Экзамен зачет учебный год 2023 / European Condominium Law
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solvent owners to pay their contributions, a simpler solution would be to impose fines for non-payment in the by-laws. Provided such by-laws prescribe fines that are not excessive and stipulate that due process must be adhered to in enforcing the fine, they should not be open to challenge.
On the other hand, using the suspension of votes as a measure to enforce financial obligations may be constitutionally challenged. Moreover, such a measure is reported to be largely ineffective due to the fact that defaulters do not generally tend to be interested in attending meetings anyway. Exclusion from the community or forfeiture of a unit is in some countries considered too draconian for the enforcement of financial obligations, which should ideally be dealt with by financial sanctions.516
The ‘super charge’ introduced in many condominium statutes that affords priority to condominium claims to the proceeds of a forced sale greatly enhanced the chance of recovery of unpaid contributions, particularly in the case of owners who default due to financial difficulties. In tandem with the compulsory provision for reserve funds in many condominium statutes, this can help the condominium to continue with works of maintenance and repairs even when some of the owners are in arrears with their payments. A fine line must be drawn however when deciding on the content of super charges in order not to deter financial institutions from providing finance for the purchase of condominium units. After all, management bodies of condominiums and mortgage creditors who have financed the purchase of the majority of the units in a scheme share a common goal, namely, to fill the units with solvent residents who can discharge their financial obligations to the management body as well as their mortgage repayments.
The justifications advanced for the liability of the successor in title (Kenneth) for the debts of his predecessor (Edmund) are threefold: that the condominium should be kept solvent, that the other owners should not be expected to cover the deficit caused by the defaulter, and that the purchaser is well placed to obtain information about whether the seller has paid his contribution and about the general financial position of the condominium. The ideal solution is to impose joint and several liability on the seller and purchaser, thus giving the purchaser a right of recourse against the seller if he has paid the debt.
516 Scottish report.
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In practice, the problems experienced in the collection of assessments have been compounded by the credit crunch of 2007. The slowdown in the economic climate has caused many owners to renege on their financial obligations to the condominium as well as on their mortgage payments. The inevitable upshot was a lack of funds to carry out the required maintenance and repairs, and this had a particularly noticeable effect on the outside walls of many residential schemes. This led, for example, in Spain to the collapse of fac¸ades and balconies in several Spanish cities. Banks, being the main financiers of condominium units, have called in mortgages but have often been unable to find purchasers to buy the units at forced sales and were thus forced to retain ownership of the units and pay the monthly contributions. The tough economic times have caused the transformation of newly built ‘mega-condominiums’ into ghost towns in Spain. The failure to sell a large percentage of newly built units has caused cash flow problems for developers, many of whom became insolvent. This in turn has led to condominium schemes becoming derelict given that insolvent developers have been unable to contribute towards the maintenance of the buildings. Any owners who had purchased units in such developments experience the forced close down of facilities, such as swimming pools, lifts and even central heating installations, in order to survive financially.517 In other jurisdictions, employees of the state, parastatal organisations and huge private enterprises were granted subsidies to purchase condominium units that they could not afford to buy for themselves. These schemes were never going to be viable in practice, because the owners could barely afford to pay their mortgage instalments, let alone maintenance contributions.518
Austria
Operative rules
A sectional owner’s liabilities to third parties (like the bank) are purely personal, and as such affect neither the other sectional owners nor the body corporate. If the sectional owner fails to repay his loan when it falls due, his mortgage creditor is entitled to enforce his claim against his estate by a forced sale, if necessary. This will generally be the case because the apartment is likely to be the principal asset of an owner in
517 Catalan report. |
518 South African report. |
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financial difficulties, and any significant creditor is likely to have secured his loan with a mortgage over the property. In such an event, the sale can be completed by auction (CC § 461).
The debts of a sectional owner owed to the body corporate are secured by a statutory preferential lien (gezetsliches Vorzugspfandrecht) (Law on Apartment Ownership § 27 and Code on Enforcement of Civil Judgements, § 216 art. 1 no. 3).519 This generally has the effect of prioritising claims of the owners’ association in the event that the owner is forced to sell his share in the scheme.520 This is an exception to the general principle of ranking under Austrian law, according to which mortgage creditors rank according to the date of registration of their mortgages (first in time is stronger). The claims of the owners’ association will generally rank above those of Bank A. However, the preferential lien enjoyed by the body corporate must be pursued judicially within six months of the unpaid assessments falling due and the lawsuit must be noted in the land register. Consequently, the statutory preferential lien cannot be relied upon by the owners’ association in relation to claims dating back more than six months.
