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Management of an apartment building: what should the part-owner choose???
In 2015 the legislation regulating intercourse in the sphere of realization of property rights in an apartment building underwent significant changes. There was adopted the Law of Ukraine “About peculiarities of realization of property rights in an apartment building” of 14.05.2015 No. 417-VIII (hereinafter referred to as – Law). In this Law one can find the innovations the main purpose which is creation of a mechanism of taking decisions on maintenance of the common property in an apartment building and management of this property by its part-owners. Also, this very Law together with the effective legislation of Ukraine regulating the institute of the part-owners’ association of an apartment building, made certain changes. In particular, the Law clearly determines some other methods (forms) of management of the common property in an apartment building, compared to the ones stipulated by the Law of Ukraine “About association of the part-owners of an apartment building” (hereinafter referred to as – Law about APOAB), namely: By the part-owners cumulatively, without establishing of APOAB; By the part-owners cumulatively, by way of establishing of APOAB; By way of delivery of all or some part of the functions on the basis of the agreement to a physical person-entrepreneur or a legal person (manager). By reference to generalization of the innovations, the part-owners of the building have the right of managing the common collective property in all cases. All or some part of the functions on the management of an apartment building may be delivered to the manager or all functions – to the part-owners’ association of the apartment building (common association of the part-owners of the apartment building), according to the decision of the part-owners. Thus, part-owners now have the right to: decide all questions on the management of the building at their meeting individually (Article 10 of Law); create part-owners’ associations of the apartment building and deliver them all functions on the management of the building (in the order established by Law about APOAB) deliver all functions on the management of the building to the manager, on the choice of the part-owners: to a physical person-entrepreneur or to a legal person; partially to deliver the functions on the management of the building to the manager, and partially to leave some functions for themselves, with a predetermined condition that the decisions must also be taken at their general meeting. Let’s stop on each of the forms of building management separately. The first form of management – an individual (realized by the part-owners) management of the building by way of meeting gatherings. The indicated form of the common property management realization in an apartment building foresees that any decisions on the management are taken by the part-owners by way of convocation and conduction of the part-owners’ meetings. According to Part 3 of Law, meetings of the part-owners may be convocated by an initiative group comprised in the not less than three part-owners or the manager. Powers of the part-owners’ meeting. Law determines that meetings of the part-owners are allotted with the powers to take decisions on all questions of management of the apartment building, including, on such questions as: 1) disposition of the common property of the apartment building, on establishing, changing and removing of limitations on using it; 2) determination of the manager and recalling him, approval and changing of the agreement terms with the manager; 3) election of an authorized person (persons) of the part-owners for completion, making changes and cancellation of the agreement with the manager, monitoring the fulfilment of its clauses; 4) determination of the manager’s powers concerning management of an apartment building; 5) arranging of current and capital repairs, reconstruction, restoration, technical re-equipment of the common property of an apartment building and choosing of subcontractors for performance of such works; 6) determination of the date and place for arranging of the next part-owners’ meeting; 7) determination of the list and size of expenses on the management of an apartment building. Taking decisions at the meeting of the part-owners, according to Law, proceeds in the following way: First, the initiative group or the manager informs the part-owners about arranging of a meeting. The notification about the date and place of a meeting is given not later than 10 days before the date of the meeting gathering to every part-owner against signed receipt or by mail, as a registered letter on the address of the flat or a non-residential premises belonging to the part-owner of an apartment building. Also, this notification is obligatory put up in every entrance of an apartment building. The notification must contain the information about the initiator of the meeting gathering, date, place, time of the arranging and about the agenda. Together with the notification about arranging of the part-owners’ meeting, any additional materials or information which will be the subject matter at the meeting may be added too. The next stage of taking decision procedure on meetings is their immediate taking at a meeting. A decision is considered taken by the part-owners’ meeting, if it is voted by the owners of flats and non-residential premises the area of which exceeds 75 % of the general area of all flats and non-residential premises of an apartment building. If they decide an issue of choosing the manager or election of an authorized person for completion, making changes and cancellation of the agreement, then, for taking of such decisions it is enough, when they are voted by the owners of flats and non-residential premises the area of which exceeds 50 % of the general area of all flats and non-residential premises of an apartment building. If at time of a part-owners’ meeting gathering they don’t get the necessary number of voices for taking the decisions, then, they conduct a written questionnaire of the part-owners who did not vote at their meeting. A written questionnaire is carried out