Экзамен зачет учебный год 2023 / European Condominium Law

In Estonia, a majority of apartment owners may indeed submit a notarially certified application for cancellation of the registration of the condominium on the basis that the structure of the scheme building has become completely unusable and the local authority has certified accordingly. It is, however, tenuous to suggest that the term ‘outmoded’ used in our scenario exactly matches the term ‘unusable’. Similarly, in Catalonia, the scheme can be terminated if a public authority declares the building ‘deemed to be destroyed’ but it is not clear that the public authority will do so on the ground of obsolescence. The South African legislation provides perhaps the best opportunity, where the court may declare the building to be ‘deemed to be destroyed’ on account of its obsolescence.

Most jurisdictions do, however, provide that a condominium may be terminated by a unanimous resolution of the general meeting,878 accompanied by an application for the cancellation of the registration of the condominium in the land register.879 In Spain, for example, the condominium is terminated by a unanimous resolution to cancel the title deeds of the condominium and to subject the building to the provisions of the Civil Code on ordinary coownership. Austria, Slovenia and Poland require a notarial agreement for termination of the scheme, entered into by all the owners and accompanied by the consent of all holders of real rights in the property.880 If an apartment association has been established in Estonia, the members may request dissolution of the association by a majority of two-thirds of the owners present or represented at a general meeting.

Alternative methods of terminating condominium schemes include a notarially certified application for termination by a single owner who has acquired all the apartment ownership units,881 the sale and transfer of all the units to a single owner,882 and a unanimous resolution to sell all the common property in the scheme.883

In England, Ireland and Sweden, where a company or the real estate cooperative association manages the scheme, the dissolution of the

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scheme can be sought by means of a winding up resolution. If a 100 per cent majority passes the resolution in England, the liquidator appointed under insolvency legislation need not apply to the court for a winding-up order. If, however, only 80 per cent approves the resolution, the liquidator must make such an application. In Ireland, winding up can be undertaken on any ground, including the obsolescence of the scheme. If the management company is solvent, there will be a voluntary winding up and a liquidator will be appointed. Once a special resolution is approved at an OMC meeting, the company will petition the High Court, which may direct that the company is wound up. Once dissolved, the company will cease to exist.

In Sweden, a cooperative association can be liquidated by a unanimous resolution in favour of liquidation at the first general meeting. Alternatively, termination may be achieved through consecutive general meetings in which a simple majority at the first meeting followed by a subsequent two-thirds majority would be sufficient to trigger liquidation. The reporters suggest, however, that it is probably simpler for the group to sell their shares on the open market than to start a process of liquidating the association.

If an apartment association has been established in Estonia, the management board may submit an application for a dissolution of the association by a declaration of bankruptcy. However, the dissolution of an apartment association has far from an overwhelming impact; once it is dissolved the scheme is managed by the community of apartment owners under the provisions of the Law on Apartment Ownership.

Descriptive formants

The general descriptive formants for this Case are the provisions of condominium and real estate cooperative legislation, the Model By-laws (or the Model CCS) and procedural provisions contained in legislation on associations and company law. This is supplemented by landlord and tenant analogies, case law and academic literature. In Scotland, it was found that Development Management Schemes could cope better with the issues encountered in the given scenario.

(a) With regard to maintenance issues, reporters had to explain two key distinctions. These distinctions had to be drawn between ‘maintenance’ and ‘improvements’ on the one hand, and ‘substantial’

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to reserve the right to add new storeys to the top of existing apartment buildings (derecho de sobreelevacio´n), although this has been frowned upon by commentators.

(d) The descriptive formants for the requirements relating to the termination of a condominium scheme again include the preliminary deliberations on the introduction of condominium legislation and the provisions of the legislation itself; the applicable provisions of the legislation on associations (including non-profit associations); the provisions of the Civil Codes on the dissolution of juristic persons; and the private autonomy of developers to add suitable covenants in constitutive deeds. Interestingly, South African literature has opened the door for condominium schemes to be terminated on the ground of mere obsolescence irrespective of any physical damage or destruction of the building.

