providing for the Annual Service Charge
Approving House Rules
Definitions
The main definitions in the Act include:“residential unit” is a unit in a multi-unit development which is designed for use and
occupation as a house, apartment, flat or other dwelling or is designed and used as a
childcare facility and such facility is not intended to primarily share amenities, services and
facilities with commercial units in the development.
“owners’ management company” (“OMC”) means, a company established for the purposes
of becoming the owner of the common areas of a multi-unit development and the
management, maintenance and repair of such areas and which is a company registered
under the Companies Acts;
“common areas” means all those parts of a multi-unit development designated, or which it is
intended to designate, as common areas and including where relevant all structural parts of
a building and shall include in particular—
(a)
(b)
(c)
(d)
(e)
(f)
(g)
the external walls, foundations and roofs and internal load bearing walls;
the entrance halls, landings, lifts, lift shafts, staircases and passages;
the access roads, footpaths, kerbs, paved, planted and landscaped areas, and
boundary walls;
architectural and water features;
such other areas which are from time to time provided for common use and
enjoyment by the owners of the units their servants, agents, tenants and licensees;
all ducts and conduits, other than such ducts and conduits within and serving only
one unit in the development;
cisterns, tanks, sewers, drains, pipes, wires, central heating boilers, other than such
items within and serving only one unit in the development;
Mixed Use Multi-Unit Developments
The Act shall apply to residential units and commercial units in the development to the extent
that amenities, facilities and services are shared by such commercial units and residential
units. The provisions in the Act regarding annual reports and meetings, annual service
charges and contributions to the sinking fund and voting rights are applied in a fair and
equitable manner.
Sale of Units & Transfer of Common Areas (New MUD’s)
A person shall not transfer his or her interest in a residential unit, in a MUD unless:
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An OMC has been established at the expense of the developer
Ownership of the common areas of the MUD has been transferred by deed to the
OMC
A certificate from a qualified person that the relevant parts of the MUD are in
compliance with the Building Controls Act 1990.
a contract in writing is entered into between the developer and the OMC concerned,
prior to such transfer, setting out the rights and obligations of each of those persons
relating to the completion of the development
The developer should ensure that the OMC has all the powers necessary to perform
functions imposed on OMC’s by the Act and exercise any powers conferred on such
company by the Act.
The OMC shall have legal representation and not be represented by the same solicitor or
firm of solicitors as the developer and the reasonable costs should be discharged by the
developer.
Transfer of Common Areas within 6 Months (Existing MUD’s)
Where, prior to enactment of this Act, a residential unit in a MUD has been transferred to a
purchaser and the ownership of the common areas has not been transferred, or where a
MUD has been substantially completed, the developer shall arrange for the transfer of the
common areas to the OMC before 1st October 2011.
The developer shall retain the beneficial interests in the common areas which will be
transferred on completion. The developer is still obliged to complete the development. The
developer shall retain rights to pass and re-pass over the common areas in order to
complete them. There must be a valid insurance policy in place in respect of all risks relating
to the developers use of the MUD and the developer must indemnify the OMC against
claims made against it in respect of acts or omissions by the developer in the course of
completion works.
Automatic Membership
Where ownership of a residential unit in a MUD has been transferred, membership of the
OMC is transferred without the need to execute a transfer or have it approved by the
Directors of the OMC.
An OMC shall take all necessary steps to issue a membership or share certificate to the
members as soon as practicable following notification of change of ownership of the
residential unit, that the register of members is updated and that there is compliance with all
other requirement under the Companies Acts.
A unit owner is obliged to provide certain information to the OMC as set out in the Act.
Beneficial Interest
Where the MUD has been completed the owner of the beneficial interest shall make a
statutory declaration for the benefit of the OMC that the beneficial interest is transferred to
the OMC. The Act also provides for the merging of the beneficial and legal interests in
advance of completion of a development. If the owners of 60% of the residential units
request the beneficial owner make a statement that the beneficial interest stands transferred
to the OMC the developer shall make that declaration.
Voting Rights
The voting rights of members in an OMC shall be structured in such a way that one vote
shall attach to each residential unit in a MUD, each vote being equal, and no other person
shall have voting rights. In an existing MUD where a person wishes to exercise other voting
rights (golden share or weighted voting) must obtain authorisation from the Circuit Court.
In a mixed development the voting rights must be apportioned in a manner which is fair and
equitable.
The Articles of Association of all OMC’s should be reviewed to ensure that the voting rights
provide for all the provisions in the Act.
Directors Appointments
A person shall not be appointed as a Director of an OMC for life or for a term greater than 3
years. If this situation exists the Director must resign within 3 years of enactment of the Act.
OMC Name Change
The words “Owner Management Company” or OMC shall be included in the name of every
OMC that no contract for the sale of a residential unit has been entered to prior to 1st April
2011. There is no statutory requirement for OMC’s to change the company name if a
contract for sale has been completed before 1st April 2011.
