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01 March 2011

New Law Society Leaflet Provides Advice to Apartment Owners

A new information leaflet has been published this week which provides practical advice and guidance to those considering purchasing an apartment in Northern Ireland.

The leaflet entitled ‘Buying and Living in an Apartment’ was launched at the Long Gallery in Parliament buildings by Law Society of Northern Ireland on Tuesday 1st March 2011. The Minister of Finance and Personnel, Sammy Wilson MP spoke at the launch event and welcomed the publication.

The Society have produced the leaflet in response to the findings of a new Discussion Paper, also published this week by the Law Society into Multi-Unit Developments in Northern Ireland.

Commenting on the publication of the new information leaflet and discussion paper the President of the Law Society, Brian Speers said:

“The Law Society is delighted to launch our information leaflet which we believe will go some way to providing those contemplating purchasing an apartment with practical guidance and advice.

We hope that our discussion paper will provide the basis on which a wider discussion can be held on an issue which is affecting many home owners throughout Northern Ireland.”

Multi Unit Developments are apartments or housing blocks which share communal areas and service facilities. These have significantly increased over the last ten years in Northern Ireland with the property boom.

Welcoming the publication of the discussion paper, Sammy Wilson said: 

“As an elected representative I am acutely aware of the difficulties many residents of multi-unit developments can face.  Those residents have raised concerns about the operation of management companies, a lack of security, failure to insure properties and to maintain communal areas in these developments.

“People who purchased their properties in the hope of turning those properties into a warm and secure home often face a daily battle to keep that dream on track.  Many of these purchasers are first-time buyers who have had to pursue the apartment option because the cost of a house was beyond their reach.

“If we are to address the issues, all of the key players must recognise and accept their roles from the developers right through to the purchasers themselves. I congratulate the Law Society on the production of its discussion paper and I look forward to its continued support and assistance as we take this important strand of work forward.”

The Discussion Paper highlights the findings of a working group set up by the Law Society to investigate issues in respect of the upkeep of shared communal areas and the responsibilities and relationships between owners and managing agents. 

It identifies a growing lack of communication between parties involved and an increasing lack of awareness amongst apartment owners in respect of their responsibilities and their legal rights.

The paper makes a number of recommendations which the Law Society believes will go some way to protecting the long term interests of property owners and addressing the overriding issues.

Fundamental to this the Society believes is the need for a joined up approach which clearly outlines the responsibilities of all parties and an awareness campaign which provides practical information to those considering purchasing an apartment.

The Law Society has begun this process by producing an information leaflet which provides practical guidance to those considering purchasing an apartment or flat in a multi unit development.

In addition the Society has recently revamped its pre-contract enquiries to include a detailed section on management companies and their operation to ensure purchasers have all the information they need when buying their home.

To download the information leaflet please click the link below:

Buying or Living in an Apartment

To download the discussion paper please click the link below:

Law Society MUD discussion paper

- ENDS -


 

Notes to Editor

 

MULTI UNIT DEVELOPMENTS

  • A Multi Unit Development is a building or a group of buildings made up of multiple residential properties that share common areas and/or services.
  • Put simply, an apartment block, or in more recent years, a new housing development which may have a mixture of types of dwelling.
  • Given that apartment blocks share common passageways, stairways and lifts and that the external walls and roof of the property will need maintenance, it may be obvious that there should be some mechanism in place for looking after the common areas.
  • In housing developments built in the last ten to fifteen years, it is not so apparent, but the reason is found in planning law.
  • The planning requirements for new developments require “green areas” which are to be owned and maintained by all the property owners in the developments, hence the need to manage those areas.
  • The Law Society paper focuses primarily on apartment blocks.

 


 

WHO IS RESPONSIBLE FOR WHAT?

  • There are a number of parties involved and their relationships are linked. For a development to function well and remain viable, all those involved must play their part.  These include:
  1. THE DEVELOPER, with his solicitor, will set up the legal framework for the development. He will decide on the terms of the lease under which the apartments are held and   generally sets up a management company, to manage the common areas and services in which each unit owner in the development becomes a shareholder. the developer will usually maintain the development until it is completed, at which stage the management company will take over.
  2. THE MANAGEMENT COMPANY - The intention is that the common areas in the developments are transferred to the Management Company once all the properties are sold, and so each unit owner has an interest in the common areas, through their share in the Management Company.

The lease will provide payment of a SERVICE CHARGE to cover their share of insurance, maintenance and repair costs. Although unit owners are told about the service charges at the outset, in a new development it may be difficult to predict accurately how much the charge will be each year. Also, some unit owners find it difficult to accept that they should contribute to a “sinking fund” to cover long term repairs such as roof repairs, especially if the development is relatively new.

As shareholders, Unit owners are entitled to be actively involved in the running of the management company. They can – and should- attend company meetings, elect directors, approve the accounts and monitor expenditure.

  1. THE MANAGING AGENT - The Management Company should oversee maintenance and repair work at the development. on occasion the management company will appoint a managing agent to carry out its tasks. indeed, on occasion the developer will already have put an initial agreement in place with a managing agent who will do the day to day work of running the development for the management company. sometimes this arrangement will include a representative of the managing agent being appointed as a director or secretary of the management company, which arguably could lead to a conflict of interest.

 THE ISSUES

  • There is concern that not all Multi-Unit Developments work effectively and efficiently. There may be many which do run well, but obviously those are not the ones we hear about.
  • There is also concern that in the current climate and with many builders facing straitened economic conditions, work in transferring common parts has not been completed.
  • A survey within the legal profession suggested that management companies may not be operating correctly- in extreme cases, there were reports that a management company had not filed its accounts or annual returns with the Companies Registry and had been struck off the Companies Register.
  • Financial concerns are also important: in some cases unit owners may refuse to pay their service charge, which leads to difficulties in providing services for the development as a whole.
  • Sometimes this is a form of protest about perceived lack of service, or because the charge is higher than expected. Consideration needs to be given to mechanisms which can ensure payment of service charges, while providing unit owners with clear information about spending and how it is monitored.
  • The money held in sinking funds by management companies should be properly managed and the unit owners kept informed: it is after all their money. At present, there is no regulation of how this money is held.
  • If a managing agent is appointed, lack of engagement by the unit owners can lead to situations where the agent is not given proper direction by the Company, or the reverse happens and the managing agent operates almost with autonomy and without proper accountability to the unit owners.

About the Law Society of Northern Ireland

·        The Law Society of Northern Ireland was established by Royal Charter in 1922.

·        It has an elected Council of 30 solicitors and a staff headed by its Chief Executive, Alan Hunter.

·        As well as having a Royal Charter, Parliament has given the Society powers as set in the Solicitors (Northern Ireland) Order 1976.

·        The Society is a professional body, which is charged with matters of discipline, education and regulation of practising solicitors in Northern Ireland. The Society regulates the profession in the public interest.

·        Regulation of solicitors includes the annual issue of a Practising Certificate to each solicitor. This certificate entitles the solicitor to hold himself or herself out as a solicitor entitled to practice in Northern Ireland.

·        The Society has a dedicated department, which handles complaints by clients against solicitors.

·        The Society runs Continuing Professional Development seminars for its members on an ongoing basis.

·        The Society has a very well stocked Law Library available to its members with highly qualified library staff. This stocks major legal textbooks, law reports and periodicals and is fully equipped with a modern computerised information system.

·        The Society contributes to draft legislation and frequently comments on proposed changes to the law including the impact of the changes on solicitors, their clients and the community.