Metalegal formants

(a) Condominium legislation imposes an obligation on the collectivity of owners, generally organised by way of a management corporation or association, to repair and maintain the common property and common facilities. This reflects the importance of ensuring that common property is kept in good condition on a regular basis and is kept in line with technical developments. This will secure the value of the condominium development in the interests of owners or unit holders and their mortgage creditors.885 If the condominium building and its common facilities are not regularly maintained, its condition could deteriorate to the point where the marketability of units is jeopardised. It is therefore imperative that a reserve or sinking fund is put in place to cover repairs, maintenance, replacements and renewals.886

In practice, however, owners and in some cases even owners’ associations adopt a somewhat laissez faire attitude towards maintenance. This is particularly the case in small apartment buildings consisting of two or three apartments, where maintenance duties are often neglected and frequently not carried out in accordance with the by-laws. In larger apartment schemes, monthly contributions to reserve funds for long term maintenance and renovations are frequently set far too low in order to keep monthly levies down. This tends to result in disputes when, after a certain number of years, expensive repairs (such as repairs to a leaking roof) become imperative.887 In Slovenia, owners who cannot afford to contribute towards the cost of maintenance often

block decisions that are likely to involve an increase in their own financial burden. Consequently, many older apartment buildings in Slovenia are in a very poor state of repair. The legislator introduced a requirement for a mandatory reserve fund in 2003 to force apartment owners to make provision for future long-term maintenance and repairs. However, the minimum contribution, regulated by ministerial decree, is in many cases too low to achieve the intended result. New measures may well be necessary to prevent apartment buildings from degenerating into slums.

The owners in upmarket schemes in South Africa take for granted that maintenance should encompass the updating of obsolete materials in line with technological advances. In low-cost schemes populated by financially insecure owners, the general trend is to keep maintenance costs as low as possible and even to elect owners who share this philosophy as members of the management board. This is dangerous and could ultimately lead to the deterioration of apartment schemes. For this very reason the 1999 amendment of the Spanish condominium statute imposed administrative sanctions on owners who oppose or delay necessary repairs. Such owners may also be held liable for any damage caused by the delay in implementing the repairs.

Uniquely, Greece requires unanimous consent for carrying out necessary repairs. This leaves such repairs to single owners who may subsequently claim contributions from the other owners. The danger with this approach is something of a free-rider problem; most owners will be happy to reap the benefit of the repairs but will be reluctant to contribute towards their cost.

(b) Regarding the installation of a lift, the Norwegian report observes that the purpose of a condominium scheme could be regarded as solely involving the ‘passive’ management of the existing scheme, and not involving any new activities, additional investments or risk-taking. On the other hand, the opportunity to upgrade the status of the scheme in line with current general economic, technological and societal developments should be catered for. The legislator has tried to strike a balance by requiring a special majority for measures exceeding ordinary maintenance and management, and by introducing general rules with regard to minority protection.

Consequently, condominium legislation recognises that with the passage of time, improvements, alterations and renovations to the scheme may be required. Mindful of the fact that some owners may not have sufficient funds to pay for certain types of alterations, improvements can only be undertaken if approved by a special majority or a

can be justified in light of the actual benefits received from the so-called improvements. Furthermore, if an improvement benefits certain owners more than others, every unit owner may petition the court to allocate the costs for such improvements on a fairer basis. It is worth noting, however, that despite the above-mentioned exception, there is no exception for loan financing for an improvement where this goes beyond the scope of regular maintenance.

(c) Only a select number of jurisdictions permit the establishment of exclusive use areas on the common property in favour of one or more owners, and do so in a very haphazard manner. In order to create certainty, such a right should be given property status and should be capable of registration in the land register, as is the case in South Africa. This is not the case in England; although limited use areas must be entered in the commonhold community statement and thus form part of the registration documentation, they appear to be revocable rights equivalent to licences, rather than proprietary rights equivalent to easements.

Before such rights can be established the owners or unit holders who do not derive any benefit from the solarium would have to be appeased. In all likelihood the support of the other owners for a unanimous resolution required to install the solarium will only be obtained if the future beneficiaries agree to pay the cost of the installation as well as some kind of remuneration to the other owners together with the cost of future maintenance of the exclusive use areas.889

(d) As condominium regimes are ordinarily taken to be permanent institutions, extremely high hurdles must be overcome to cause their termination.890 The archaic method of making termination of the scheme dependent on destruction of or damage to the building891 is unrealistic. The only realistic option that remains is a unanimous resolution to terminate the scheme, or alternatively the consent of all the owners obtained in some other way.892 Even this has been

889If the management body establishes a number of new exclusive use areas by virtue of a unanimous resolution under the South African legislation, it would in practice auction the various exclusive use areas to the owners in the scheme. The proceeds would be used to fill the coffers of the scheme. See also the Greek report.