Annual Meetings & Reports
An OMC shall prepare and furnish to each member an annual report which shall include the
following:
(a)
(b)
(c)
(d)
(e)
a statement of income and expenditure relating to the period covered by the report;
a statement of the assets and liabilities of the company;
where the owners’ management company is required to establish and maintain a
sinking fund—
(i) a statement of the funds standing to the credit of the sinking fund, and
(ii) details of the amount of the annual contribution to the fund and the basis on which
such contribution is calculated;
a statement of the amount of the annual service charge and the basis of such charge
in respect of the period covered by the report;
a statement of the projected or agreed annual service charge relating to the current
period;
(f)
(g)
(i)
a statement of any planned expenditure on the refurbishment, improvement or
maintenance of a nonrecurring nature which it is intended to carry out in the current
period;
a statement of the insured value of the multi-unit development, the amount of the
premium charged, the name of the insurance company with which the policy of (h)
a statement setting out, in general terms, the fire safety equipment installed in
the development and the arrangements in place for the maintenance of such
equipment; and
a statement fully disclosing any contracts entered into or in force between the
owners’ management company and a director or shadow director of the company or
a person who is a connected person as respects that director or shadow director.
The annual report does not form part of the statutory financial statements of the company.
21 days notice must be given to each member for the annual meeting and the annual report
shall be furnished to each member 10 days before the meeting. The annual meeting shall
take place within a reasonable proximity to the MUD and at a reasonable time unless
otherwise agreed in writing by 75% of the members of the company.
Annual Service Charge
An OMC shall establish, as soon as practicable, a scheme in respect of annual service
charges from which the OMC may discharge ongoing expenditure reasonably incurred on
the insurance, maintenance (including cleaning and waste management services) and repair
of the common areas of the MUD concerned and on the provision of common or shared
services to the owners and occupiers of the units in the development.
The annual service charge in respect of a MUD relating to a particular period shall not be
levied unless it has been considered by a general meeting of the members concerned called
for purposes which include the consideration of an estimate of the expenditure it is
anticipated will be incurred by the company in that period.
The estimate of expenditure shall be broken down into the following categories:(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
insurance;
general maintenance;
repairs;
waste management;
cleaning;
gardening and landscaping;
concierge and security services;
legal services and accounts preparation; and
other expenditure arising in connection with the maintenance, repair and
management of the common areas anticipated to arise.
If the proposed service charge is not approved by at least 75% of the persons present and
voting at the meeting, the proposed service charge shall not take effect but the charge
applying for the previous period shall continue to apply pending the adoption of a service
charge for the period concerned.
Service charges levied may not be used to defray expense on matters which are or were the
responsibility of the developer of the MUD unless the expenditure is approved in writing by
75% of the members of the MUD.
The owner of each unit in a MUD shall be obliged to pay all service charges levied. The
Developer must pay the service charge in the case of any unsold units in the MUD.
The annual service charge shall be calculated on a transparent basis and shall be equitably
apportioned between unit owners. If any part of service charge levied is not required for the
year concerned any excess shall be taken account in setting the service charge for the next
year. Also, if the annual service charge is inadequate for the expenditure for the year
concerned the inadequacy shall be added to the service charge for the following year. Any
excess of the annual service charge may be applied on expenditure which may be incurred
An OMC shall maintain sufficient and proper records of expenditure incurred by it to enable
appropriate verification and audits to be undertaken.
Sinking Fund
An OMC shall establish a sinking fund for the purposes of discharging expenditure
reasonably incurred on the MUD.
The obligation to establish a sinking fund and to make contributions to such fund shall apply
on the happening of the later of—
(a)
(b)
the passing of a period of 3 years since the first transfer of the ownership of a unit in
the multi-unit development concerned, or
the expiry of 18 months from the enactment of the Act (i.e. 1st October 2012).
This expenditure may include:(a)
(b)
(c)
(d)
the refurbishment,
improvement,
maintenance of a non-recurring nature, or
advice from a suitably qualified person relating to paragraphs (a) to (c),
Expenditure shall be regarded as being expenditure on maintenance of a non-recurring
nature where—
(a)
(b)
(c)
the expenditure relates to a matter in respect of which expenditure is not generally
incurred in each year,
it is certified by the directors of the owners’ management company as being
expenditure on maintenance of a nonrecurring nature, and
the expenditure is approved by a meeting of the members of the owners’
management company as being expenditure of a non-recurring nature.
The owner of each unit in a MUD shall be obliged to make payment to the sinking fund of the
amount of contribution fixed in respect of the unit concerned. The amount of the contribution
to be paid by each unit owner to the sinking fund in respect of each particular year shall be
the amount of €200 or such other amount as may be agreed by a meeting of the members.
If the members agree to contribute a lesser amount into the sinking fund, this may cause
difficulty in future years if there is not enough funds in the sinking fund to pay for the defined
expenditure.
The contribution made to the sinking fund shall be held in a separate account and in a
manner which indentifies these funds as belonging to the sinking fund and such funds
should only be used for expenditure as provided.
