J
Jain and Chris
Senior Member
In our March edition, we published an article about owning an apartment which I thought some of you would be interested in reading. It's quite a fascinating insight by GPNG law firm in Sofia into maintenance agreements. Here it is:
APARTMENT OWNERSHIP
OR HOW FAR CAN DEVELOPERS GET WHEN THEY OFFER YOU A MAINTENANCE AGREEMENT
We have treated the topic of apartment ownership, as well as maintenance
agreements before, but it will be useful for those investors who have
purchased properties in residential complexes, to be reminded once again
of their basic rights and obligations as owners of shares in the common
parts of their complex. More precisely we intend to inform readers on
the provisions of the maintenance agreements that they are obliged to
sign. These two topics are interrelated, because the one of the main
purposes of the execution of property management and maintenance
agreements is precisely the maintenance of those ideal shares in the
common parts of all owners, forming the apartment ownership of a complex.
The Bulgarian legislation has already provided a definitive set of rules
for the management of apartment ownership in the Property Act 1951 and
the Regulation on the Management, Order and Control of the Apartment
Ownership 1951. Article 38 of the Property Act defines what parts of the
building represent apartment ownership – these are the internal yard/s,
the staircase, the roof, the external and internal bearing walls, the
external doorways of the building and the doors, leading to the storage
facilities under the roof and in the basements, the lifts, the premises
for the janitor, as well as every other part that is naturally or
according to its designation serving all owners. The apartment ownership
is not subject to partition. The only allowed partition can be on a
floor-by-floor basis, as long as the separated floors can be used
independently and without affecting the rights and normal use of the
rest of the building by the rest of the owners.
Two corporate bodies perform the management, maintenance and control on
the apartment ownership – the General Assembly of the apartment owners
and the Manager (or the Management Council). The organisation, voting
rights and powers of these two bodies are quite similar to those in a
company:
1. The legal quorum necessary to conduct a General Assembly is ¾ of the
owners, but if the quorum is not achieved at the announced hour of the
forum, it may take place one hour later, in the presence of as many
owners as may attend.
2. The required majority for adoption of a decision is the so-called
ordinary majority – 51% of the owners, attending the assembly.
3. The General Assembly adopts Regulation on the Internal Order. It also
elects the Manager (Management Council).
4. The General Assembly determines the size of the monthly/annual
instalments, due by each owner to cover the expenses for the management
and maintenance apartment ownership.
5. The Manager is obliged to fulfil its obligations, strictly following
the resolutions of the General Assembly.
6. The Manager may be empowered by the General Assembly to conduct
certain ordinary actions that are within his course of business and
cover certain minor expenses at his own discretion.
According to Article 41 every owner is obliged to participate in the
expenses for the maintenance, recovery and other useful expenses for the
common parts, for which a decision of the General Assembly of the
Apartment Owners has been adopted. At the same time, according to the
above-mentioned Regulation, the Common Assembly cannot refuse to approve
to cover expenses that are necessary for the maintenance or recovery of
the apartment ownership. At the same time the Regulation explicitly
provides that repairs, improvements and alterations to the apartment
ownership can only be made after a resolution of the Assembly had been
adopted. An interesting legal provision is the one, stipulating that the
owners of two or more apartments in one unit, as well as the owners of
one and the same unit, have only one vote. The purpose of this clause is
not to allow one person to have a decisive vote (as it often happens in
practice, if the developer decides to keep the title to several
apartments in the complex). One needs to interpret the character of this
rule. It is submitted that it has a mandatory character and this rule
may not be waived by the General Assembly. Another important provision
is that the resolution for making certain useful, but not necessary
alterations to the apartment ownership must be adopted with the votes of
¾ of the owners, attending the particular session of the Common
Assembly. The Regulation contains a definition of “necessary expenses” –
urgent expenses for ensuring the good technical condition of the
building, its facilities and equipment with the view of protecting the
health and safety of the residents and visitors.