The sale and alienation of an apartment to a third party does not lead to the former owner’s liabilities automatically shifting to the purchaser. However, if a mortgage creditor has an outstanding mortgage over the apartment in question that is registered in the land register, the purchaser will be liable as a ‘real debtor’ (RealSchuldner) for the seller’s unpaid arrears. Essentially, the creditor remains able to execute his claim against the apartment concerned, regardless of the fact that it has been alienated to a purchaser (CC § 461).
Descriptive formants
Mortgage creditors can enforce their claims against apartment owners according to the general provisions on mortgage in the Austrian CC. The owner’s association has, since 2002, a statutory preferential lien against an owner’s undivided share in the common property to satisfy its claim, which is limited to six months’ arrears and ranks higher than a mortgage creditor’s claim.
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Ehrlich, ‘Maßnahmen gegen einen pflichtwidrig handelnden Wohnungseigentu¨ mer’ |
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(2012), p. 46. |
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See further Lo¨ cker, Osterreichisches Wohnrecht, § 27 WEG no. 8 ff; RIS-Justiz RS 0122784. |
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Metalegal formants
The statutory preferential lien, which also covers claims of individual sectional owners against another apartment owner, helps to fill the coffers of the owners’ association but as it is limited to six months’ arrears, puts pressure on the manager to enforce the claim in a timely manner.
Belgium
Operative rules
The association of co-owners does not have any statutory priority in respect of arrears owed by one of the owners. In the event that an owner fails to pay his contribution towards maintenance charges, the remedies available to the association include service of a writ of sequestration (‘bewarend beslag/saisie conservatoire’) and a garnishment order (‘beslag onder derden/saisie-arreˆt’).521
The manager, as representative of the owners’ association, can also (and must if inscribed in the by-laws) issue the defaulter with a reminder (‘aanmaning/mise en demeure’) and ultimately take the case to court to enforce the debt if his efforts to achieve a friendly settlement were unsuccessful.522
One of the reforms introduced by the amendment of the Civil Code in 2010 was the introduction of certain protective measures to shield third party purchasers from the liabilities of their predecessor. CC art. 577-11 par. 1 provides that the public notary who supervises the signing of the notarial deed necessary for the sale of a private unit must withhold from the price of the conveyance the arrears due by the seller. The notary will then first pay the secured creditors. The seller can contest these arrears, in which case the public notary will inform the manager (art. 577-11/1, par. 2.), who then has a period of twelve days to serve a writ of attachment with regard to the arrears (art. 57711/1 par. 3).
In this matter, it is important to appreciate when liability shifts from the seller to the purchaser in respect of maintenance and similar charges. Five categories of expenses fall on the purchaser: (a) expenses for conservation, maintenance, repair and renovation, which have been resolved in the general meeting before the transfer, but for which
521 Timmermans, ‘De gemeenschappelijke lasten’, p. 185. |
522 Ibid., pp. 185–7. |
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the manager has only ordered payment after the transfer; (b) an order to make a contribution to the capital of the association, which has been approved by the general meeting before the transfer; (c) expenses for urgent repairs approved by the general meeting but for which the manager has only ordered payment after the transfer; (d) expenses for the acquisition of common parts, which the general meeting has approved before the transfer but for which the manager has only ordered payment after the transfer; and (e) the fixed amounts due by the owners’ association for judicial proceedings dating from before the transfer, but for which the manager has only ordered payment after the transfer. In order to protect the buyer, the details of these expenses must be communicated by the manager to the public notary. Ordinary charges are only borne by the purchaser if they date from after the date of the transfer (art. 577/11§ 2 nos. 1–4).
Descriptive formants
The above provisions are laid down in the Civil Code and are thus mandatory. Any change to these provisions in the by-laws of the scheme would therefore be null and void.
Metalegal formants
During the parliamentary debates on the 2010 reforms it was debated whether owners’ units should be charged with a statutory priority security right in favour of the owners’ association as is the case in France. The legislator eventually decided against introducing such a priority right, mainly due to the fact that at that time the legislators were engaged in serious efforts to reduce the plethora of statutory priority rights in Belgian law.523 Instead it decided to extend the protection for people who purchased apartments from owners in default of payment of their contributions.
Catalonia
Operative rules
(a) The CC stipulates that owners who are in arrears with the payment of their monthly contributions (morosos) are neither allowed to vote (art. 553-26.1) nor to challenge the resolutions of the management
523See Parliamentary Debates, Chamber of Representatives 2008–09, nr. 1334/11, p. 93 (www.dekamer.be); Sagaert, ‘De hervorming’, p. 194 no. 54.
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body (CC art. 553-31.2), except if they are contrary to the law.524 Finally, in the event that an owner wants to sell his or her unit, he has to furnish the notary public appointed to effect the transfer of the unit with a declaration that he is not in arrears with his payments as well as a certificate from the secretary of the condominium that all his contributions and other amounts owed to the condominium have been paid. The notary is not allowed to prepare a notarial deed of transfer without having received such a declaration and certificate (CC art. 553-5.2). Without a notarial deed the transfer and the purchaser’s acquisition of the unit cannot be registered in the Land Register and thus cannot be enforced against third parties.
