Unfinished business

ON a cold Tuesday night in February, a group of frustrated residents from Gleann Riada housing estate near Longford town gathered at the Longford Arms Hotel in a room hired at their own expense.

The purpose of the meeting was to determine what action they could take — if any — to force the developer to complete the estate they had in good faith bought into.

A litany of problems was outlined: sewage seeping onto a lawn, footpaths cracking, pipes sagging, no sign of a promised crèche, no street lighting and apartments to the fore of the estate which have never been occupied and which are now the perfect playground for antisocial behaviour.

Part of the difficulty for residents in getting issues resolved is that more than one developer was involved in the Gleann Riada site.In addition, because many houses in the estate are rented, the potential for strength in unity is weakened — tenants do not have a vested interest in ensuring an estate is completed and the notion of setting up a residents’ association falls back on the few.

And so the meeting was attended mainly by exasperated owner/occupiers and landlords, whose efforts to have the developers brought to book have so far been unsuccessful.

The meeting discussed setting up a war chest in the event of taking the developer to court. It culminated in a vote in favour of organising another meeting to which local politicians and press would be invited in to highlight the problems at Gleann Riada and pressure the developer to complete the work.

There is no upside to this tale. Among the downsides is the personal cost to the house buyer of having to sue the developer, a cost he or she did not factor in as part of their purchase and a price they should never have to pay. Add to this the emotional cost and spread the misery across 600 more unfinished estates throughout the country, a conservative figure based on information supplied by 28 county councils to the Irish Examiner.

People living in these estates face a long road to justice. Planning permissions have a lifespan of five years, so in the majority of cases, the local authority cannot go after a developer until that five years has elapsed. He can request an extension, provided work on the development has commenced, and provided he makes the extension application while the original permission is extant. After that, if he has not abided by the terms of his permission, the local authority can take enforcement proceedings against him.

The local authority has seven years from the time the permission lapses to do this. Potentially, this can leave the resident with little recourse for at least 12 years. The local authority can draw down a bond — either a cash deposit or a bond held by a bank, insurance company or building society — to bring estates up to scratch, but this is seen as a last resort.

Brian White, director of services at Waterford County Council points out: “Until such time as the planning permission has expired and the council has gone through enforcement proceedings, eg prosecute the builder for not being in compliance with planning permission, there is little point in trying to call in a bond from a bank or insurance company. Banks/insurance companies will have to be satisfied that you exhausted every other legal avenue before calling in the bond.”

Unfortunately, the homeowner is bottom of the entitlement pile. The outlook is particularly bleak where the developer has gone bust.

“If the developer is in receivership/examinership, he may be under the protection of the courts, so the Council cannot access the bond. Company assets are protected by Courts from creditors whilst in examinership,” Mr White said, adding that in many cases banks and lending institutions have ‘first charges’ in place and the local authority is not a preferential creditor.

Enforcement is not always the solution either. “Taking an Enforcement Order against a builder who is already hanging in there might be counterproductive, in that one extra creditor (ie, the council), may push them over the edge (financially),” Mr White said.

Bonds are supposed to enable the planning authority, without cost to itself, to complete the necessary services to a satisfactory standard in the event of default by the developer, but increasingly, this is not the case. Their value around the country varies widely from €10,000 per house in Waterford County Council’s area to €2,000 per unit in Cavan. The bond must be paid up front and the vast majority of developers submit bonds rather than cash deposits because they need the cash for working capital. It is easier for a planning authority to access cash deposits.

Bonds were never intended to cover the cost of finishing major structural defects such as water mains, pump houses, treatment plants, and works of this order are being left undone now.

Mr White believes the wording of the bonds may also prove problematic, because they say that the bond “will cover the works carried out by the local authority in completing the development to a satisfactory level”.

“It was suggested that the council would have to carry out works first and then submit the costs to the banks to call in the bond. Waterford County Council doesn’t have money to finish estates and will require the money up front,” Mr White said.

Louth County Council also identified potential difficulties with bonds. In cases where insurance bonds rather than cash bonds have been used, the council said there “is a concern the developer many not have extended the bond beyond the expiry of their planning permissions where their developments remain unfinished”.

Wexford County Council has had to deal with a number of cases where the developer has “disappeared” and gone into liquidation or receivership and has left unfinished estates where the bond,if available, would not even go close to rectifying problems with the estate. Director of services Eamonn Hore said this will leave “a significant financial burden on local authorities, sometimes running into tens or even hundreds of thousands of euro”.

Mr Hore said while they have solved many problems through negotiation with the developers, it had been necessary to take planning enforcement action against developers in more than 90 cases over the past two years.

“In cases where the bond would not cover the cost of repair it is necessary to go the enforcement route, secure prosecutions and even return to court for continuous offence, to force developers to repair or rectify problems,” Mr Hore said.

Unfortunately, he said, the legal system can be dreadfully slow, with long delays arising from delaying tactics from developers, “spurious planning retention applications or piecemeal commitments given in court, leading to adjournment after adjournment and delays running into many months or even years before cases are disposed of”.

In Kilkenny, the planning authority has had some success with enforcement but again has had difficulties with insufficient bonds. The trend in Kilkenny now, according to the council, is for developers to build houses only for clients who have already entered into contracts rather than building without a demand. This, in turn, will prolong the completion of estates.

