Law reform for apartment owners at least two years away

Apartments / Film 3

Alliance Party MLA Kieran McCarthy was proud to put his name to new legislation that would reform land law relating to apartment ownership in Northern Ireland.

And he bristled with pride when he sat in front of the Department of Finance committee on December 8 last year to explain his bill and how it would bring stability where there was none for apartment owners.

The property boom brought a vast increase in apartment living in the decade up to the crash in 2008. Official figures put the number of apartments today at 60,000 And the concept of communal living was not as prevalent here as in other parts of the world such as the United States and in major cities in Europe.

Existing land law was outdated and in order to provide apartment owners with protection, change was required; Kieran McCarthy aimed to bring about those changes with his private members’ bill.

Looking on with pride from the sidelines was Michael Donaldson – the campaigner for apartment owners who had worked closely with the Alliance Party to research and prepare the new legislation.

THE ISSUES APARTMENT OWNERS NEED ADDRESSED

It was Michael Donaldson who first captured the attention of Kieran McCarthy to the plight of apartment owners. The owners were being denied clear legal title to their properties and complained about being fleeced financially by unregulated and, in too many cases, unscrupulous management agents who were able to fix service charges to maintain and clean the common areas of apartment blocks – stairs, corridors, gardens, car park and the exterior walls and roof – without reference to the people paying them.

Kieran McCarthy - suddenly withdrew his private members bill

Kieran McCarthy - suddenly withdrew his private members bill

“Back in 2008 when I identified that there were issues here to be answered with regard to the conveyancing,” Michael Donaldson recalled, “with regard to these management agents, with regard to bad practice, I contacted local, political representatives, all the parties.

“Of all the parties that I contacted the only person that responded was Kieran McCarthy.”

Mr Donaldson – the founder of the Apartment Association of Northern Ireland – was delighted when the Strangford MLA brought Alliance Party leader David Ford along to a meeting arranged with a group of 31 apartment owners in Co Down.

“I was very pleased that Kieran McCarthy brought David Ford with him”, Mr Donaldson told the Detail. “And after hearing what I had to tell everybody I was delighted to say that David Ford was astonished and was unaware of what was going on and publically he promised everybody that he would see to it that a private members bill would be introduced to the assembly to regulate, in the first instance, the agents, and perhaps have some sort of a licensing system for them, and also to look even in depth to the actual leases provided by developers that are totally inappropriate.”

Having identified failings in the land law that did not provide adequate protection and regulation for apartment owners, Michael Donaldson joined Alliance party general secretary Stephen Douglas and Kieran McCarthy in a research programme to help them with the drafting of a new bill that would have the approval of the Assembly.

As part of that research, they surveyed 3,000 apartment owners.

At that Stormont meeting of the Department of Finance committee on December 8 last year, Stephen Douglas spelled out what he saw as the main failing in the existing legislation.

“To summarise,” he said, “the main conclusion was that a piecemeal approach — for instance, regulating management agents — would not get to the nub of the problem.

“One reason for that is that the foundation stone of a person’s property rights is being the legal owner not just of their apartment but the common parts of a development, such as corridors and roads. Until they become the legal owner of those, they cannot exercise control over their maintenance and the spending of their service charges.

“I have seen quite a few leases for apartments, and in every one of them that was built in the past 20 years — although most of them were built in the past 10 years — there is a provision that the developer/landlord agrees to convey the legal ownership of the common parts to the management company of which you become a member or shareholder when you buy your apartment. I have yet to find an apartment where that lease obligation has been discharged.”

Stephen Douglas - helped draft apartment land reform bill

Stephen Douglas - helped draft apartment land reform bill

WHAT DERAILED THE BILL?

There was evidence of all-party support for the Kieran McCarthy’s bill. Mitchell McLaughlin of Sinn Fein congratulated the Strangford MLA.

“Every MLA has come across this problem,” he said, “which has evaded resolution for far too long. I was concerned to hear the reference to tweaking at this stage, as the Bill is good. Anyone can challenge the judgement of the Assembly and the legislation; people can also lobby their MLAs if they think that appropriate amendments can be made.”

