New law on jointly owned buildings

To avoid misunderstandings, we must recognize that there is currently relevant legislation regulating jointly owned buildings, which, however, has significant drawbacks.

The first problem:

There are often difficulties in collecting common charges from owners who do not pay on time. Collection requires filing a lawsuit through the courts, through a civil action, which is a long and costly procedure for any Management Committee (MC).

Penalties.

According to a recently introduced bill currently being debated in the House of Representatives, the MC may collect a fine from an owner who owes common charges. A new Agency to be established at the level of the respective municipalities (the Agency) would be authorized to impose an administrative fine on the owner. The Agency will be able to sue the defaulter by filing a civil or criminal action. In order for the debtor to present a defense in a civil case, the debtor will have to first pay the utility debt, either to the court clerk or to the MC, and then hire an attorney to prepare a defense. The UC would be able to restrict the debtor's rights by denying the debtor the ability to restrict access to his property. This provision of the law requires further explanation. Namely, what exactly will the MC be allowed to do to pressure the debtor to pay?

The new bill would require the Registry of Real Estate to provide a certificate of common expense before authorizing a real estate transfer.

Capital Improvement Fund.

Another problem is that there is no provision in either the existing legislation or the draft law for the establishment of a capital repair fund. Currently, only a small fraction of buildings have an established capital improvement fund used to raise money to be used for major building repairs such as roof insulation, elevator replacement, entryway improvements, and maintenance (repairing major cracks, painting, etc.) of the building's exterior envelope. It is much easier and more prudent to have a significant amount of money in the building fund at the time of a major repair than to require owners to give away a significant amount of money in a relatively short period of time when the need arises. We believe that new legislation should mandate the creation of a capital improvement fund.

The main problem.

But what seems to be the biggest problem? Perhaps the biggest flaw in the new bill is the lack of a requirement for transparency through regular and reliable provision of information to owners from the MC. In the existing legislation, there is a general requirement for quarterly provision of information, whereas the Bill provides for provision of information either twice a year or annually during the Annual General Meeting of owners.

The bill changed the allocation of common costs so that only 40% covered and 20% uncovered porches are included in the calculation of total unit area. It is clear that owners in jointly owned buildings retain the right to set their own Regulations in deviation from the Standard Regulations that accompany the legislation. This means that owners with a 75% majority can change the provisions of the Standard Rules. The new bill improves the procedures, rights and responsibilities of participating owners and the MC in the event of a problem in connection with another unit or in common areas.

Record Keeping.

The bill transfers the control of jointly owned buildings to the distributive body of municipalities instead of the Real Estate Registry, which is the current procedure. The involvement of the Real Estate Registry in the problems of jointly owned buildings has so far been almost negligible. We hope that the new Agency, within the municipalities, will be able to fulfill its mission so that problems such as the absence of a Management Committee, delayed payment of utilities by owners and timely repairs will find their solution in a short time.

We should emphasize that the bill requires Management Committees to secure a certificate of building suitability from consultants (sort of like a technical building inspection), which is also a requirement of other citizen safety legislation.

Co-owned buildings will be required to register with the Agency's registry and inform it annually about the establishment of a Management Committee, paying the corresponding annual fee (20 euros).

In conclusion, the new bill offers some solutions to the main problem of non-collection of general expenses. The second major problem, the lack of transparency in providing correct and timely information, is not addressed by the new bill and is something the House of Representatives should correct during the debate on the bill. Our final concern is that with the increased duties and responsibilities of MC members, it is likely that owners will have little or no interest in participating in Management Committees. Our suggestion is that all owners should be appointed as UC members by law, but for practical reasons a small group of owners should act as the UC Executive Committee.

About the author: George Mouskides is a director of FOX Smart Estate Agency and chairman of the Cyprus Property Owners Association.