The Minister may make regulations regarding the class or classes of expenditure which may
be the subject of the annual service charge or incurred by a sinking fund.
OMC Annual Charge
An OMC may issue a single request for payment of the aggregate of the charges (annual
service charge & sinking fund) and every request for payment shall set out the basis of the
calculation of the charge and contribution, a breakdown of how it is calculated and the
amount payable in respect of the unit concerned.
House Rules
An OMC may make house rules as respects the development or part of the development
relating to the effective operation and maintenance of the development and with the
objective of enhancing the quiet and peaceable occupation of units generally in the
development
(a)
(b)
(c)
unit owners,
tenants of unit owners, and
servants, agents and licensees of persons referred to in
paragraphs (a) and (b).
House rules made under subsection (1) shall be made in a manner consistent with—
(a)
(b)
the objective of advancing the quiet and peaceful enjoyment of the property by the
unit owners and the occupiers, and
the objective of the fair and equitable balancing of the rights and obligations of the
occupiers and the unit owners, in the development or part of the development
concerned.
House rules shall not be made under this section unless the rules have been considered and
approved by a meeting of the members.
Dispute Resolution
A person may make an application to the Circuit Court:(a)
(b)
for an order under this section to enforce any rights conferred, or obligation imposed,
by this Act or any rule of law, or
for an order relating to any matter to which reference to making an application under
this section is made in this Act.
An application under this section shall state the circumstances giving rise to the application
and the order or orders that the applicant invites the court to make and whether or not
mediation or other dispute resolution process has been attempted.
A person who may petition the court include:
(a)
(b)
(c)
(d)
(e)
(f)
the owners’ management company relating to the relevant multi-unit development or
a part of the relevant multiunit development;
any member of such an owners’ management company;
any trustee under a will, settlement or other disposition of and by such member;
the personal representative of a member of such an owners’ management company;
the developer of the multi-unit development;
with the permission of the court, such other person as the court sees fit.
The Act sets out various orders that the Circuit Court may make in regard to the application.
Mediation
The Circuit Court may, upon its own motion or upon the request of any party to an
application, direct the parties to meet to discuss and attempt to settle the matter. Such a
meeting is referred to as a “mediation conference”.
The conference shall take place at a time and place agreed by the parties to the application
or as set by the court. A chairperson shall be appointed and the notes of the chairperson
shall be confidential and not used in evidence in any proceedings.
The chairperson shall prepare and submit to the court a report which shall set out the terms
of the settlement signed by the parties or where there was no mediation conference or a
settlement has not been reached.
A copy of the report shall be given to each party to the application. The court may make an
order directing a party to pay the costs of the application or such part of the costs of the
application as the court directs.
Restoration to the Register of Companies
Where a OMC has been struck off the register in accordance with—
(a) section 311 of Companies Act 1963, or
(b) section 12 of the Companies (Amendment) Act 1982
If a member or officer of a company is aggrieved by the fact of the company having been
struck off the register, the registrar of companies, on an application made in the prescribed
form by the member or officer before the expiration of 6 years from the publication in Iris
Oifigiúil of the notice that the company was struck off the register, provided that the registrar
has received all annual returns outstanding, if any, from the company, may restore the name
of the company to the register.
Upon the registration of an application and on payment of such fees as may be prescribed,
the company shall be deemed to have continued in existence as if its name had not been
struck off.
Each application shall be accompanied by a certificate from a solicitor or an accountant
certifying that the company is an owners’ management company operating as such.
Transfer of benefit of guarantees and warranties
Where a person develops a MUD, the benefit of any warranty or guarantee relating to any
materials used in the construction, repair or improvement of a MUD or plant, machinery or
equipment installed in the multi-unit development shall stand transferred to the OMC
concerned without any requirement for the giving of a notice of assignment to any person for
the benefit of the unit owners in the development.
Where the development stage of a MUD has ended, a developer shall furnish to each OMC
concerned the documentation specified in Schedule 3 of the Act relating to the development
concerned.
Restriction on Certain contracts
An owners’ management company shall not, after enactment of this Act, enter into a contract
for the provision of a service or the purchase of goods—
(a)
(b)
which is expressed to run for a period in excess of 3 years from the date the contract
is entered into by the OMC, or
which provides for a penalty to be imposed on or damages to be paid by the OMC if
the contract is terminated by it after a period of 3 years from the date the contract is
entered into by the owners’ management company.
Documentation to be passed over to the OMC
The Third Schedule to the Act sets out what documentation must be passed over to the
Owner Management Company when the owner of the beneficial interest in the Multi-Unit
Development makes a statutory declaration transferring over the beneficial interest.
If you require assistance in amending the Memorandum and Articles of Association for an
Owner Management Company, please contact Kate Brennan on 059 9183888.
E-mail: [email protected] DISCLAIMER: This document is for information purposes only and does not purport to represent legal advice.