Legislation affecting multi-unit developments

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Created: Friday, September 30 2011 10:59

The Multi-Unit Developments Act, 2011 (the “Act”) came into operation on 1st April 2011 and applies to new developments completed after 1st April 2011 and to existing multi-unit developments.

The Act provides a statutory framework for multi-unit developments (mixed use or residential only) containing at least 5 residential units with shared amenities, facilities and services.

The most significant part of the new legislation is that a developer is now legally obliged to transfer the common areas of multi-unit developments to the management company which is made up of unit owners in the development. Previously, the multi-unit development structure envisaged the transfer of the common areas following the sale of all of the units.

If the development is a new multi-unit development, the transfer is required to take place before sale of the first residential unit. If the development is an existing development, then the developer is obliged to transfer the common areas to the management company by 30th September 2011.

From 30th September 2011 onwards, it will not be possible for a developer to sell a residential unit in a development unless the transfer of the common areas has taken place.

The Act requires that a contract between the developer and the management company is entered into, which must outline their respective obligations including statutory requirements, completion of common areas, retention monies and dispute resolution. Both the developer and the management company are required to have separate legal advice (at the cost of the developer) in the conclusion of this contract.

The developer is required to indemnify the management company against any claims made in respect of acts or omissions by the developer in the course of completing the development.

The Act deals with the management of the common areas by the management company and the internal governance and operation of such company. For example, there is a requirement to establish a sinking fund by the later of 3 years from the date of transfer of the first unit in the development and 30th September 2012 where no such fund has already been established. The sinking fund required will include a payment of €200 per annum by each unit owner, or such other amount as may be agreed by the members.

The Act is a welcome framework for owners of houses or apartments in multi-unit developments. However, the Act is a significant extra expense for developers to ensure compliance with the legislation.