Application of Multi-Unit Developments Act 2011 to conventional housing (both existing and new start-ups)

Conveyancing 06/06/2014

The Conveyancing Committee has been asked to provide guidance on the application of the MUD Act to conventional housing estates, whether existing or ones just being commenced.

With developments just commencing, solicitors for purchasers were concerned that section 3 of the MUD Act, which prohibits a person from transferring his or her interest in a residential unit in a multi-unit development unless the common areas have been transferred to an owners’ management company (OMC), would apply and would render void the transfers of a house to a house purchaser. 

Conventional housing, as far as this practice note is concerned, is a housing development that:

  • Does not include any apartments or duplex units or, if it does, these modules of the development are self-contained and have their own OMC or co-ownership arrangement that will own and manage, maintain and repair the common areas within the relevant cartilage,
  • Only contains common areas, such as roads, footpaths, grass verges and open spaces, the maintenance of which is intended be taken over in due course by the local authority, and there are no conditions in the planning permission for the development to the contrary, and
  • In relation to which the builder/developer, is providing an undertaking and indemnity under seal to complete all the common areas and to maintain same until they are taken over by the local authority and to indemnify the house purchaser in relation to all costs and expenses in relation to the same until this has been done.

The view of the Conveyancing Committee in this regard is based on the definition of OMC in the MUD Act, which is “a company established for the purposes of becoming the owner of the common areas of a multi-unit development and the management, maintenance and repair of such areas and which is a company registered under the Companies Acts”.

It is the opinion of the committee that, in the case of conventional housing as defined above, section 3 cannot apply because there cannot be an OMC within the definition in the act. This is because there are no common areas that an OMC would manage, maintain and repair. In such cases, there is no OMC, there was no intention to have an OMC, and there is no need for one.

Insofar as existing estates of conventional housing are concerned, solicitors for purchasers are concerned that the common areas should be transferred to an OMC in all cases.

If the development was one where an OMC was intended to take over the common areas, then the provisions of the MUD Act apply and the common areas should have been transferred to the OMC by 30 September 2011. However, the attention of solicitors is directed to the practice note published in the June 2013 Gazette (p51) pointing out that non-compliance with the provisions did not necessarily make a property unsaleable. While that PN referred to apartment developments, it clearly could apply equally to such a housing development. The facts in any case need to be considered. In some cases, the developer company and the OMC may have been dissolved and many years may have passed, and it is clear that the transfer may never happen without the members of the OMC taking legal action. In others, there may just be administrative delays and it may be clear that the transfer will take place, but not just yet. The important factor for a purchaser’s solicitor is that the client has been fully advised and can make an informed decision.

If the development was one that meets the criteria applied above to new conventional housing, the view of the committee is that (subject to one exception dealt with next) there can be no obligation to transfer the common areas because there cannot be an OMC that would manage, maintain and repair any common areas.

The exception relates to cases where, some years ago, some local authorities started putting conditions in grants of planning permission for apparently normal conventional housing developments requiring the forming of OMCs to maintain the common areas, even though the common areas were ones that traditionally would have been taken in charge. The Department of the Environment, Heritage and Local Government issued a directive to all local authorities on 28 February 2008 referring them to section 180 of the Planning and Development Act 2000 and requiring them to develop a policy on taking in charge. The imposition of such conditions seems to have petered out after that.

However, the committee is not in a position to give any clear guidelines in such cases, which will probably only be solved by the residents of such estates availing of the provisions of section 180 to have the common areas taken in charge despite the conditions in the planning permissions. Solicitors acting for purchasers of housing in such estates should make sure that purchasing clients are aware of the potential problems. It may also be necessary to qualify a certificate of title in such cases.