CATEGORY: PROPERTY – REAL ESTATE
The extent of property rights with regards to an apartment, and the obligations of the owner thereof in respect of the jointly-owned multi-storey building of which the apartment constitutes a unit, are matters which concern a great number of citizens in the course of their participation in the co-ownership of the building, particularly over the last few years in light of the rapid growth in the construction of multi-storey buildings in and around urban areas.
From our professional experience it would appear, however, -and this is something we can confidently attest to- that, not a lot of apartment owners will take the time to research and identify their rights and obligations in the jointly-owned building, prior to the purchase of an apartment.
The present article seeks to provide the reader with the basic knowledge which every owner or interested purchaser of an apartment should possess in order to safeguard his rights, as well the knowledge that must be possessed by the members of management committees in the exercise of the legal responsibilities, powers and obligations they undertake for the administration of a multi-storey building.
The relevant legislative instrument on the matter is the Immovable Property (Tenure, Registration and Valuation) Law, Cap. 224 (hereinafter the “Law”), and more specifically, sections 38A – 38ΛΒ thereof.
Structures considered as jointly-owned
A building is deemed to be jointly-owned, if it comprises of at least five units, notwithstanding that the building itself may be owned by a single person. Whether a building which fulfils the said condition shall be characterised and registered as a jointly-owned building in the land registry, is not a matter for its owner or owners to decide, but rather a legal obligation. Conversely, a building comprising of two and up to four units, is not automatically considered as a jointly-owned building, although it may be so registered in the land registry at the election of its unit owners.
Jointly-Owned Building – Nature of Ownership
The form of horizontal ownership of immovable property created by undivided co-ownership of a jointly-owned building (being the legal terminology used to characterise a building comprising of numerous floors and units – in other words a multi-storey building) is idiosyncratic and dual in nature.
On the one hand it is idiosyncratic as it deviates from the principle of immovable property law enshrined in the latin phrase ‘superficies solo cedit’, meaning that anything situated above the land’s surface belongs to the owner thereof (section 5 of the Law) and has at its core the horizontal division of the building and not of the land. The plot of land on which a jointly-owned building is erected continues to be the subject of undivided co-ownership between apartment owners in perpetuity, depending on the percentage of the share held by each apartment owner in the jointly-owned building, while the provisions of the Law pertaining to the division of ownership of a plot of land owned in undivided ideal shares – which provide for the vertical division of the plot, the right of pre-emption or option afforded to a co-owner for the purchase of a share in the undivided immovable property being for sale etc – are not applicable in the case of a jointly-owned building.
On the other hand, it is dual in nature in that it confers upon the owner of an apartment comprising a unit of the jointly-owned building, exclusive and absolute ownership of the private unit in respect of which he holds a separate title deed, and also undivided, ideal and proportionate share in the jointly-owned property, which is determined by the owner of the plot on which the jointly-owned building is erected (usually a land development company), depending on the value of the unit relative to the total value of all units in the jointly-owned property.
Apartment – Nature of Ownership and Area
Each apartment or unit in a jointly-owned building, belongs to, is occupied and enjoyed by, the owner thereof as private property, in respect of which a separate certificate of registration of immovable property (title deed) is issued following its registration, in the land registry, which includes the details of the unit (usually including, the parking space or spaces and the storage area corresponding to each unit, and the area thereof etc), any limited jointly-owned property exclusively allocated as part of private property (for example roof for the creation of a roof garden or swimming pool), the share in the jointly-owned property corresponding to the unit, as well as the joint rights of co-owners in relation to the jointly-owned building.
The area of an apartment, consists of the covered area surrounded by the apartment’s exterior walls, including covered and uncovered verandas. Common walls between adjoining apartments or between an apartment and the jointly-owned property, are evenly distributed between them. The caselaw of the Supreme Court repeats the provisions of the Law and expressly asserts the position that the exterior walls of an apartment, constitute jointly-owned property and, as such, fall under the administration (but not ownership) of the management committee of the building. For instance, according to caselaw, the installation of a smokestack on the exterior walls of a building, does not constitute trespass on the property of the apartments on the walls of which it was installed. Such an installation would, however, constitute trespass on the jointly-owned property, if it was placed without the previous approval of the management committee, and it would be up to the management committee to commence legal proceedings in case of non-compliance, for the purpose of obtaining the necessary court orders for the trespass to stop.