during 15 calendar days from the date of a meeting gathering of the part-owners. If during 15 calendar days the necessary number of voices is not got, the decision is considered untaken. The order of the questionnaire arranging is determined by Part 8 of Article 10 of Law. The next stage of taking decision procedure on meetings is documentation of the decision taken. Fixation of the decision of the part-owners’ meeting proceeds by way of drawing up a protocol which is signed by all of the part-owners (their representatives) participating in the meeting. The protocol is signed by every part-owner under the chosen voting option (‘For’, ‘Against’ or ‘Abstain’). The protocol form is established by the central executive body of Minregionbud and established by its Order of 25.08.2015 No. 203. In the protocol the following is to be indicated: surname, first name and patronymic of the part-owner, the document justifying the right of property on a flat or non-residential premises, number of the flat or non-residential premises, the general area of the flat or non-residential premises, the document which gives powers on voting, in case of delegation the last by a part-owner. If it goes about choosing of the manager or election of an authorized person of the part-owners for completion, making changes and cancellation of the agreement with the manager, then, the protocol of the part-owners’ meeting is drawn up in двух copyах (Part 9, Article 10 of Law). It is also predetermined that one copy is given in escrow to the manager, and the second one is given in escrow to the authorized state authorities on the state registration on location of the apartment building. The authorized state authorities must post the resultative part of the decision taken by the part-owners’ meeting on their official website. The order concerning storage of protocols of the part-owners’ meetings by the executive boards of the village, community or town councils and posting of them on the official website of the corresponding council are determined and established by the Resolution of the Cabinet of Ministers of Ukraine of February 24, 2016 No. 109. The next stage of taking decision procedure on meetings is making notifications about taking of the decision. A notification about the decision of the part-owners’ meeting is presented to every part-owner of the apartment building in a written form not later than during 10 days from the moment of its taking. Furthermore, the notification is placed open to the public in every block and at the entry. A decision of the part-owners’ meeting is compulsive for all part-owners. Considering the analysis of the very procedure of taking decisions on such form of management as an individual (realized by the part-owners) management of the building by way of arranging meetings, one can conclude that this form is rather complex and needs a great quantity of efforts for its realization, and implementation of the very this form of the common property management makes sense only in the buildings with not a great number of flats, where all neighbors are permanent inhabitants and know each other not one year long. Association of the part-owners of an apartment building (hereinafter referred to as – APOAB) or a managing company. Now, let’s consider these two modes of management of an apartment building (of a common property). For a better illustration, we’ll do a comparative analysis of the indicated forms of management with a simultaneous presentation of risks and positive aspects. APOAB – it is a legal person created by the owners of flats and non-residential premises of the apartment building for assistance in using of their own property and in management, maintenance and using of the common property. The goal of the association lies in realization of the part-owners’ rights on ownership and use of the common property, maintenance of an apartment building and the building surrounding grounds, getting assistance in having qualitative housing and public and other services on reasonable prices and fulfilment of responsibilities (obligations) by the part-owners as owners of the property in the apartment building. It’s worth noting that, in accordance with the effective legislation, APOAB is a nonprofit organization which doesn’t make it a point to receive profit and distribution of the last among all part-owners (Article 4 of Law about APOAB). Under the notion of a manager it shall be understood a physical person-entrepreneur or a legal person (a subject of an entrepreneurial activity) who, on the basis of the agreement with by the part-owners, is imposed with a responsibility as for repairу and a proper maintenance of the common property of the part-owners of the apartment building and the building surrounding grounds of the indicated building and appropriate conditions of living and satisfying of their domestic, household and practical needs (Part 1, Article 1 of Law). Conclusion: APOAB and a managing company are absolutely different on their judicial character of functioning. APOAB is a non-commercial, nonprofit legal person with the goal that the joint owners themselves should perform the functions in a special form what concerns management of the building in modes optimal for the part-owners, with the least possible expenses, and the manager (managing company) is a subject of an entrepreneurial activity with the goal of its activity to receive profit what can’t, but affects the types of activity, owing to which this goal is achieved. Certainly, one shouldn’t equate all managers in an indiscriminate way and make conclusion that quality of the provided services will be sacrificed for the sake of use. But, one shouldn’t forget that it will undoubtedly affect the cost of these services. As they said one day in England – what is good can’t be cheap. Furthermore, mediation – it always means an increase of the service cost and necessity from the side of the part-owners to perform an additional control. APOAB is created by the owners of the flats and non-residential premises of an apartment building, or in several apartment buildings. For an organizational meeting it is needed, first of all, availability of properly registered property rights of more than 50 % of the flats and non-residential premises of the building (buildings). For establishing of this organ an organizational meeting is convocated. By decision of the general meeting, the functions on management of an apartment building may be delivered to (all or partially) the manager. If the functions on management of an apartment building, on the decision of the common association meeting, are delivered to the manager, the management intercourse is subject to the agreement concluded between the association and the manager, the terms of which must correspond with the terms of the model agreement adopted by the central executive body that provides formation of the public housing policies and policies in the sphere of housing and community amenities (Article 13 of Law No. 2866-III). The agreement with the manager may be concluded on a corresponding decision of the part-owners, notwithstanding the fact exists APOAB in the building or not. Conclusion: the way of electing one of two last forms of management by the part-owners of the common property is the same – taking of the decision by the general meeting of the building. The difference is that the main document which is used by APOAB in its activity is a statute, and in case with the manager the main document is the agreement of management. Also, a positive factor of APOAB is the fact that the statute is subject to checking by the public registrar where the elected leader of APOAB has to submit it after approving at the general meeting of the part-owners, and in case with the agreement of management, the manager (a managing company) doesn’t have such a duty, but has more possibilities for inclusion of the provisions which will not meet the interests and wishes of the part-owners. Now every part-owner of a flat or a non-residential premise in the building is considered to be a member APOAB. A general meeting of the part-owners of the building is the supreme body of APOAB management. Decision of the general meeting is compulsive for all part-owners. Management of an apartment building by the manager is realized on the basis of the agreement about delivery of services on management of an apartment building. The terms of this agreement must correspond to the terms of the model agreement adopted by the Cabinet of Ministers of Ukraine. Thus, the significant terms of this agreement are: 1) list of services; 2) rights and obligations of the sides; 3) price on services; 4) term of validity of the agreement. Conclusion: Thus, there is a member intercourse in APOAB among the equal part-owners and they take the crucial decisions on management of the building. In the same time, in case with the manager (managing company), the agreement groups of the part-owners (or APOAB) and the manager lie in the basis of all processes. Herewith, for a particular part-owner in the second case the possibilities of participating in management may be significantly limited, depending on the functions of management delegated on the agreement to the manager. Certainly, even in case with APOAB, the part-owners can’t consider themselves protected of some swindle occurrences from the side of APOAB administration, however, the possibilities of influence on the manager (managing company) are all the same less, whereas, the manager is not reelected, and for cancellation of the agreement some time and resources are needed. Law discovers the main rights and obligations of the part-owners in Articles 15 and 16. However, this list isn’t complete, it may be extended by the Statute of APOAB or detailed on the agreement with the managing company depending on the form of management chosen. Conclusion: the base stock of the rights and responsibilities leaves unchanged, however, their additions and detalization depends on the legal literacyи of the concluded Statute of APOAB or the agreement with the managing company. The activity of APOAB receives its normative consolidation in the Civil, Housing and Land Codes of Ukraine, with the profile Law No. 2866-14 and No. 417-VIII and other regulatory legal acts and statutes. What concerns the managing company activity, it is regulated by analogous acts, and APOAB, as well as with the acts of the corresponding enterprises. Conclusion: whereas, the goal of the manager lies in receiving profit, then, a substantial volume of the legislation is spread on his activity too. Introduction of the control measures on observation of the legislation by the manager is reasonable, namely, of the provisions of tax, competitive and other regulatory acts, in order to avoid any violation cases from the side of the manager. Control on fulfilment of the incumbent responsibilities plays a very important role. The agreement determines the main forms of control. Some of them are an authorized genеral meeting of APOAB, as well as separately created organs in accordance with the Statute. Conclusion: the main difference is that, in case of performing management by the managing company, the control side is the part-owners of APOAB or the persons authorized by the meeting, and, in case of performing management by APOAB, it will be immediately the part-owners who realize their own rights. Thus, we can see that in any case the part-owner of an apartment building is the first subject of management. Analyzing the peculiarities of APOAB and managing company activity, one may make conclusions on the following: Firstly, the main factors of effectiveness of each of the abovementioned forms of management is the part-owners’ activity, an economic and legal familiarity, as at establishing APOAB, so as at the stage of agreement with the managing company. Also, the great role is played by the quality control level on delivering services on management, responsibility and professionalism of the persons authorized for the management performing. Secondly, whereas, APOAB doesn’t have the goal of profit receiving, then, at choosing of this form of management some minor expenses on maintenance of the building and the territory may be achieved. APOAB is a form of the part-owners’ self-organization, that’s why, the character trait is a large-scale transparency of its activity. However, nobody should forget about a humane factor, namely, a corrupt practice