MUDDY WATERS – What the MUD Act Means for Your Development

The Multi-Unit Developments (MUD) Act 2011 was introduced into law on 1st April 2011. This piece of legislation contains 34 sections of new law and has been introduced to help combat the various issues that continue to affect the transfer and operation of multi-unit developments in the State. The legislation seeks to provide a comprehensive legislative framework for multi-unit developments and apartment management companies to comply with.  As cranes start to re-appear on the horizons, developers need to know how to structure their developments to take account of the rules.

The ‘MUD’ Act enables apartment owners to take control of common areas and the management of the complex for the benefit of all residents. The Act requires the transfer of common areas to the management companies and for Developers to pay service charges levied in respect of unsold units.

The MUD Act applies to multi-unit developments as well as residential developments. Buildings containing bed-sit type units are excluded from the scope of the act; the units must have “self-contained facilities (that is, bathroom and cooking facilities)”.

The most radical provision of the Act applies to new developments, where no units have yet been sold. Under section 3, a developer cannot transfer an interest in a residential unit unless:

  1. A management company has been established at the expense of the developer;
  2. The common areas and the reversion in the residential units have been transferred to the management company;
  3. The management company is issued with a certificate from a suitably qualified person that the fire-safety certificate for the development has been complied with;
  4. A contract is established between the developer and the owners’ management company (“OMC”) prior to transfer setting out the rights and obligations relating to the completion of the development as regards compliance, work on the common areas, the process for resolving disputes and the process for releasing money held by the OMC.

Sections 4 and 5 apply to existing developments in which the common areas and the reversion have not yet been transferred to the management company. As of the 1st of April 2012 developers were given a 6 month deadline to complete the transfer of common areas and the reversion. However, no specific sanction applies where this deadline is passed.

Section 7 stipulates that the transfer of common areas to the OMC does not relieve the developer from “the duty, obligation or responsibility to ensure completion of the development” in compliance with planning and building control legislation. Similarly, section 9 requires the developer to indemnify the management company in respect of all claims arising from the works and for “adequate insurance” to be put in place.

In addition, under Section 19 developers must establish and maintain a building investment fund or ‘sinking fund’ to cover “Refurbishment, improvement, maintenance of a non-recurring nature” and sets the requirement of a €200 contribution per unit per year, unless otherwise agreed.

Other matters provided for in the Act are as follows:

  • Voting rights are one unit one vote’ unless circuits court provides otherwise.
  • No Director can be appointed for more than 3 years.
  • Annual Meeting must be held and report distributed to all members.
  • OMC’s struck off 6 years or less are exempt from having to go the High Court for reinstatement.
  • The developer, OMC or any member can apply to the court for an order to enforce the act.
  • The court may in the course of proceedings request or direct that mediation take place and both parties must attend.

This welcome but complex piece of legislation will help developers and owners manage their roles and responsibilities in an organized way for future development.

If you have any queries feel free to contact John at 01 639 3000 or jhogan@leman.ie

Disclaimer

This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Leman Solicitors for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.

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