Homeowners stuck in the MUD

Apartments / Film

Thousands of apartment owners in Northern Ireland may be living in properties for which they do not have clear legal title.

Retired chartered arbitrator Michael Donaldson says the figure may be as high as 40,000 and he says that during the years of the property boom outdated land law was ill-equipped to deal with the rapid growth in private sector apartment construction that began in the 1990s.

Further, Mr Donaldson – campaigner and founder of Apartment Association of Northern Ireland [AANI] – says a consequence of no specific apartment law was that developers and conveyancing solicitors managed to circumnavigate complicated aspects of several laws. Their actions whilst solving the problem in the short term had long term ramifications that exposed apartment owners to unscrupulous management agents providing cleaning and maintenance services – sometimes at exorbitant prices.

There are 60,000 apartments in Northern Ireland according to the latest figures from the Northern Ireland Housing Executive…that’s eight per cent of the housing stock.

The Northern Ireland Law Commission began work on new legislation in April last year and immediately identified complications in the laws governing Multi-Unit-Developments [MUD].

Their spokesperson is Imelda McAuley – who is conducting research and preparing to write new legislation on [MUD]. She told The Detail: “This is a very complex subject and it will require quite a lot of time to sort all the issues out. There are three main areas of law which are involved; property law, company law and contract law. But beyond that there are about another I’d say five or six areas of law which also impinge on this subject.”

However, the president of the Law Society Brian Speers says there is no evidence to support Mr Donaldson’s claim. And he told The Detail he felt there was no need for new legislation: “I don’t know that new legislation is required, the Law Society produced a discussion paper complimenting work that the Law Commission are doing with the view to inviting comments and stimulating a debate and creating evidence as to what is the experience of people who have either purchased, or are the developers of or who are involved in any way with what has become known as mutli-unit developments, typically blocks of apartments or housing schemes where there are common areas which need to be managed collectively.”

On the ground, however, there is growing evidence and concern over the issue of legal title.

Problems exist where developers fail to transfer ownership of the common land areas around apartment blocks – the areas that include car-parks, hallways, stairwells, exterior walls and the roof – to the owners of the apartments in that particular block.

This is something that the Northern Ireland Law Commission has been hearing about in answers to a questionnaire distributed as part of the Commission’s consultation process.

“Many apartment developments do operate quite successfully,” Ms McAuley said. “Some have no problems or very few problems and don’t have any problems, you know, with the title being handed over. But on the other hand there are some where the title has not been handed over and because of that it has caused a multitude of problems.”

Imelda McAuley

Imelda McAuley

And Ms McAuley said that where developers are unable or unwilling to transfer land ownership on apartment sites, there needed to be a remedy in law and the Commission could provide that.

“It will depend really on what we put in place,” she said, “what the department does down the line, what the legislation looks like. This is a problem, it is a problem that has to be addressed, I don’t think there is any doubt about that.

“People cannot pay a lot of money to buy an apartment and then risk losing everything if the development itself is not completed, or if the management company structure that’s not put in place, and they have no control over decision making in their home, you know, in the building they live in. That is not a satisfactory situation. It’s one that has to be resolved and it can be resolved by legislation.”

The owners’ management companies were put forward as the solution to who should take ownership and responsibility for maintenance of the common areas of land around the apartment site.

The intention was that the developer when he first purchased the land would set up the owners’ management company. This company would remain dormant in Companies House as the apartments were built.

Michael Donaldson

Michael Donaldson

“The developer is the only member of the company,” said Michael Donaldson, “or him and his wife or solicitor, whatever, and then as each apartment is sold you get a share in the company. But if nobody’s told about that, nobody really knows the true share holders in companies.”

He says these shelf companies are left to sit dormant in Companies House, meaning they don’t trade. But the apartments need maintained. So the developer is either approached or approaches a property agent.

“Now, the owners don’t know anything about this,” says Michael Donaldson, “and the property agent takes over the role of the owner management company.

“But the property agent in most cases doesn’t tell the apartment owners that he’s only an agent. The property agent describes himself as the management company and the people sign up direct debits, pay their cheques over, as my wife did, to an agent who they don’t have a contract with. Sounds ridiculous, doesn’t it?”

This was one of the major issues raised last December when Alliance party MLA Kieran McCarthy was pushing ahead with his private members bill – the Apartment Development Managements Reform Bill.

Michael Donaldson had joined forces with Kieran McCarthy and Alliance party director Stephen Douglas to prepare the bill. Together they conducted a survey of 3,000 apartment holders – a fact that impressed MLAs from other parties.

Mr McCarthy told a Department of Finance committee on December 8 last year that developers providing a lease to apartment buyers included a clause promising to transfer ownership of the common areas to the apartment owners.

He said sometimes that clause states that the landlord will transfer the title after the last apartment has been sold. However, if somebody has bought an apartment in a mature development, his or her solicitor may have discovered that the landlord never got round to transferring ownership to the apartment owners at all.

“Before the credit crunch,” Mr McCarthy said, “your lawyer would probably have advised you to buy anyway and take a view on what he or she would have said. That is not happening today. Today, solicitors and banks are very reluctant to let a person sell or buy an apartment, the common parts of which are not owned by the apartment owners. Clauses 2, 3 and 4 [in the proposed bill] will make it mandatory for the common parts of future, existing and partially built developments to be transferred to the apartment owners within six months of the Bill’s being enacted.”

This was intended to end the practice whereby developers whilst waiting to sell all their apartments contracted management agents to provide the services required to keep the site clean and tidy…to give apartment owners greater influence in who should be contracted to provide cleaning and maintenance services.

Mr McCarthy said some developers contract maintenance services but will not allow apartment owners to see the details of the contract and he said in many cases there was no written contract leaving managing agents free to charge what they like.

Next week, The Detail will look at the operation of management agents and the financial implications of the failure of developers to transfer ownership of land that would activate owner management companies and give control to the people who own apartments on the site.