I commented some months ago (see RCR 46/2010 - response) about the original Registrar's Conference resolution as I felt that it was incorrect. At the time, if I recall correctly, one of the reasons for the resolution was given as the "cost of issue of a certificate". Since that time there have been various comments backwards and forwards and Circular 4 / 2011 was issued, in my opinion quite correctly (see Suspension call and related articles).
There are three aspects which need to be considered:
- The cost of the issue of the certificate
This should really not be a problem. If the purchaser feels that the amount being charged by the managing agents is excessive, he can refer to the Home Owners Association company and insist that the certificate is issued to him at a reasonable charge. If the HOA refuses to do anything about that, he would be quite entitled to go to court for an order that a certificate be issued to him at a reasonable charge. The fact that the charge may be unreasonable would not be a sufficient reason for dispensing with the requirement of a certificate.
- The second question is that of payment of the outstanding amount
I am in agreement that, in the case of insolvency, the HOA cannot refuse to issue the certificate unless payment of the arrears has been made. The HOA would only have a concurrent claim. The liquidator would be entitled to go to court for an order that the certificate be issued. I think that the only amount which the HOA could insist must be paid in the event of a sale in insolvency, would be a reasonable amount to cover the costs of the issue of the certificate. I agree that in a sectional title matter the position would be otherwise. In the case of a sale in execution by the Sheriff, the conditions of sale would provide that the purchaser must make payment of whatever amount is required to obtain clearance certificates and it therefore places the obligation to make payment on the purchaser. It is a contractual obligation.
- The most important aspect however is the reason why such a certificate is necessary
In the normal cluster complex provision has to be made for payment for such items as maintenance of common property, security, conduct on the property and in many cases, payment for electricity and water which services are often supplied by the Council through a bulk service account to the HOA which then distributes the electricity and water to the individual properties. If it were possible to transfer the property into the name of the purchaser without the purchaser being obliged to become a member of the HOA and to be bound by its rules, then one could have the position that the HOA would not have funds to carry out its duties and the complex could not function properly. This would mean that financial institutions would not give finance to purchase units in that complex and the investments of all the parties owning properties in the complex would be compromised. In many instances the condition has been inserted as one of the conditions insisted upon by the Council when granting permission to subdivide. In most instances the council does not accept responsibility for the services inside the complex and the HOA must make provision for all such services to be maintained. It is therefore essential that the consent from the HOA should be obtained before transfer can be registered and it is accepted that such consent will only be issued once the purchaser has entered into the necessary contractual relationship.
I confirm therefore that in my opinion it is quite correct to withdraw the original Registrar's Conference resolution as it was in my view taken without proper consideration of all aspects which affect properties in such cluster complexes. Circular 4/ 2011 is in my opinion quite correct and restores the position to what it should have been.