Each apartment owner may carry out amendments, additions or repairs to his unit without the approval of the management committee or of the other co-owners, provided that the said works shall not in any way affect the functionality or enjoyment of the jointly-owned property by the co-owners thereof, and shall not infringe the rights of the owner of any other apartment.
Jointly-owned property – Rights of Co-owners
Whilst the jointly-owned property is administered by a management committee, it belongs to, is occupied and enjoyed by, all apartment owners in undivided ideal shares. In this respect, any act by the management committee or by a co-owner, pursuant to which the expulsion or exclusion of another co-owner of his property is sought, or the deprivation of his right to occupy his property, constitutes a trespass in his jointly-owned property rights, giving rise to a cause of action against the wrongdoers. The installation of a smokestack on the exterior wall of a multi-storey building was held not to be equivalent to expulsion or deprivation of a right to occupy property. On the contrary however, the installation of stakes on a pavement in a manner as to obstruct the free passage of a co-owner to the building’s parking area, was deemed to be a violation of the said private rights of a co-owner to a multi-storey building, thereby recognising that the latter had a cause of action as against the trespassing co-owner. Of course, in such a case, the management committee in its capacity as the administrator of the jointly-owned property, would also have a cause of action since the trespass would occur on jointly-owned property.
The insurance of a jointly-owned building against the risk of fire, thunder and earthquake is imposed and mandated by law. The responsibility for insuring the jointly-owned building rests with the management committee which decides for the insurance amount in relation to the value of the building’s replacing in case of total loss. In respect of the jointly-owned property’s insurance against any other risk (in addition to the ones referred to hereinabove) the consent of a simple majority of its owners is required, that is a percentage in excess of fifty per cent (50%).
Jointly-owned property – Regulation and Management of its Affairs
It is well known that the regulation and administration of the affairs and matters of a jointly-owned building, fall within the scope of the responsibility and duties of the management committee, the election of which is mandated by the Law.
The control, operation, administration, management and use of the jointly-owned property as well as the relationships between the apartment owners and their rights and obligations in respect of the jointly-owned building, are governed and regulated by regulations which may be registered in the land registry.
Template regulations for the management and regulation of the affairs of jointly-owned buildings are contained in the Law, which apply automatically and are regarded as registered in respect of jointly-owned buildings not having registered custom regulations. In most cases, management committees elect to adopt the template regulations which are included in the Law since the said regulations are quite comprehensive and detailed with regards to the regulation of the affairs of the jointly-owned building, and in so doing, avoid engaging in a time consuming and burdensome process of discussing and drafting custom regulations. The regulations of a jointly-owned building may be amended, revised, replaced or repealed, by a decision of at least seventy-five per cent (75%) of apartment owners.
Management committee – Election
The first management committee of a jointly-owned building is elected, and the number of its members determined, at the first annual general meeting of apartment owners of the jointly-owned building. With regards to the manner of calling of the first general meeting in the absence of a management committee, (since its composition is determined at the first general meeting), the Law does not provide express guidance. Nevertheless, the Law allows for the appointment of a stand-in or temporary management committee, if so requested by the apartment owners who applied for the registration of the jointly-owned building (the number of owners required for such an application is not prescribed in the Law). It is submitted, that this may be the most legally sound and appropriate process for convening and attending the first general meeting for the purpose of electing the first management committee.