(b) Similarly to the Spanish Law on Horizontal Property, the Catalan CC provides that the claim of the condominium for arrear assessments is secured by a ‘tacit charge’ (implied by operation of law) over Edmund’s apartment (CC art. 553-5.1).525 The security is limited to arrears for the current and previous year and ranks above a mortgage registered over the unit either prior or subsequent to the claim of the management body. Although this ‘tacit charge’ (afectacio´) is somewhat suspect, because it is neither a mortgage nor is it required to be registered in the Land Register, it nevertheless has preference over any express prior mortgage in the case of the mortgage debtor Edmund’s insolvency (Law on Insolvency of 2003 art. 90.2). The condominium has only a personal unsecured claim against Edmund for assessments owed to it beyond the current and previous year, which falls outside the scope of the ‘tacit charge’.
If Edmund sells the unit to Kenneth, Edmund (the seller) will remain personally liable for the debt.526 The unit remains subject to the preferent tacit charge securing payment of assessments for the present and the previous year.527 Consequently, the charge may be enforced and the unit may as a result be sold in a public sale to a third party by the condominium (CC article 553-5.1) giving the latter a preferent claim on the proceeds of the sale. However, Kenneth (the purchaser) is given the right to pay any assessments owed by Edmund before enforcement of the tacit charge. In such an event, Kenneth has a right
524SAP Lleida 5-3-2009 (AC 2009\1533); SAP Girona 17–9–2010 (JUR 2010\386822).
525SAP Madrid 15-3-2001 (JUR 2001\170282).
526The Catalan court in SAP Tarragona 24-9-2009 (JUR 2009\491761) followed the Spanish court in SAP Toledo 16-2-2002 (JUR 2002\102098) based on art. 9 of the Spanish Law on Horizontal Property.
527SAP Barcelona 25-2-2009 (JUR 2009\170325).
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of recourse against the seller,528 who must certify at the exact moment of the sale that he was not in arrears with assessments owed to the management body (CC art. 553-5.2). If the certification turns out to be false, Edmund remains liable for payment of the debt.
Descriptive formants
Several Catalan court decisions529 made it clear that the Spanish Law on Horizontal Property does not apply in Catalonia. Thus, while art. 18-2 of the Spanish Law allows defaulting owners to challenge resolutions of the management body that are contrary to law, they are not allowed to challenge them under Catalan legislation. This seems to be contrary to the rationale of the Spanish law reform initiative in 1999 that intended to reduce arrears owed by limiting the rights of defaulting owners to challenge resolutions dealing with the alteration of owners’ quotas. The tacit charge on the unit that secures the claim of the condominium for assessment arrears is not an optimal solution because its legal nature and functioning in the case of insolvency of the current owner is unclear.
Metalegal formants
It is well-known that many condominiums experience difficulties in collecting contributions from owners, mainly because the sanctions provided by legislation are not very effective. It is generally accepted that the position has worsened since the credit crunch at the end of 2007.530 This will have a negative effect on the condition and maintenance of condominiums. In Catalan cities it is not so rare to find balconies and other attachments to external walls of condominiums having collapsed as a result of the failure to maintain external walls in a good condition.
The credit crunch has also caused huge problems for banks as the prime provider of mortgage credit to purchasers of condominium apartments. Banks have thousands of repossessed units in stock, which are very difficult to sell during the recession and post-recession periods, leaving the banks with the obligation to pay the monthly assessments of the apartments they own.
528SAP Lugo 23-4-2009 (JUR 2009\245322).
529See the decisions quoted in fn. 25 above.
530Bozalongo Anton˜ anzas, ‘Problemas econo´micos de las comunidades para la conservacio´n de la finca’ (2011), p. 349.
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Some newly built condominiums face another potential disaster. Many developers have gone bankrupt and are unable to pay the assessments on the unsold apartments. This catastrophe is evident in so-called ‘ghost cities’ consisting of entirely new-built mega condominiums, which have mushroomed all over Spain. Many of these mega condominiums are now occupied by only a handful of owners and the developers who hold almost 80 per cent of all the units in the building are either bankrupt or missing. The remaining families are either forced to close down common facilities (like the swimming pool, central heating or elevators) or maintain these facilities with their own funds.