Local authorities have set higher bonds in recent years since the problem of substantially unfinished estates began to emerge in 2005 and 2006. A spokesperson for the Department of the Environment said it was a matter for local authorities to set their own bonds and in the past, some local authorities had under-assessed the limit.

The department has advised that planning authorities include a condition in the planning permission that allows for the recalculation of the bond value by reference to the House Building Cost Index (or the Consumer Price Index) if the development is not commenced within a specified period after the granting of the permission.

In Wexford, Mr Hore believes bond companies have become “noticeably more pro-active in recent times”, writing to local authorities giving deadlines by which bonds will be cancelled unless local authorities formally write with updates confirming that bonds will be required.

There is no legal requirement on planning authorities to inspect developments for compliance with planning permissions, other than in response to a complaint, or where they otherwise become aware that there may be non-compliance with a planning permission.

It is the policy of local authorities not to take an estate in charge if it has not been finished in accordance with the conditions of planning permission. Taking in charge means taking control of the public roads and footpaths, public lighting, fire hydrants, water mains, treatment plants, public open spaces and playgrounds. There is a mechanism within the planning legislation that allows the majority of residents to request that the local authority take an estate in charge, but again this is unlikely to happen until all other avenues have been exhausted.

Labour TD for Cork East Sean Sherlock has sought to reduce the time residents have to wait before making this request. Technically, the request can be made as soon as the developer leaves the site. In practice, the local authority is unlikely to accede to the request until enforcement has been exhausted. Mr Sherlock, in his bill — the Planning and Development (Taking in Charge of Estates) (Time Limit) Bill — is seeking to put a three-year time limit for residents to wait before the estate would be taken in charge. The bill passed first stage and awaits a second stage reading.

Mr Sherlock believes a balance needs to be struck between the residents’ rights and the developer’s capacity to fulfil his contract. If residents come forward prematurely asking that the estate be taken in charge, it can put undue pressure on the builder. Mr Sherlock believes legislation is needed to give the council power to sanction aberrant developers, either through building a financial penalty clause into the contract or the right to refuse further development.

Co Longford has a number of estates where residents are dealing with the fallout of as yet unfinished developments; at Stone Park, Silver Birches, Aughnacliffe. The situation is the same for residents of Shannon Grove, Carrig-on-Shannon, Co Leitrim. Co Roscommon puts at 86 its number of unfinished estates. Cavan has 55. These are counties that fall within the BMW region, (Border/Midlands/ West) all of whom benefited in the past from section 23 tax relief/the Upper Shannon Rural Renewal Scheme.

Sinn Féin councillor for Roscommon/South Leitrim Martin Kenny said section 23 tax relief had produced many ghost housing estates and unfinished estates in both counties.

“It is the reason why a lot of developments happened and in the beginning, it was good, but it lasted too long, people got greedy,” he said.

He said the problem of empty houses and unfinished estates “is probably discussed every month at every council meeting in every county in the country”.

“These matters are tangled in legal issues around planning conditions and bonds deposited, with many sites changing hands several times before being built, but in the heel of the hunt the process to get outstanding works like road surfaces, lighting, landscaping and footpaths finished is too protracted and easy for the few runaway developers to get away with it.

“Of course many builders want to finish the work but can’t get the finance from the banks, however the banks should have a responsibility to ensure the properties they funded are finished,” Mr Kenny said.

He believes NAMA should take over the housing estates that are mostly finished, in areas where they can sell, and where the developer is in effect bankrupt, and move those houses into an agency that oversees the work needed to bring them up to standard.

“Then sell them at cost price or even below, in order to get the market reset, putting a floor under prices and getting buyers into the market. It’s hard medicine but it’s the only way,” Mr Kenny said.

Professor Rob Kitchin, director of the Maynooth-based National Institute for Regional and Spatial Analysis, and co-author of a recent report on ghost estates, is in agreement with Sean Sherlock that 12 years is too long for residents to wait for the local authority to come to the rescue.

“It should be built into the process that a developer can’t walk away. It’s pretty awful for the residents. There are a lot of estates with high occupancy that have not been passed over to the local authorities, anything built in the last 10 years potentially.

“There should be a mechanism to get estates finished earlier than that.”

In relation to ghost estates, Prof Kitchin believes their fate should depend on where they are: “The houses will be perfectly okay as long as they remain sealed, and when the market turns a corner and the population grows, they should fill, certainly around the cities... In rural areas, it will obviously take longer.”

He sees bulldozing houses — as suggested in reports of NAMA’s intentions — as “a last resort”.

“There are huge associated costs with reverting land back to agricultural use. It’s not just a case of going in with a bulldozer. The only reason I could see for demolishing houses is if they were vandalised, or left to the elements, to the extent that they were rendered uninhabitable.”

Prof Kitchin’s advise going forward is to keep supply and demand linked. “In Ireland, this became de-coupled. There was a lot of speculative building going on. The market lost the run of itself. There was over-lending.

“There were lots of reasons: stamp duty, capital gains, development levies, overzoning of land for residential use, the number of planning permissions granted did not tally with demand.

“All of us were benefiting from employment opportunities, investment opportunities; it didn’t seem in anyone’s interest to burst the bubble.”

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