Preserving the value of your asset
Frequently, we are called upon to advise clients on the maintenance and upkeep of the common areas of the building complex to which their property belongs. Typically, we come across the situation where a buyer of a new property in a building complex, who after taking possession is ‘obliged’ by the vendor (usually the developer of the project) to sign a ‘management’ agreement, so that the management and upkeep of the complex’s common areas, are assumed and undertaken by the developer or a third party maintenance company appointed by the developer.The developer’s intentions may be well meaning. It is only natural for one to want to protect and preserve one’s creation, but the law intends and envisages otherwise. The law does not permit the developer or the person who built the project with common areas to assume that it can control its management and upkeep. Even worse, a development may be delivered to its rightful owners and thereafter no one shows any interest in ensuring that the development is maintained and kept in an acceptable state.
Moreover, we frequently hear of complaints by owners of units in a building complex questioning the lack of a management committee in place, or the bad maintenance or even the lack of value for money of such maintenance. Matters become untenable when a building remains uninsured for its true value, or falls into disrepair to such an extent with the potential to affect the health and safety of the owners, their tenants and visitors to the building complex.
- The facts and the law
According to clear provisions in the Immovable Property (Tenure, Registration and Valuation) Law Cap 224 every building complex with common areas is required by law to have a management committee for the management of its affairs and rules and regulations regulating rights and duties of each unit owner.
The term ‘owner’ is not limited to title deed holders but includes persons entitled to be registered as title deed holders. This means that the purchaser of a unit within a complex is the owner of the particular unit for the purposes of the law.
- So, what are the owners’ rights and basic duties under the law?
The owners are bound to call, each year, the annual general meeting of the owners of the units which form part of the building complex. At the General Meeting the owners must adopt the rules and regulations governing the rights and duties of the owners of the units in the building complex and appoint a management committee which has its own rights and duties. This is vitally important as it is clearly, not the right or the duty of the developer of the building complex to assume the right to charge the owners maintenance fees each month. Therefore,private maintenance agreements signed by a developer and each and every owner individually where the developer charges the owners for the maintenance and upkeep of the common areas, is an illegal practice in the eyes of the law and as such not enforceable. Simply put, under such an arrangement, if the buyer refuses to pay, or fails to do so the developer cannot sue for recovery of the maintenance fees. Similarly, the vendor of the property cannot set the fees payable by each owner for the common expenses. Consequently, the nonpayment of maintenance fees can be highly damaging to the appearance and functionality of the common areas of the building complex.
According to Cyprus law, the Management Committee as a ‘legally recognised body’ is the only body that can demand contribution to the maintenance and upkeep of the project, and take legal action, against any nonpaying owner of a unit. Consequently, it is only the Management Committee that can enter into agreements with companies involved in the maintenance of buildings, swimming pools, gardens, lifts etc and no one else.
Within the year, and if called correctly, any owner or group of owners may request the convening of , with adequate notice, what is known as an ‘ad-hoc general meeting of the owners’ to discuss and decide upon any matter which concerns the common areas of the building complex.
- Distinction from a management company
A management company (a limited company) cannot replace the management committee of a building complex. A management committee is allowed to appoint the services of a management company to deal with the day-to-day operations of the building complex. The cost of these services is considered a common use expense. The management committee has the duty to agree to reasonable remuneration for such services, which shall then be apportioned according to each owner’s share in the common use areas.
- Expenses are a shared cost
By law the owners of all units are obliged to share the expenses for the insurance, maintenance, repair and management of the building complex. The share in common use expenses is determined on the basis of the area of each unit and not on a flat rate. So, a person who owns a larger apartment in an apartment block is bound to pay a larger proportion of the monthly maintenance costs of the common areas than someone who owns a smaller apartment.
- Applicable regulations
Standard regulations or custom regulations.
The law provides that the owners under certain conditions, can adopt their own rules/regulations if they wish but in order for these to apply, they need to be registered at the Land Registry. The rules/regulations adopted cannot contradict the law, Cap. 224.
- Benefits of having a correctly established management committee:
Adhering to the provisions of the law ensures that the complex is safe, clean and maintained, which will have a positive effect on the value of the individual units (apartments, houses, shops).
A badly maintained building complex will reduce the value and salability of any unit in the complex, however well maintained the interior of the unit may be.
The owners can determine budgets for the maintenance and upkeep of the building complex.
The management committee may hire and fire any third person it has contracted to maintain any part of the common areas of the building complex. So, if the swimming pool is badly maintained the elected management committee can break the agreement, provided it does so in accordance to contract law.
The management committee is accountable to the owners and is voted in by the owners. Consequently any breach of trust by the management committee can mean that it can be removed by the owners.
The management committee can take legal action to recover maintenance contributions from any owner failing to abide by his/her legal duties. No other body can take legal action in such a case.
The management committee on behalf of the owners can raise a contingency fund for future needs of the common use areas of the building complex.
- How can we help you?
The above is a basic commentary and overview on the provisions of the relevant law Cap 224. Our team is ready to assist the owners of developments with common areas however big or small. We undertake to correctly convene general meetings of the owners, establish management committees, form the rules and regulations, prepare agreements with the maintenance companies and advise on legal rights against owners who are failing to settle their maintenance fees or to defend those who believe they are being unfairly treated. In addition, we can advise on the transfer of power from the developer to the owners, so this is done amicably and as seamlessly as possible.