The expenses are covered proportionately, depending on the size of the
ideal share in the common parts of each owner. Bear in mind that the
General Assembly may decide to distribute the expenses on a different
basis – for example proportionately to the number of people that live in
one unit. The owners are obliged also to provide access to their
premises, when this is necessary for the conducting of certain
measuring, surveying, construction or repair works. If an owner does not
comply with the adopted resolutions of the General Assembly or violates
the Regulation of Internal Order or refuses to pay the due expenses,
he/she may be officially warned or even forced to leave the property.
One final, but very important legal provision is that the persons who
practice their business or conduct other activities in the building,
which involves more frequent access of third parties, must participate
in the expenses for lighting, cleaning and maintenance of the common
parts, as well as for the janitor with five times the regular
instalments, i.e. as if it is for five owners.
Knowing the above basic legal provisions, it is easy for every owner to
realise what is too burdensome for them in their Maintenance Contract.
Let us mark the most frequent violations of the owners’ rights.
When purchasing an apartment in a residential complex, buyers are obliged
to sign a Maintenance Contract together with the signing of the
Preliminary Contract, usually by virtue of an express contract clause.
However, the apartment ownership is formed from the moment of the
completion of the structure of the building. That is why the buyer gets
acquainted with the content of the offered Maintenance Contract only at
that time and is not even given the opportunity to change it with the
explanation that he has been bond to the Maintenance Contract by the
Preliminary Contract. This is wrong for two reasons. Firstly,
undertaking the obligation to sign a Maintenance Contract does not mean
that you agree and accept irrevocably its content, without being aware
of it. Secondly, if the General Assembly decides that this Maintenance
Contract should not be signed and the imposed Maintenance Company and
Manager are not accepted, then the binding clause of the Preliminary
Contract shall become ineffective and not only will you not be obliged
to sign this contract, but you will not be allowed to because it will be
in violation of the will of the General Assembly.
Last, but not least, after the conscious solicitors kept repeating
constantly that the mandatory legal provisions for the apartment
ownership must be observed when offering a Maintenance Contract, some
developers realised the significance of these provisions and started to
offer a whole package of documents – a Protocol of a Resolution of the
General Assembly, by way of which it chooses the Manager, the
Maintenance Company, the fees and the content of both the Maintenance
contract and the Regulation on the Internal Order, of course all of them
as per the developer’s own interest, a Power of Attorney for a third
person (employee of the developer or the Maintenance Company) to vote at
his/her own discretion at the Common Assembly and a copy of the adopted
Maintenance contract and Regulation on the Internal Order. This is not
an attempt to obey the law, but to impose the developer’s will without
violating the law. It is hard indeed to find all other owners
constituting the General Assembly, but if you are offered this
attractive package to sign, then you are in your right to require
information on the rest of the owners from the developer so that you can
organize the session of the General Assembly and vote the offered
resolutions.
If the owners of a complex manage to organise their decision-making body
– the General Assembly, they will be able to discuss the Maintenance
Contract prior to its signing and avoid other violations, some of which
are:
1. The Maintenance Contract often provides for the right of the Manager
to decide on improvements and expenses that are not “necessary” at his
own discretion, thus imposing unlimited expenses to the owners;
2. The Maintenance Contract often ignores the powers of the General
Assembly and appropriates its rights, which is illegal;
3. The Maintenance Contract often provides that the Manager will be
entitled to cut off your electricity in case you do not pay your fees.
As you see above, the Maintenance Contract has nothing to do with your
own apartment ownership and indeed you are obliged to cover the common
expenses, but not paying for your own apartment’s electricity may entail
its cutting off by the Electricity company, but the Manager of the
apartment block would be in violation of the law if he were to do this.
4. It will be very useful for the General Assembly to ascertain the
number of business premises – restaurants, bars, hair-dresser studios,
massage studios and offices, that are located in the building, so that
they are obliged to pay five times higher expenses.
