Report on Multi-Unit Developments - Law Reform Commission

sound position and cannot afford to pay. In many jurisdictions, unit owners who
come under each category are treated differently. 7 For those who cannot pay in
many jurisdictions 8 liens are automatically imposed over the property and,
sometimes, even the over the contents of the property in the case of default in
payment. 9
7.09 In this State, the most widely used enforcement mechanisms are the
threat of legal action and, if that is not effective, the initiation of a claim against
the unit owner for breach of a covenant agreement in the District Court. The
Commission turns now to discuss and briefly assess the range of enforcement
mechanisms available in other jurisdictions.
(i)
Use of rent money to pay the service charge
7.10 In the case of unit owners who are financially sound and can afford to
pay their service charges, alternative mechanisms are used. The Commission is
aware that some unit owners hold the view that owner-investors are sometimes
uninterested in the day to day maintenance of the development, although the
Commission believes that this does not apply in general. The difficulties
associated with enforcement are exacerbated in cases where the unit owner
lives overseas. The Canadian province of Ontario, for example, specifically
targets unit owners who fail to pay service charges by requiring tenants of the
defaulting landlord to pay the service charge value to the owners‘ management
company rather than paying rent to the landlord. Thus, the payment can
constitute payment towards rent under the lease. 10
7.11 This diversion of funds away from the unit owner constitutes a
relatively straightforward means of enforcement. Where the unit is not leased
and the owner defaults on a service charge payment, an automatic priority lien
is created over the unit. 11 As a result, the Commission believes that it is open to
the Oireachtas to consider providing, as an enforcement option, that where an
‗owner-investor‘ defaults on payment of service charges or building investment
fund contributions, the rent payable by the tenant to the unit owner should be
7
See: van der Merwe and Muniz-Arguelles, ―Enforcement of Financial Obligations
in a Condominium or Apartment Ownership Scheme‖ (2006)16 Duke Journal of
Comparative & International Law 125
8
Ie: France, Ontario, British Colombia, Spain, Singapore, Puerto Rico and the
United States.
9
These are ―rights of security as against property for money owned‖- Coughlan,
p.lvii.
10
Section 87(6), Ontario Condominium Act, 1998 C.19.
11
Section 86 (1) Ontario Condominium Act 1998 C.19.
162