Mr McLaughlin went on to say: “Your approach has been very competent. One of the reasons that the issue has not been resolved is that a significant vested interest is watching the process very carefully. Given its interests, it may not particularly welcome this development, notwithstanding unanimous support from the Assembly.

“The consultation is useful in ensuring that the Bill is competent on those issues that people wish to see addressed. It is also very useful to you, in framing the legislation, to protect it against inhibition, delay or obstruction.”

But delay was exactly what happened next. On the eve of the bill’s second reading last December, Kieran McCarthy stunned many of his supporters when he announced he was withdrawing his bill following a meeting with the Finance Minister Sammy Wilson.

Kieran McCarthy’s explanation was that he had listened to sound advice at a meeting with the Minister for Finance Sammy Wilson.

According to Michael Donaldson a major factor was the highly critical assessment of Mr McCarthy’s bill by the Northern Ireland Law Commission.

“All the work that Stephen had put in and the work that I had put in,” he said, “and basically the Law Commission said it wasn’t fit for purpose and that it shouldn’t go through the second reading.”

Put bluntly, Michael Donaldson views the Alliance decision to drop the bill as nothing more than capitulation to the DUP.

“I was astonished was that Kieran McCarthy stood aside and Sammy Wilson took over,” he told the Detail. “So if the legislation wasn’t fit for purpose, why would Sammy Wilson and the DUP put their hand up to it and say: We’ll handle this? I still don’t have the answer to that.”

Parliament buildings - where the Assembly has legislative powers

Parliament buildings - where the Assembly has legislative powers

There were clear indications at the Finance Committee meeting last December of all-party support for Kieran McCarthy’s bill. And there’s been an enthusiastic engagement by the Northern Ireland Law Commission to draft new legislation which will include measures to regulate management agents.

However, not everyone has been supportive. Indeed some do not see the need for new legislation at all.

Brian Speers is president of the Law Society which represents solicitors who do the conveyancing work on behalf of both the purchaser and the developers. He rejected the Alliance party’s assertion that there was unclear title where apartment owners did not have their share of the common areas around blocks of apartments.

“I don’t know that new legislation is required,” he said, adding: “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 in 2008 when Kieran McCarthy first took up the challenge of championing the cause of apartment owners, there was no appetite at Stormont for change. In September that year the then Finance Minister Nigel Dodds wrote to Kieran McCarthy to say: “I can confirm that my Department has no plans to legislate in the near future on matters relating to leasehold reform, including giving leaseholders a right to assume control of the management of their development.”

WHERE IT LEAVES APARTMENT OWNERS

Retired journalist Michael McRitchie became involved with Kieran McCarthy’s campaign for change through a relative’s experience on buying an apartment. He’s been finding out about how lenders view the issue of clear title which lay at the heart of what was Kieran McCarthy’s bill.

“The transfer of the lease to the ground and the common areas which include exterior walls, roof, foundations, halls, lifts, machinery/services etc. is very much a problem often because the ground/common areas title is held by the developer’s bank as security for his loan,” Mr McRitchie said.

That means the bank won’t let go until it is paid, the developer can’t pay because he can’t sell the development or because he has invested in another development which won’t sell because the bubble burst in 2008. So the title cannot be transferred to the owners company.

“Of our two major local lenders,” Mr McRitchie said, “we now have Progressive saying politely that they don’t lend on apartments, and Bank of Ireland saying they will not lend on unclear title. And Mr Speers says the transfer is not important.”

The Halifax offered only a ‘no comment’.

But Mr McRitchie has discovered that the National House Building Council that provides 10-year quality guarantees may be affected unless title has been transferred.

“Presumably this is to avoid the developer claiming on his own insurance to pay for remedial works on his own bad construction,” said Mr McRitchie. “This could be a huge problem as many flat blocks are not well built and many of their builders have gone bust, so what are the hapless owners to do?”

The N.I. Law Commission says it will publish a consultation paper next year and will not have a final report ready until 2013. It remains to be seen if the bill will still bear Kieran McCarthy’s name when it’s next before the Assembly.