Croatia
Operative rules
(a)If an owner defaults on his obligation to pay an agreed contribution to the common fund (Law on Ownership and other Real Rights art. 89), the manager can sue the defaulting owner on behalf of all of the other unit owners (art. 93(2)). The manager may also petition the court to register a lien over the defaulter’s unit in order to secure the condominium’s claim (Law on the Enforcement of Court Orders of 2012 art. 295 ff.) or seek a court order to expel the defaulter by means of a forced sale of his unit at auction (art. 98(3)(1)). It is not entirely clear whether such a forced sale would automatically accelerate the mortgage. The Law on Ownership and other Real Rights remains silent on the issue; this would suggest that the sale would go ahead with the mortgage remaining intact, which would present a serious obstacle to the sale.
(b)If Edmund is late with both his mortgage payments and monthly contributions to the common fund, the manager can resort to the same measures discussed above. The existence of unpaid mortgage instalments does not change the position, because the bank enjoys priority with respect to the unit regardless. If the manager decides to proceed by way of a forced sale of the unit, the bank, as a secured creditor, will be satisfied in full from the proceeds of the sale before the manager (Law on Execution of 2012 art. 86). If the bank decides to enforce the mortgage, the only option available to the manager is to join the enforcement proceedings in the hope of satisfying his claim from the remaining proceeds of sale (art. 85).
On the change of ownership of the unit, there is no automatic transfer of debt from the previous owner to the new owner, nor is
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there joint and several liability of the previous and subsequent owner. Kenneth would therefore not generally be liable for the debt that was incurred by Edmund (i.e. before the transfer of the property). However, if the manager registered a lien on Edmund’s property prior to the sale, the manager can institute enforcement proceedings against Kenneth, who does not take the property free of the lien (Law on Ownership and other Real Rights art. 298(1)). If there are any enforcement proceeding pending against the property, this inhibits any sale of the property (Law on Execution art. 84(3)).
Descriptive formants
Note that Croatian law gives the manager the power to sue on behalf of all of the unit owners in the performance of his functions. There is some controversy as to the manager’s status in this regard. Courts have interpreted the manager’s actions as those of a legal representative, which suggests that he does not have individual procedural standing in such cases. This view was, however, dismissed by the Constitutional Court, which has held that the manager has statutory authority for initiating such proceedings.531
Also note that under Croatian law claims of the common fund are subordinated to any debts owed to secured creditors. This rule applies regardless of the type of claim secured by the mortgage. Thus, the mortgage lender’s claim would be preferred even if his claim did not relate to the original lending to fund the purchase of the unit.
Claims on behalf of the common fund do not enjoy any kind of statutory priority in sales in execution. However, taxes or other administrative burdens on the property falling due in the past year are preferred to claims of the mortgage creditor (Law on Execution, art. 1123(1)(2)).
Metalegal formants
As mentioned above, financial and social problems result when owners frequently default on the payment of contributions. There is also a misplaced perception that common expenses are external, and that individual unit owners need not be punctual in complying with their financial obligations. Incidentally, mortgage lenders are also affected, because the value of their security is tied to the value
531 See U-III-3671/203 (Official Gazette 87/06); U-III1656/2004 (Official Gazette 127/06).
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of the property, which diminishes if there are not sufficient funds for regular maintenance and repairs.
Denmark
Operative rules
The answer to this question depends on what arrangements the management body (owners’ association) has made to secure its claims for common expenses against owners who default on the payment of their contributions. Under the Model By-laws the management body may register a mortgage in the Land Register over every unit for an amount of 41,000 Danish Kroner (approximately €5,500) as security for the payment of common expenses (§ 17 par. 1). This charge covers all arrear payments, interest on arrears, collection costs and payments owed to the management body for repairing and cleaning the apartment that Edmund had grossly neglected.
(a)The association can institute ordinary court proceedings against Edmund for the payment of the above charges. This accumulation of debt might cause Edmund to think twice before refusing to pay if he is solvent.
(b)If Edmund cannot pay, the association’s only other remedy would be to apply for attachment and a compulsory sale in execution of the apartment. The priority of satisfaction out of the proceeds of the compulsory sale will depend on which mortgage was registered first. If the mortgage in favour of the association mentioned above was registered first, the association would have a prior right to be satisfied up to an amount of €5,500 out of the proceeds of the compulsory sale. If not, the bank has priority, because the association’s mortgage will rank lower than liens, mortgages, encumbrances and easements already registered against the condominium (Model By-laws § 17 par 2). Note that this will be the position irrespective of whether the association or Bank A calls up their mortgage.
(c)The Model By-laws require that prior to transfer of a unit, the transferor must disclose his debt to the association and supply information on the association’s finances and administration of the scheme to the transferee (§ 9). As Kenneth would presumably be liable for all the arrear assessments on the unit once it is registered in his name,532
532Blok, Ejerlejligheder, pp. 243 and 253 suggests that unless the by-laws of the particular scheme provides otherwise; Kenneth cannot be held personally liable for any debts owed by Edmund towards the owners’ association.