If the Maintenance Company/the Manager does not agree with the adopted
resolutions and changes of the contract, or increases unilaterally the
fees before its signing (as happens very often) the General Assembly may
just decide not to enter into this contract.
APARTMENT OWNERSHIP
OR HOW FAR CAN DEVELOPERS GET WHEN THEY OFFER YOU A MAINTENANCE AGREEMENT
We have treated the topic of apartment ownership, as well as maintenance
agreements before, but it will be useful for those investors who have
purchased properties in residential complexes, to be reminded once again
of their basic rights and obligations as owners of shares in the common
parts of their complex. More precisely we intend to inform readers on
the provisions of the maintenance agreements that they are obliged to
sign. These two topics are interrelated, because the one of the main
purposes of the execution of property management and maintenance
agreements is precisely the maintenance of those ideal shares in the
common parts of all owners, forming the apartment ownership of a complex.
The Bulgarian legislation has already provided a definitive set of rules
for the management of apartment ownership in the Property Act 1951 and
the Regulation on the Management, Order and Control of the Apartment
Ownership 1951. Article 38 of the Property Act defines what parts of the
building represent apartment ownership – these are the internal yard/s,
the staircase, the roof, the external and internal bearing walls, the
external doorways of the building and the doors, leading to the storage
facilities under the roof and in the basements, the lifts, the premises
for the janitor, as well as every other part that is naturally or
according to its designation serving all owners. The apartment ownership
is not subject to partition. The only allowed partition can be on a
floor-by-floor basis, as long as the separated floors can be used
independently and without affecting the rights and normal use of the
rest of the building by the rest of the owners.
Two corporate bodies perform the management, maintenance and control on
the apartment ownership – the General Assembly of the apartment owners
and the Manager (or the Management Council). The organisation, voting
rights and powers of these two bodies are quite similar to those in a
company:
1. The legal quorum necessary to conduct a General Assembly is ¾ of the
owners, but if the quorum is not achieved at the announced hour of the
forum, it may take place one hour later, in the presence of as many
owners as may attend.
2. The required majority for adoption of a decision is the so-called
ordinary majority – 51% of the owners, attending the assembly.
3. The General Assembly adopts Regulation on the Internal Order. It also
elects the Manager (Management Council).
4. The General Assembly determines the size of the monthly/annual
instalments, due by each owner to cover the expenses for the management
and maintenance apartment ownership.
5. The Manager is obliged to fulfil its obligations, strictly following
the resolutions of the General Assembly.
6. The Manager may be empowered by the General Assembly to conduct
certain ordinary actions that are within his course of business and
cover certain minor expenses at his own discretion.
According to Article 41 every owner is obliged to participate in the
expenses for the maintenance, recovery and other useful expenses for the
common parts, for which a decision of the General Assembly of the
Apartment Owners has been adopted. At the same time, according to the
above-mentioned Regulation, the Common Assembly cannot refuse to approve
to cover expenses that are necessary for the maintenance or recovery of
the apartment ownership. At the same time the Regulation explicitly
provides that repairs, improvements and alterations to the apartment
ownership can only be made after a resolution of the Assembly had been
adopted. An interesting legal provision is the one, stipulating that the
owners of two or more apartments in one unit, as well as the owners of
one and the same unit, have only one vote. The purpose of this clause is
not to allow one person to have a decisive vote (as it often happens in
practice, if the developer decides to keep the title to several
apartments in the complex). One needs to interpret the character of this
rule. It is submitted that it has a mandatory character and this rule
may not be waived by the General Assembly. Another important provision
is that the resolution for making certain useful, but not necessary
alterations to the apartment ownership must be adopted with the votes of
¾ of the owners, attending the particular session of the Common
Assembly. The Regulation contains a definition of “necessary expenses” –
urgent expenses for ensuring the good technical condition of the
building, its facilities and equipment with the view of protecting the
health and safety of the residents and visitors.