890English and Estonian reports.

891This may be caused by natural disaster, terrorist activity or even extreme vandalism.

892The other alternative ground for termination, namely, the sale of all the units to a developer, also requires the cooperation of all the owners.

For example, if the costs of the intended alteration are neither covered by the reserve fund nor financed solely by the sectional owners who are in favour of the alteration, there will be legitimate grounds for challenging the resolution.894 They can furthermore claim that they would be unduly adversely affected by the intended alteration. In such scenarios, it is ultimately up to the courts to consider conflicting interests at issue and to come to a decision of whether the measure decided upon can be carried out.

(c)The installation of a solarium on the roof of the building for exclusive use by the owners of the top floor would constitute a measure of extraordinary management and would thus require support from the majority of owners calculated by share value. As the owners of the top storey wish to use the solarium exclusively, they are faced with two (fairly unattractive) options. One would be to obtain the consent of all the other apartment owners. The other option would be to seek an order of the court allowing the alteration, based on a unit owner’s right to alterations to the common property in terms of the Law on Apartment Ownership (§ 16(2)). This would be difficult for the measures mentioned, as examples are mostly modern technical measures benefiting all the apartment owners.

(d)The termination of the scheme by demolition of the building requires the consent of all the owners as well as holders of registered real rights in the scheme (§ 35(1)).895 The remaining property, namely, the parcel of land on which the building was formerly erected, would be owned in undivided co-ownership shares (schlichtes Miteigentum) by the former apartment owners (CC §§ 825 ff.) and the provisions of the Law on Apartment Ownership will no longer apply. It will, however, be possible to re-establish a condominium if a new building is constructed on the land.

Metalegal formants

If the structural alteration can be said to constitute mere maintenance, it can, as explained in Case 3, be carried out by the manager alone without the need for a corresponding resolution of the body corporate.896 In practice, managers nevertheless do tend to obtain a resolution for more substantial maintenance measures.

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Belgium

Operative rules

Resolutions regarding alterations or works related to the common parts of the scheme, except for those that fall within the competence of the manager, must be approved by the owners’ association in a general meeting with a three-quarters majority (CC art. 577-7 § 1 no. 1b). The manager has the authority to undertake measures of conservation and provisional management (art. 577-8 § 4 no. 4).

There are no specific provisions about groups of owners who wish to force through a resolution that is not approved of by the required majority, other than the general rule that any owner can seek the permission of a judge to carry out urgent and necessary works (art. 577-9 § 4 par. 1). In conformity with the principle that no person may abuse his rights, abuse of minority or majority positions will be argued if the advantage gained by a provision is manifestly disproportionate in relation to the disadvantage caused to others.

Under a new provision introduced by the 2010 reforms, a condominium consisting of at least twenty units may establish a subsidiary owners’ association for each individual building within the scheme (art. 577-8/1). In fact, it is even possible to create separate subsidiary associations within the same building where separate areas of the building can clearly be distinguished physically. These subsidiary associations have power over specific common parts referred to in the deed of subdivision, and do diminish the main association’s exclusive competence with regard to the common parts that are general to the entire scheme (art. 577-3 par. 4). The creation of subsidiary associations can sometimes be helpful in practice to establish coalitions between groups of owners (see Part III).

(a) Repainting the building is usually seen as a normal alteration of the common parts of the scheme, as the exterior walls are part of the common property. Therefore, a three-quarters majority is required (art. 577-7 § 1 no. 1b). In the unusual case that there is an urgent need to repaint, for example, to save the fac¸ade from disintegration, repainting can be seen as a measure of conservation or of provisional management, which can be authorised by a normal majority of the owners present at the meeting (art. 577-6 § 8). In such a case the manager is also allowed to act alone, without preceding approval of the owners’ association (art. 577-8 §4 no. 3). As said, any owner can seek the permission of a judge to carry out urgent and necessary works (art. 577-9 § 4 par. 1).