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Maintenance Agreements - article

Discussion in 'Bulgaria Property' started by Jain and Chris, Mar 26, 2008.

  1. Jain and Chris

    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.
     
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