New law regarding co-property

On 1 September 2010, the law of 2 June 2010 amending the Civil Code in order to modernize the functioning of co-ownership came into force, at least a major part of it. The legislator has chosen to preserve the philosophy and basic structure of the law of 30 June 1994, but wishes to put an end to certain discussions that were raised and to solve certain practical problems that had occurred.

The most striking innovation is the ability to create subgroups of co-ownership, either with or without legal personality.
In addition, some principles of Corporate Governance are introduced within the internal organization of the association of co-owners, such as strengthening the position of the co-owners in the relationship between the building manager and the co-owners, making the management of the building manager more transparent, and by subjecting the building manager to the supervision of the Board of Co-ownership and an external auditor.

Hereafter a number of important modifications, but not all, will be discussed briefly.

Division

Because co-properties become bigger and more complicated, there is practical need for the possibility to create "division”, i.e. the division of the common parts in independent legal entities. This happened in practice, until the Supreme Court (Hof van Cassatie / Cour de Cassation) stated, in a decision of 3 June 2004, that "co-owners of groups of buildings bound by the same basic deed are not authorized to establish separate subgroups for separate buildings".

Hence the role and competence of any subgroups established under the old law could only consist in taking preparatory decisions relating to the decisions indentified by the general meeting of the main association and therefore the usefulness of such sub groups was very limited.

By virtue of the new law subgroups with legal personality can be formed, provided that the main association of co-ownership entails twenty lots or more. For a group of buildings this is possible for each building. In a building with a physical division into distinct parts, this is possible per part of the building. The establishment of associations must be regulated in the basic deed. Moreover, the associations are only involved in respect of the private common areas as indicated in the basic deed. The main association of co-ownership remains exclusively responsible for the general common areas and for the issues belonging to the joint management of the co-ownership. Finally, for each sub group, a basic deed and a regulation of co-ownership must be drawn up.

Enterprise number

Henceforth, all (sub-) associations of co-owners with legal personality must have an enterprise number, as any document issued by the association has to mention this number (577-5 § 1 BW).

Although associations of co-owners are deemed to have a company number since the introduction of the Crossroads Bank for enterprises (Kruispuntbank van Ondernemingen / Banque Carrefour des Entreprises), many of them have not yet obtained the aforementioned number, as this number was only granted upon the entry of new articles of association in the public registers, or upon the entry of deeds changing the existing articles of association, in the public registers. If the association of co-owners does not have a company number yet, the building manager or, in its absence, the co-owners have to submit an application without delay.

General Meeting of Co-owners

Each year the co-owners must hold at least one general meeting, which takes place during the period set forth in the co-ownership regulations. A co-owner chairs the meeting and therefore not the building manager, unless the latter is also a co-owner.

In principle, the building manager convenes the general meeting. The convening notice shall state the place, day and hour of the meeting and also the agenda. The building manager shall put all the written proposals of the co-owners, the Council of co-ownership and the sub-associations on the agenda, provided that the building manager has received the above mentioned proposals at least three weeks before the first day of the period as set forth in the co-ownership regulations for holding the General Meeting. The convening notice shall also mention how the co-owners can obtain access to the documents with regard to the items on the agenda to be treated. The co-owners and the Council of co-ownership may at each time inform the building manager of the items to be included on the agenda of the general meeting. Items that are communicated too late are treated at the following meeting.

In order to prevent abuse and to avoid that by leaving the Meeting, the quorum is no longer reached, the attendance quorum will only be assessed at the beginning of the meeting.

The renewed apartment law, however, provides in a number of adjustments with regard to the proxy system. Thus it is stipulated that a proxy can in principle only be used for one general meeting, except if one uses a general or specific notarial power of attorney. Furthermore, no one may accept more than three proxies, unless the total of his votes and those of his agents is limited to 10% of the total number of votes. Moreover, one cannot take part in the vote, even as an agent, with a higher number of votes than the total number of votes of the other co-owners present or represented. In addition, each proxy must contain the name of the agent. Blank proxies are no longer possible. Finally, it should be noted that no trustee or a person employed by the association of co-owners may participate in the deliberations and voting with regard to his task.

In accordance with Section 577-6 § 8 subsection 2 of the Belgian Civil Code, abstentions, blank and invalid votes are no longer considered as votes to calculate the required majority. The foregoing puts an end to the existing controversy under the law of 30 June 1994 and a link is sought with the regulations as applicable in the parliamentary assemblies.

Building Manager

First of all, the relationship between the building manager and the association of co-owners has to be recorded in a written agreement.

Furthermore, the legislator modified the duration of the mandate of the building manager in order to break any existing over-concentration of power. In accordance with Section 577-8 § 1 subsection 3 of the Belgian Civil Code, the mandate of the building manager cannot be longer than three years, renewable, however, by explicit decision of the General Meeting only. The mandate cannot be renewed tacitly. Moreover, the law stipulates that the fact that the mandate of the building manager is not renewed, does not itself give rise to compensation.

By means of the new law, the tasks of the building manager are updated, refined or extended where necessary.

Council of co-ownership and external auditor

By virtue of the new law the installation of a Council of co-ownership is mandatory for associations of co-owners with at least twenty plots. This Council replaces the "management board" and gets new responsibilities. The council, consisting only of co-owners, is responsible for ensuring that the building manager performs its duties properly. The Council must report to the co-owners. To this end the Council may, after having informed the building manager, take note and copies of any piece or document relating to the management of the building manager or the co-ownership. In addition, the Council may receive any other task or delegation of powers, however restricted to specific operations and in time (one year), if the Meeting hereto decides with a majority of three fourths of the votes, except for powers granted by law to the building manager and the General Meeting.

Where the old law did not provide for an external auditor function, the appointment of an external auditor is now compulsory for all co-ownerships. His   task consists in monitoring the financial management of the building manager.

Transitional Provisions

Pursuant to Section 577-14 subsection 2 of the Belgian Civil Code, the current provisions contained in the articles of association, which do not comply with the now applicable legislation, will be replaced by the corresponding legal provisions as from the date of entry into force of the law.`

For some provisions, a transitional arrangement applies, which means that the new legislative changes do not take effect immediately, but will become effective under special conditions.

Finally, the building manager must, within the year following the entry into force of this law ( i.e. 1 September 2010, so before 1 September 2011) submit a version of the existing basic deed adapted to Sections 577-3 to 577-14 of the Belgian Civil Code, the co-ownership regulations and the rules of procedure for approval to the General Meeting.