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Can a developer buy an entire occupied apartment block?

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  • 29-06-2018 9:31am
    #1
    JTMan
    Registered Users Posts: 5,540 ✭✭✭


    I live in an apartment block. I own the apartment.

    There was a rumour that a developer was looking to "buy the entire block" and then demolish it and rebuild a new block.

    Can a developer do this? If so, would they have to get 100% sale approval from each and every apartment owner? or is a certain percentage acceptable?

    Not saying I am against it (if a decent price is offered), just curious as to how the mechanics of such a situation works.

    Thanks.


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    #2
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Usually the developer buys the whole block outright.

    In some cases the developer will offer residents the option of a cash sale or a like-for-like swop for a new unit in the rebuilt block. This is a bit of a risk for the apartment owner; if the builder goes bust before finishing the new block, then you may have lost everything. But in the current market it would be a decent deal.

    But yes, normal rules apply. They need the agreement of all owners before they can do anything.


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    #3
    Claw Hammer
    Registered Users Posts: 6,238 ✭✭✭Claw Hammer


    Contrary to what the O/P says, he is not the owner of the apartment, he is merely a tenant.The Developer will only need the majority of unit owners to sell him the fee simple interest in the block. After that he can avail of the repair clauses in the lease is to force all owners to accept the rebuilding.


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    #4
    billybonkers
    Registered Users Posts: 2,293 ✭✭✭billybonkers


    Claw Hammer wrote: »
    Contrary to what the O/P says, he is not the owner of the apartment, he is merely a tenant.The Developer will only need the majority of unit owners to sell him the fee simple interest in the block. After that he can avail of the repair clauses in the lease is to force all owners to accept the rebuilding.

    What? OP said they own the apartment....


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    #5
    JTMan
    Registered Users Posts: 5,540 ✭✭✭JTMan


    Thanks for the replies. I own the apartment!


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    #6
    Claw Hammer
    Registered Users Posts: 6,238 ✭✭✭Claw Hammer


    billybonkers wrote: »
    What? OP said they own the apartment....

    The OP has a lease from the management company, despite what he thinks. If he looks at his title deeds he will see the lease.


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    #7
    billybonkers
    Registered Users Posts: 2,293 ✭✭✭billybonkers


    Claw Hammer wrote: »
    The OP has a lease from the management company, despite what he thinks. If he looks at his title deeds he will see the lease.

    I don't have a leas from a management company


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    #8
    [Deleted User]
    Posts: 3,621 ✭✭✭ [Deleted User]


    Claw Hammer wrote: »
    The OP has a lease from the management company, despite what he thinks. If he looks at his title deeds he will see the lease.

    You are referring to the title of the ownership which would be lease hold.

    This is not the same as being a tenant of the the property.


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    #9
    Claw Hammer
    Registered Users Posts: 6,238 ✭✭✭Claw Hammer


    billybonkers wrote: »
    I don't have a leas from a management company

    How many apartments are in the block? When was it built? Do you pay service charges? To whom? If it was build before 2009 and there are more than 4 apartments you cannot have a freehold. You either have a lease or nothing.


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    #10
    El Tarangu
    Registered Users Posts: 1,618 ✭✭✭El Tarangu


    seamus wrote: »
    Usually the developer buys the whole block outright.

    In some cases the developer will offer residents the option of a cash sale or a like-for-like swop for a new unit in the rebuilt block. This is a bit of a risk for the apartment owner; if the builder goes bust before finishing the new block, then you may have lost everything. But in the current market it would be a decent deal.

    But yes, normal rules apply. They need the agreement of all owners before they can do anything.

    Would this happen often in Ireland? I would have thought with the difficulties faced by lenders and landlords in evicting a homeowner or tenant generally, that buying an entire block with x number of owners/tenants would not be worth the headache, as if any one of them objected, it would take years to resolve.


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    #11
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Claw Hammer wrote: »
    Contrary to what the O/P says, he is not the owner of the apartment, he is merely a tenant.The Developer will only need the majority of unit owners to sell him the fee simple interest in the block. After that he can avail of the repair clauses in the lease is to force all owners to accept the rebuilding.
    In such an hypothetical you'd have a difficult time using the repair clause to demolish and rebuild.

    You also have another issue; all of your leaseholders are still entitled to a unit. Where's the value for the developer? Whole apartment blocks are expensive to build. I've heard of scenarios where a developer extends a block and stick 3 floors on top to sell. But if you knock an entire 30-unit block to build a 40-unit one, you only get to sell 10 units, you have to give 30 of them back to the leaseholders.

    There's no money in that.

    My understanding of the MUD act is also that such a transfer would not be legal in any case. Ownership of the management company, and by extension the lands on which the units are built, is determined by unit ownership. The only way to transfer your rights in the management company is to sell your unit.

    Or to put it another way - if the management company decided to "sell" the lands on which the block is built, the owners in that block become members of a new management company with ownership over the land. A developer cannot just buy the land beneath the block. The unit owners still maintain control.

    It's not unheard of though for a developer to buy a controlling share of such a block (i.e. buy half of the units) and use his powers to be a prick and force people out.


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    #12
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    El Tarangu wrote: »
    Would this happen often in Ireland? I would have thought with the difficulties faced by lenders and landlords in evicting a homeowner or tenant generally, that buying an entire block with x number of owners/tenants would not be worth the headache, as if any one of them objected, it would take years to resolve.
    If there's an actual tenant in situ, then selling the unit will allow you to evict them.