In practice, however, the convening of the first owners’ general meeting, which must take place within three (3) months from the date of registration of the jointly-owned building to the land registry in accordance with the template regulations, is arranged and coordinated by the land development company which constructed the building, or by the first owners thereof following an understanding to this end between them or with the assistance and guidance provided by external consultants (such as lawyers or companies offering building administration services etc). At this juncture, the care and diligence which must be exercised by the persons taking the initiative to convene the general meeting cannot be overstated, since the unlawful convening or calling of a general meeting, may result in the invalidation from the outset of the appointment of the management committee and of the actions or decisions taken by the management committee following its appointment. It therefore follows that it is imperative that apartment owners be provided with sound advice and guidance in respect of the actions which they must undertake for the calling and convening of the general meeting.
Management committee – Legal status and task
In the course of managing and regulating the affairs and matters concerning the jointly-owned building, the management committee, which constitutes a body recognised by Law, always acts on behalf, and for the benefit of the owners of the apartments comprising the jointly-owned building, having extensive responsibilities the scope of which is determined by the Law and the regulations concerning the regulation and management of the jointly-owned building.
The main objective, mission and obligation of the management committee is to control, operate, administer and manage the jointly-owned property, taking decisions and doing any deeds or acts which are necessary for the purpose of ensuring conformity with the provisions of the Law and of the regulations governing the management and operation of the jointly-owned building.
Management committee – Powers, responsibilities and obligations
The management committee has the power to bring a claim against any owner, occupant or third person in respect of matters or issues regarding the jointly-owned property, including cases relating to the causing harm or damage to the jointly-owned property, or in respect of overdue contributions towards common expenses owed by an owner. The management committee also possesses the power to enter into contracts in respect of any matter relating to the maintenance and management of the jointly-owned property. In the context of its obligations, the management committee must implement measures and ensure that the jointly-owned property remains in good and functional condition, undertaking the maintenance thereof and of any part, component, fixture or fitting thereof, as well as to enter into an insurance contract for the benefit of the jointly-owned building with a licensed insurance company.
Additionally, the management committee may establish and maintain a fund, which is, in the management committee’s opinion, sufficient for the purpose of covering the expenses relating to the control, operation, management and administration of the jointly-owned property for the payment of insurance premia and for the performance of the responsibilities, duties and obligations of the management committee. The fund maintained by the management committee, is financed by the apartment owners, usually in the form of monthly contributions imposed by the management committee.
Management committee – Management of expenses and owners’ contributions
One of the most important issues arising in the context of the management of jointly-owned buildings, relates both to the obligation of owners to make financial contributions towards covering the necessary expenses regarding the jointly-owned property for the security, maintenance, repair, restoration and management thereof, and to the extent of the said obligation.
It should be noted from the outset, that the proportion of each owner’s share in such expenses, is determined on the basis of the area occupied by each apartment. As has been recognised by caselaw, the obligation of an owner to contribute towards the necessary expenses pertaining to the management of the jointly-owned building in general is absolute and DOES NOT cease to exist nor is it extinguished merely because the expenses in question relate to services or facilities of the jointly-owned building not being used or enjoyed by an owner. To take an example, the owner of a ground floor shop is not released from the obligation to contribute to the maintenance of the building’s elevator, notwithstanding the fact that the elevator is not being used by the said owner or by his customers. In addition, all owners of a building complex being entitled to use a swimming pool located within the building complex, are under an obligation to contribute towards the expenses regarding the maintenance of the swimming pool, despite the fact that they may not, in fact, be using it. Conversely, in the case of co-owners not having a right to use the swimming pool, or in the case of a swimming pool which has been constructed illegally, the owners are under no obligation to make contributions.
The obligation of an apartment owner to contribute towards the necessary expenses regarding the jointly-owned building, continues to apply even in the case where the apartment is occupied and used by a third person, residing in the apartment. Importantly, the fact that an apartment remains unused or vacant for any period of time, does not absolve the owner of the said apartment from the responsibility to comply with every obligation emanating from the regulations governing the regulation and management of the affairs of the jointly-owned building, including contributing towards necessary expenses.
Management committees should be especially cautious when taking decisions resulting in the creation of expenses for the performance of construction works in the jointly-owned building. This is attributable to the fact that not all expenses concerning the maintenance or restoration of the jointly-owned building are recoverable from apartment owners. Any such expenses should be necessary for the maintenance, repair or restoration of the jointly-owned building. For instance, the construction of a swimming pool would not constitute a necessary expense for the purposes determined by the Law.
