There are a number of examples around Clare at the moment where residents in newly built residential estates are being forced to take the management of common areas into their own hands. In some cases, the developer of the estate may have gone into liquidation and the estate may have fallen into disrepair. In other cases, the local authority may not be willing to take control of the estate common areas because certain works remain to be completed by the developer. In such situations, occupants of these estates are organizing themselves into Residents Associations.
Where people decide to form an Association, there is no legal requirement for them to prepare formal written rules. However, it is recommended that in all cases where an Association is formed, rules should be adopted to ensure that each and every member is aware of their legal rights and obligations. Where rules have not been adopted there is a greater risk of dispute between members and, more importantly, exposure to liability.
An alternative to the Residents Association is to form a company limited by guarantee. The advantage of doing so is to ensure that the members’ liability is limited to the guaranteed amount (usually €1.00 per member). The cost of public liability insurance can be prohibitive whereas the cost of forming and operating a company limited by guarantee might be less expensive. In the majority of cases, a Residents Association will not form a limited liability company and therefore the members are responsible for the liabilities of the Association.
On the other hand, the disadvantage of an organization operating under the protection of a limited company is that the rules and regulations are governed by the Companies Acts and annual audited accounts must be prepared and annual returns filed in the Companies Office. For small organizations with little cash flow, this cost may be prohibitive.When forming a Residents Association, careful consideration should be given to certain issues such as membership, appointment of the committee and officers, meetings and the future alterations of the rules, subscriptions, finance and funding and finally suspensions and expulsions.
It is important to note that a Residents Association like any other organization is legally responsible for its actions. Therefore an Association can be sued for breach of Contract, compensation for injuries, for nuisance and for breach of legislation. Specific advices should be sought from an insurer in relation to what areas of exposure should be insured against and what level of cover should be in place.
For further advices in relation to any item raised in this column, please feel free to contact Joseph Considine of Hassett Considine Solicitors LLP