The dark side of the boom for homeowners

Homeowners await news of the prospect of keeping their homes, says Special Correspondent Michael Clifford.

Next Monday at 6pm, they will file into the Oakwood Arms Hotel in Shannon to find out what prospects they have of keeping their homes.

Many of these home-owners are still absorbing the shock they received just prior to Christmas when they were told that between them they had to come up with €2.25m or face the possibility that their homes would have to be vacated as fire

hazards.

Some among them are investors, but at least half of the 240 units are owned by people who opted to make their homes in the Brú na Sionna development in the town.

Now the fire officer for Co Clare has instructed that remedial works be started by March 10 or further action may ensue. This would ultimately lead to the issuing of a fire safety order which requires the work to be completed or a building be evacuated.

Levon Dmritiev and his wife bought their duplex in 2013 to make a home to raise their two children. They are naturalised Irish citizens and have been living here

for 17 years.

Over recent months, Levon has watched the unravelling of the secrets hidden behind the walls of Brú na Sionna.

“A few months ago, my wife said she noticed new security guys walking around the estate,” he says. “Only now I’m realising they were fire marshals.”

The development’s management company has confirmed that once fire safety issues were identified, it was agreed that “security” be put in place.

At the management company AGM on December 18, Mr Dmritiev and his fellow owners were told that the first tranche of money would have to be paid early this year. On the basis of the square footage of his home, Mr Dmritiev was told his initial bill was €7,000 and this would have to be doubled by the end of the year.

He is not satisfied with the flow of information that he and his fellow homeowners have received from the management company.

“The way this is calculated by square footage, we don’t know why that is so and whether or not it is fair,” he says. “Who is deciding these things? As well, we don’t know who made the tests which show the fire safety problems.

“We want answers to these questions and we deserve to be told on Monday.”

The meeting was called by the management company to update owners. The company nominally represents all the owners in the estate but the Irish Examiner understands that a number of owners have sought independent legal representation as they are not convinced that their interests coincide with those of the directors of the management company.

The directors are all owners themselves. At the AGM in December, the proposal to raise the money along the lines now being progressed was taken after a two-hour discussion and

carried by 59 votes to four.

However, Mr Dmritiev and others are questioning the basis for that vote in the

absence of full information.

However matters proceed here, the history of Brú na Sionna, and the mess in which the owners find themselves, is a salutary tale from the dark side of the building boom.

The estate of 12 blocks was largely built between 2005 and 2007. The developer was one of the biggest in the Mid West at the time, Ennis-based Paddy Burke.

He had funded the development with a loan from Anglo-Irish bank, which eventually found its way into Nama.

When Paddy Burke’s company went into receivership in December 2010, the estate was not fully completed.

Crucially, the common areas had not yet been handed over to the owners. The developer also owned around a quarter of the homes. By then, the existing owners had formed their own management company, Tullyvaraga.

A dispute arose between the receiver for Paddy Burke and Tullyvaraga over the finishing of the estate.

According to the Multi Unit Development Act, the developer is obliged to finish an estate and hand over the common areas fully completed.

However, the act does not appear to cover the eventuality of the developer going bust. In such an instance, with whom lies the responsibility to complete the development?

Cora Devanney, Toddle Inn Creche at the Bru na Sionna Estate. Picture : Eamon Ward.

The owners, through Tullyvaraga, felt the receiver should take on the responsibility of the developer to finish the estate and acquire certificates of compliance for the common areas.

The receiver was of the view that this was not his baby. He initiated legal proceedings against Tullyvaraga, which counter-sued for the failure to complete the estate.

At this point, hope still persisted, as Nama was ultimately holding the purse strings. Over the years, Nama has in a number of instances acted beyond its legal obligation to complete estates that required work.

So, despite pending litigation, the prospect of Nama intervening in the name of social responsibility always existed.

Then Nama sold off the loan, and with it any prospect of State intervention.

“To the management company’s surprise, Nama sold the debt (on Brú na Sionna) to Promontoria Ltd,” says Conor Glendon, solicitor acting for the management company.

Promontoria is a subsidiary of the mother of all vulture funds as far as this country is concerned — Cerberus.

Now while the proceedings continue with the receiver for Paddy Burke Ltd, the real power is with the vulture fund which has taken over the Burke loans.

The fund has no obligation to make good any work, as it was not responsible for the construction.

In preparation for the pending litigation, detailed survey work was done, which uncovered the serious fire safety deficiencies.

This raised the unfinished work onto a whole new plane, opening up the possibility that the estate was not built to proper standards in the first place. A report by a fire consultant was issued on October 10 last year.

Three weeks later, the fire officer for Co Clare inspected the blocks and confirmed the major defects. A schedule of works was agreed, which must begin on March 10, according to the fire officer.

The extent of the damage and the bill was conveyed to the homeowners and investors at the management company AGM in December. That was when everybody heard that €2.25m would be required.

The owners were told that while the requirement to fork out money was unpalatable, “we are in a desperate situation”.

Another issue is timing. When did it become obvious that there was a much bigger problem than just completing work on the common areas?

One owner, Rabii Hendoui, finalised the purchase of his duplex on December 19. He had rented in the estate with his wife and two children for five years before buying their home. He told the Irish Examinerthat he hadn’t been told the extent of the problems when he bought.

Solicitor for the management company, Mr Glendon, says everything was done above board by the company.

“Everybody knew there were works to be completed going back years but it wasn’t until a more thorough investigation was done by the management company that we realised this problem with the fire safety issue,” says Mr Glendon.

“Then it was quantified in December and we learned the full extent of it. When anybody is buying, they raise pre-contract queries.

"At any time that was raised, the information available to the management company would have been disclosed.”

The other issue highlighted by Brú na Sionna is the shortcomings of the Multi Unit Development Act. The law is supposed to protect owners, but when a developer goes to the wall it would appear the only recourse is through the courts.

Local Fianna Fáil TD Timmy Dooley says the situation is extremely difficult for mortgage- holders.

“They are expected to pay significant sums to get their homes up to proper standards,” he says.

“Greater transparency is needed from all sides so that the owners have clear visibility of the full job of work to be done.”

Further clarity is needed, he said, around what obligations lay with those who took on the assets of Paddy Burke, the man behind the Brú na Sionna development.