of the authorized persons for an individual benefication. Thirdly, in case of management by the managing company, it’s reasonable to make a thorough examination of the scope of services and the expenses on them, as well as to give a judicial estimate of the agreement. It’s worth noting that in accordance with Part 5, Article13 of Law No. 417, if the part-owners didn’t choose any of three forms of management, then, the manager is appointed by the executive local authority organ individually, on a competitive base. It may be supposed that in such conditions the building may not get any significant improvements, hence, the part-owners are advised to decide regarding the form of management of the building and to start implementing their right of property into life and for its own benefit. If you, as part-owners of an apartment building, chose such form of management, as APOAB, it should be made a halt once more on the main stages of its establishing: Create an initiative group (from 3 part-owners of the residential / non-residential premises of the building) and make a plan of actions on a preparatory work for establishing of APOAB; Conduct a preparatory work on establishing of APOAB: spread the information about APOAB, talk to the inhabitants and explain the preferences of APOAB establishing, adduce examples about the already existing progressive APOABs, hold meetings with the inhabitants concerning their attitude to establishing of APOAB in your building; get the list of all residential / non-residential premises’ part-owners of the apartment building with an indication of the area size of their residential / non-residential premises; (Important – a request on receiving the list of all part-owners of the apartment building is sent by the initiative group (a copy of the protocol about creation of an initiative group is attached to the request). If the building is old, you may address to the municipal housing committee office or Technical Inventory Bureau, if it is new (built after 2012), then, to the authorized organs of the public authorities and local self-government. Prepare the statute of the future APOAB. You should know that your statute must be created in accordance with the model statute and the approved the Order of Derzhzhytlokomunhosp of 08.2003 No. 141. But, remember that you may add other provisions to your statute which will regulate the activity of your association. The main thing is that these ‘other provisions’ must to be in agreement with the requirements of the current legislation, hence, we advise to make such changes after consultation with the lawyer. Send the final version of the statute on e-mail to all part-owners of the residential / non-residential premises, so that they had a possibility to get known with the Statute and add their remarks / corrections; Send an invitation on an organizational meeting to all who is in the list of the part-owners of the residential / non-residential premises. The body of the invitation must contain the information about the day, time, place and agenda of the arranged organizational meeting. The invitation should be sent not less than 14 days before arranging of an organizational meeting, as a registered letter, or given in personally against the signed receipt. Conduct an organizational meeting in accordance with the agenda. Integrate the whole information about arranging of an organizational meeting into the protocol of the organizational meeting. Decision on the issue of voting at the organizational meeting is considered taken, if it is voted with “for” by more than 50 % area of the residential / non-residential premises belonging to the part-owners of your building. If the agenda’s decision more than 50 % area of the residential / non-residential premises belonging to the part-owners of your building didn’t enter ‘For’, you have 15 days for arranging of a written questionnaire. A written questionnaire is carried out with the help of leaflet-questionnaires. There is no a model form of leaflet-questionnaires Established by the Cabinet of Ministers of Ukraine, but we have worked out it for you, in accordance with the provisions of Law of Ukraine “About peculiarities of property rights realization in an apartment building”. The written questionnaire is carried out by the initiative group or the willing part-owners of the residential / non-residential premises of your building. Interrogate only those part-owners who did not vote at the organizational meeting. Contribute the questionnaire results to the protocol of the organizational meeting and summarize the general totals on all questions. All decisions on which the part-owners voted ‘For’ of more than 50 % area of the residential / non-residential premises of your building are considered taken. Separately it’s worth noting that: In accordance with Article 6 of Law about APOAB, the state registration of a joint society (association) is carried out in the order established by the Law for the state registration of legal persons. A joint society (association) is considered to be established from the day of its state registration. The state registration of a legal entity is carried out by the public registrar on location of the legal entity. Consequently, for arranging of the state registration of the new associations of the part-owners of apartment buildings, the founder (founders) or a person authorized by them must submit the documents stipulated by Articles 24-27 of Law of Ukraine “About registration of legal persons, physical person-entrepreneurs and public organizations” to the public registrar on location of the legal entity. P.S. Numerous legal collisions, foot-dragging and shortcoming of the current legislation, is still at the stage of maturation to the requirements of a developed democratic society, a corrupted bureaucracy which has just begun conducing to a quick decision of issues at the stage of APOAB establishing and at realization of the property owners of their own rights. The specialists of our company have got an adequate experience on both questions of establishing, and registration of APOAB. We’d like to remind that attraction of professional lawyers is always a guarantee of a qualitative and secure existence condominium.