The expenses are covered proportionately, depending on the size of the
ideal share in the common parts of each owner. Bear in mind that the
General Assembly may decide to distribute the expenses on a different
basis – for example proportionately to the number of people that live in
one unit. The owners are obliged also to provide access to their
premises, when this is necessary for the conducting of certain
measuring, surveying, construction or repair works. If an owner does not
comply with the adopted resolutions of the General Assembly or violates
the Regulation of Internal Order or refuses to pay the due expenses,
he/she may be officially warned or even forced to leave the property.
One final, but very important legal provision is that the persons who
practice their business or conduct other activities in the building,
which involves more frequent access of third parties, must participate
in the expenses for lighting, cleaning and maintenance of the common
parts, as well as for the janitor with five times the regular
instalments, i.e. as if it is for five owners.
Knowing the above basic legal provisions, it is easy for every owner to
realise what is too burdensome for them in their Maintenance Contract.
Let us mark the most frequent violations of the owners’ rights.
When purchasing an apartment in a residential complex, buyers are obliged
to sign a Maintenance Contract together with the signing of the
Preliminary Contract, usually by virtue of an express contract clause.
However, the apartment ownership is formed from the moment of the
completion of the structure of the building. That is why the buyer gets
acquainted with the content of the offered Maintenance Contract only at
that time and is not even given the opportunity to change it with the
explanation that he has been bond to the Maintenance Contract by the
Preliminary Contract. This is wrong for two reasons. Firstly,
undertaking the obligation to sign a Maintenance Contract does not mean
that you agree and accept irrevocably its content, without being aware
of it. Secondly, if the General Assembly decides that this Maintenance
Contract should not be signed and the imposed Maintenance Company and
Manager are not accepted, then the binding clause of the Preliminary
Contract shall become ineffective and not only will you not be obliged
to sign this contract, but you will not be allowed to because it will be
in violation of the will of the General Assembly.
Last, but not least, after the conscious solicitors kept repeating
constantly that the mandatory legal provisions for the apartment
ownership must be observed when offering a Maintenance Contract, some
developers realised the significance of these provisions and started to
offer a whole package of documents – a Protocol of a Resolution of the
General Assembly, by way of which it chooses the Manager, the
Maintenance Company, the fees and the content of both the Maintenance
contract and the Regulation on the Internal Order, of course all of them
as per the developer’s own interest, a Power of Attorney for a third
person (employee of the developer or the Maintenance Company) to vote at
his/her own discretion at the Common Assembly and a copy of the adopted
Maintenance contract and Regulation on the Internal Order. This is not
an attempt to obey the law, but to impose the developer’s will without
violating the law. It is hard indeed to find all other owners
constituting the General Assembly, but if you are offered this
attractive package to sign, then you are in your right to require
information on the rest of the owners from the developer so that you can
organize the session of the General Assembly and vote the offered
resolutions.
If the owners of a complex manage to organise their decision-making body
– the General Assembly, they will be able to discuss the Maintenance
Contract prior to its signing and avoid other violations, some of which
are:
1. The Maintenance Contract often provides for the right of the Manager
to decide on improvements and expenses that are not “necessary” at his
own discretion, thus imposing unlimited expenses to the owners;
2. The Maintenance Contract often ignores the powers of the General
Assembly and appropriates its rights, which is illegal;
3. The Maintenance Contract often provides that the Manager will be
entitled to cut off your electricity in case you do not pay your fees.
As you see above, the Maintenance Contract has nothing to do with your
own apartment ownership and indeed you are obliged to cover the common
expenses, but not paying for your own apartment’s electricity may entail
its cutting off by the Electricity company, but the Manager of the
apartment block would be in violation of the law if he were to do this.
4. It will be very useful for the General Assembly to ascertain the
number of business premises – restaurants, bars, hair-dresser studios,
massage studios and offices, that are located in the building, so that
they are obliged to pay five times higher expenses.
If the Maintenance Company/the Manager does not agree with the adopted
resolutions and changes of the contract, or increases unilaterally the
fees before its signing (as happens very often) the General Assembly may
just decide not to enter into this contract.