Similarly, the cost for the performance of refurbishment works in the jointly-owned building in such manner as to satisfy the aesthetic preferences of certain owners, would not be considered as necessary for the purposes of maintenance, repair or restoration of the jointly-owned building.
Management committee – Administration of common areas
Management committee – Term and Financial Reporting
The term in office of the management committee extends to about one year; more specifically its duration spans between the annual general meeting at which it was elected, until the following annual general meeting during which a new management committee is elected. It is worth noting that the annual general meeting of the owners of the jointly-owned building is convened once every year and in any event, within fourteen (14) months from the previous annual general meeting. The decisions of the management committee are taken by a simple majority, whilst the president of the administration of the management committee does not hold a casting vote.
The management committee is under an obligation to maintain statements of income and expenditure and submit them, together with all receipts and supporting documentation, before the annual general meeting of the jointly-owned building for approval. The statements of income and expenditure are subject to inspection by any owner who submits a request to this end, provided that he does so within a reasonable time.
Property Management Companies
In accordance with the template regulations governing the administration and operation of jointly-owned buildings, the management committee may employee persons or representatives and pay to them reasonable remuneration, as the management committee shall deem necessary. It is on the basis of this regulation that, especially in the last few years, management committees resort to the appointment of property management companies, which possess both the experience as well as the means and requisite personnel to enable them to manage the affairs of a jointly-owned building in a more organised, efficient and effective manner.
In certain cases, a false impression or understanding is created among apartment owners, that property management companies essentially replace the management committee in the control, management and administration of the jointly-owned building. In this respect, it ought to be stressed that, property management companies ONLY act as service providers and representatives of the management committee and the extent of the powers vested in them, is exclusively derived from the agreement they have entered into with the management committee. For example, property management companies have no power to bring a claim against an owner of an apartment who has not paid his respective contribution to the jointly-owned building’s fixed fund. This power as well as the right to the cause of action, is solely and exclusively vested in the management committee. In other words, any act undertaken by a property management company, is done for and on behalf of management committee under the instructions of which it operates.
Opinions and Suggestions
To sum up, we are of the opinion that the legislation relating to jointly-owned buildings must be reviewed and updated, having regard to the obvious increase in citizens seeking housing and accommodation in apartments and apartment buildings, many of which now comprise of multiple storeys and a plethora of apartments.
A crucial matter that warrants legislative regulation relates to the stricter supervision of management committees and/or companies providing property management services, for the purpose of ensuring that -in exercising their duties, powers and responsibilities- they conform with and/or act diligently towards the faithful observance of, the building’s regulations, particularly, for the purpose of confirming the structural safety and integrity of the building for the avoidance of accidents, and additionally, towards ensuring that the contributions of owners are not subject to mismanagement or abuse. Yet another matter of grave significance which requires legislative intervention, is the omission or intentional avoidance of payment, by certain owners, of their contributions towards covering the expenses of the jointly-owned property, who often seek to exploit to their advantage, either the fact that they are residing abroad, or the fact that the resources of management committees may not always be sufficient to cover the expenses associated with the commencement of legal proceedings against any such owner etc. Management committees would like to see the Law containing provisions allowing for the imposition of effective enforcement measures on the owner or owners refusing or omitting to pay their corresponding contribution without justification, such as conferring on the Management committee the power to restrict, via the Land Registry, the right of the owner or owners refusing or omitting to pay their corresponding contribution without justification, to dispose of their apartment unless and until all outstanding contributions pertaining to the said apartment are settled in full. Unfortunately, however, at this moment in time, Management committees cannot rely on any legislative provisions to this end.
Suggestions for the updating and improvement of the legislative framework governing jointly-owned buildings are as frequent as they are interminable. Whilst this is an issue that warrants the kind of meticulous analysis that falls outside the scope of this article, our intention is to offer our views on the subject in subsequent articles.
Author: Antonis J. Karitzis