    I'm not sure how often it happens in Ireland. There were a few of them during the boom.
    I know of one small, run-down block where a developer planned on knocking down two sides, expanding it and sticking 4 floors on top. Existing owners would get their units made bigger and renovated, in exchange they would give the builder the rights to build & sell the extra floors.
    A few people dived in and bought out the existing units, and shortly afterwards the market took a nosedive, leaving them with no upgraded rental units in a sh1tty location built in the 1970s.

    Whoops.


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    #13
    Claw Hammer
    Registered Users Posts: 6,238 ✭✭✭Claw Hammer


    ronoc wrote: »
    You are referring to the title of the ownership which would be lease hold.

    This is not the same as being a tenant of the the property.

    It is exactly the same thing. Leasehold-the operative verb being lease. This was argued in the High Court some years ago. Owners of units are very definitely tenants.


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    #14
    Mrs OBumble
    Registered Users Posts: 25,949 ✭✭✭✭Mrs OBumble


    seamus wrote: »

    But yes, normal rules apply. They need the agreement of all owners before they can do anything.

    Not necessarily: it depends on the terms of the lease.

    In some, leases, if 50% or 67%, or whatever %-age is specified, agree then all owners have to comply with the decision.

    There is quite a lot of risk being an individual owner in a block with a lot of units owner by one party - be they a developer, voluntary housing association or even just an individual.


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    #15
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Mrs OBumble wrote: »
    Not necessarily: it depends on the terms of the lease.

    In some, leases, if 50% or 67%, or whatever %-age is specified, agree then all owners have to comply with the decision.

    There is quite a lot of risk being an individual owner in a block with a lot of units owner by one party - be they a developer, voluntary housing association or even just an individual.
    The scope of the decision is important though. Where it comes to, "will we change waste collection provider", or "will we introduce clamping", then certainly individual unit owners can do nothing if the vote doesn't go their way.

    The transfer of the freehold though I'm not so sure. The scenario where a single individual becomes the owner of the common areas, and the unit owners become their tenants, may not be legal. The MUD act requires that the management company owns the common areas and that all unit owners are members of the MC.

    Whether the MC could hold a majority vote to sell everything is an interesting question - it would require that everyone is compensated for their unit and evicted, but would it be legal and enforceable?


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    #16
    Marcusm
    Registered Users Posts: 10,324 ✭✭✭✭Marcusm


    Mrs OBumble wrote: »
    Not necessarily: it depends on the terms of the lease.

    In some, leases, if 50% or 67%, or whatever %-age is specified, agree then all owners have to comply with the decision.

    There is quite a lot of risk being an individual owner in a block with a lot of units owner by one party - be they a developer, voluntary housing association or even just an individual.

    Unless the lease explicitly states in ambiguous terms that a lessee’s rights are subject to the majority decision of other parties then I doubt that any such resolution could be upheld bearing in mind the state’s obligations to vindicate the private property rights of citizens. Any explicit lease clause in such terms would likely make the property unfinanceable so I doubt that they exist either!


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    #17
    Mrs OBumble
    Registered Users Posts: 25,949 ✭✭✭✭Mrs OBumble


    Marcusm wrote: »
    Unless the lease explicitly states in ambiguous terms that a lessee’s rights are subject to the majority decision of other parties then I doubt that any such resolution could be upheld bearing in mind the state’s obligations to vindicate the private property rights of citizens. Any explicit lease clause in such terms would likely make the property unfinanceable so I doubt that they exist either!

    It's not in this country, but i have a lease like that. I would still own an 1/ 10th undivided share of the overall development even if the other 9 shareholders did something drastic with the property.

    And yes i got a mortgage for it.


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    #18
    Claw Hammer
    Registered Users Posts: 6,238 ✭✭✭Claw Hammer


    Marcusm wrote: »
    Unless the lease explicitly states in ambiguous terms that a lessee’s rights are subject to the majority decision of other parties then I doubt that any such resolution could be upheld bearing in mind the state’s obligations to vindicate the private property rights of citizens. Any explicit lease clause in such terms would likely make the property unfinanceable so I doubt that they exist either!

    If a person signed such a lease, then the state has no role in enforcing that person's property rights. The other party to the contract also has property rights.


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    #19
    Marcusm
    Registered Users Posts: 10,324 ✭✭✭✭Marcusm


    Claw Hammer wrote: »
    If a person signed such a lease, then the state has no role in enforcing that person's property rights. The other party to the contract also has property rights.

    I think you need to reread my post; I suggested State interaction only where the terms were unclear or unstated. Where such terms were clearly stated then I did not suggest any State intervention.


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    #20
    Marcusm
    Registered Users Posts: 10,324 ✭✭✭✭Marcusm


    Mrs OBumble wrote: »
    It's not in this country, but i have a lease like that. I would still own an 1/ 10th undivided share of the overall development even if the other 9 shareholders did something drastic with the property.

    And yes i got a mortgage for it.

    Developments have often been created in those terms in other jurisdictions and NY co-ops are one example as are time shares, holiday and retirement homes. However, such provisions would not be common or likely to be of broad acceptance for finance in the ordinary residential market in Ireland for good reasons.


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    #21
    Claw Hammer
    Registered Users Posts: 6,238 ✭✭✭Claw Hammer


    Marcusm wrote: »
    I think you need to reread my post; I suggested State interaction only where the terms were unclear or unstated. Where such terms were clearly stated then I did not suggest any State intervention.

    If the person didn't sign such a lease, the ordinary rules of contract would apply. There would be no need to rely on the state protection of property rights.


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