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Multi Unit Developments Act 2011 ('the Act') Implications for Lending Institutions and Receivers

What does the Act cover?

Multi Unit Developments 

This is a development comprising a unit or units in respect of which it is intended that the amenities, facilities and services are to be shared and containing not less than 5 residential units.  Certain provisions of the Act apply to schemes with less than 5 units.  

A residential unit is a unit in a Multi Unit Development which is designed for use and occupation as a house, flat or other dwelling and has self contained facilities or designed and used as a childcare facility and not intended to primarily share amenities, services and facilities.

Mixed Use Multi Developments 

This is a Multi Unit Development with at least one commercial unit. Common areas exclusive to commercial units in mixed use multi unit developments are not required to be transferred but nothing prohibits their transfer.

It does not cover wholly commercial developments.  

What are the Implications of the Act for Lending Institutions? 

  • A critical issue is that common areas in Multi Unit Developments/Mixed Use Multi Unit Developments must be transferred to an Owners Management Company (OMC) prior to the first sale of a unit or by no later than 30 September 2011.
  • Developers and OMCs must be separately represented.  The developer must pay OMC's costs in the transfer.
  • Where a Receiver has been appointed or bank are acting as mortgagee in possession then the obligations on developers within the Act could fall to be dealt with by lending institutions/Receivers.  If there are cases where common areas have not been transferred by 30 September 2011 then this is likely to prevent or at least delay sales of units. 
  • In the case of incomplete developments a contract must be entered into between the developer and the OMCs dealing with issues regarding completion of works.  How this will impact on partially completed estates where Receivers have entered into possession remains to be seen.
  • The time period for struck off OMCs to be restored to the register of companies has been extended to six years.  A simplified procedure and fee of €300.00 is payable.
  • The Circuit Court has wide jurisdiction to deal with disputes.
  • Where projects are resting on contract regard will have to be had to whether a deed transferring common areas will trigger a stamp duty liability on any unaccounted purchase monies.  Specific tax advice will be required in those cases.
  • The Act sets out provisions regarding documents to be produced upon a transfer to an OMC.  Receivers and Lending Institutions may have difficulties in procuring the documentation required. 

What Timelines Apply? 

Status of
Development as at
1 April 2011

Legal Title

Beneficial Title

Comment

No units have closed

Legal title transfers
on or prior to first sale or no later than 30 September 2011

Beneficial title is reserved in favour of Developer but must be vested as soon as all building works have completed

 

 

 

 

Certain pre conditions must be met prior to transfer Section 3

Lenders need to review security they hold and check if it needs to be updated

Lender's consent is required to the vesting of beneficial interest on completion of building works but this consent cannot be unreasonably withheld or delayed

Where there have been some sales but less than 80% of sales have closed

Legal title to transfer on or prior to 30 September 2011

Beneficial title is reserved in favour of Developer but must be vested as soon as all building works have completed

Owners of 60% or more of the residential units can request the transfer of the beneficial interest for the benefit of the Owners Management Company

Lenders need to review security they hold and check if it needs to be updated

Lender's consent is required to the vesting of beneficial interest on completion of building works but this consent cannot be unreasonably withheld or delayed

Where more than 80% of sales have closed

Legal and beneficial title transfer prior to 30 September 2011

No beneficial interest reserved.  Unsold units will have to be considered

Owners of 60% or more of the residential units can request the transfer of the beneficial interest for the benefit of the Owners Management Company

If there are unsold units then the Developer should reserve title to this together with any access required.  Lenders should check that their security is adequate in these situations

The Act has been in force since 1 April 2011 and its consequences for developers, owners and lenders are significant.  It remains to be seen how many developers will comply with the terms of the Act before 30 September 2011 and what repercussions there will be for non compliance.  For further information on this please contact Roisin Bennett at  rbennett@reddycharlton.ie  or 01 6619 500


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