New Belgian property co-ownership law explained

The law of 2 June 2010 strengthens and refines the so-called Apartment Act of 8 July 1924. This law regulates the joint ownership of common parts in real property, such as apartment buildings. The law of 30 June 1994 already brought profound changes in this matter. Practice showed, however, that a number of obstacles remained unsolved: modern means of communications were ignored, more transparency could be required from the property management agency and the democratic functioning of the co-owners general meeting could still be improved. Some of the new adjustments are explained below.

1. Partial associations

In order to ensure a more efficient management for groups of buildings or large co-ownerships and to limit the impact from important conflicts of interest which may arise in such a context, the new law provides a legal basis for the optional introduction of partial associations. From now on, partial associations can be set up with a separate legal personality for common parts which are specifically designated and only intended to be used by some of the co-owners. In addition, a main umbrella association is foreseen for the general common parts intended for all co-owners of the building or group of buildings, and for matters belonging to the common management of the co-ownership.

The conditions for the establishment of such partial associations are as follows:

    * The main association must consist of at least twenty individual parts;
    * A partial association can be established per separate building. If one is established within the same building, physical division must exist in clearly distinguishable components of that building;
    * The establishment of one or more partial associations with a legal personality can also take place within an existing association of co-owners. Therefore the bylaws of the existing association need to be changed; requiring a majority of four fifths in the general meeting of the main association.

The partial association obtains legal personality after the transfer of its deed and the rules of joint ownership at the Mortgage Registry Office. This association then has its own property and bodies, in order to effectively safeguard the interests towards the specific common parts and can represent joint owners towards third parties.

Furthermore, it remains possible (following on from the former practice) to establish actual partial associations without a legal personality.

2. Criteria for determining the number of shares into the common parts

This number has an impact on, among other things, the right to vote in the general meeting and the individual contribution obligations of the co-owners. Its value is to be determined on the basis of three exhaustive criteria: the net surface area, the destination and location of the private area. This value needs to be set out in a reasoned report by a notary, a land surveyor, an architect or an estate agent. This report should then be incorporated in the basis deed.

3. General meeting of co-owners

In order for the general meeting to function as a more efficient and democratic body and, at the same time, increase the involvement of the co-owners, the regulation was refined on various points, inter alia:

    * The rules of joint ownership must indicate the period of 15 days within which the annual general meeting will be held. The property management agency is responsible for organising the general meeting within this period of time.
    * Furthermore, the property management agency is required to organise a general meeting whenever an urgent decision needs to be taken in the interest of the co-ownership and each time a request for such a meeting is issued by registered letter from one or more co-owners who hold one fifth of the shares in the common parts. If the property management agency does not comply with such a request within thirty days of the registered letter’s receipt, the general meeting may be convened by one of the co-owners. The possibility also exists to call up the co-owners (with their consent) by electronic means such as e-mail.
    * The co-owners may at any moment add items to the agenda of the general meeting.
    * The co-owners’ access to relevant information and documents relating to the general meeting is improved. In addition to the letter convening co-owners to the general meeting, the property management agency is required to post the dates of the general meeting in the common areas of the property.
    * The meeting must be chaired by a co-owner and not by the property manager. A secretary is to be nominated by the general meeting.
    * The legitimacy of general meeting deliberations is ensured by (i) the presence or representation of more than half of the co-owners which in turn must hold at least half of the shares in the common parts, or (ii) the presence or representation of co-owners holding more than three fourths of the shares. This condition must be met at the start of the meeting.
    * The practice of granting proxies is subject to further restrictions, notably the obligation to provide a nominative document. The proxy holder must always be known and each proxy is only valid for one general meeting. In addition, only three proxies in total per person are accepted (unless the number of votes held by the proxy holder does not exceed 10% of the total number of votes)
    * The rules of co-ownership can no longer impose special majorities which deviate from the legal majority requirements.
    * The property manager is responsible for writing up the minutes of every general meeting and keeping them in a register. A copy of the meeting minutes must be provided to the co-owners within thirty days and must indicate the achieved majorities, as well as the names of the co-owners who abstained or voted against.
    * The law provides the possibility for the general meeting members to make decisions unanimously and in writing, unless a deed is required for the decision concerned.

4. Property management agency

The new law better defines the tasks pertaining to the property management agency and enhances control over its responsibilities.

Some points of interest concerning the tasks assigned to the property manager are:

    * The property manager must also communicate the date of the general meeting to every resident who has no voting right, so that they can formulate their requests and observations in writing;
    * The property manager must make all documents and data relating to the co-ownership available to the co-owners, if possible (also) in an electronic form;
    * The property manager must guarantee, if a request is made by a co-owner, the translation of the documents relating to the association, into the language of the region where the property is located;
    * The property manager must get the approval of the general meeting if he wants to enter into an agreement which may bring a conflict of interest.

In addition, corporate governance principles were included to make the relationship between the co-owners and the property management agency more transparent. For example, the relationship needs to be clarified in a written agreement and the rules of co-ownership must explain how the property manager is selected, the extent of his powers, the duration of his mandate and the means of terminating his contract. The property management agency can only be appointed for a (renewable) term of three years (instead of five years). The mandate cannot be extended tacitly. The property manager is responsible for the financial management of the resources belonging to the association of co-owners and will have to keep the accounts in accordance with the legal provisions and is hereby subject to stricter supervision. At the end of its mandate, the property management agency should hand over within 30 days the complete building management files to its successor, or to the president of the last general meeting.

5. Joint ownership council

The former management council is renamed joint ownership council. The existence of the council is mandatory for large associations of at least twenty parts, excluding basements, garages and parking spaces. In small associations, it is possible but, in principle, not mandatory establish such a council.

The council’s main task consists in supervising the property management agency. To this effect, the law grants particular information rights to the council. Unlike the former council of management, the joint ownership council is no longer required to assist the property management agency in order to avoid conflicts of interests with control activities. The council shall submit a half-yearly report to the co-owners about the performance of its tasks.

6. Other modifications

The law additionally brings the following changes to the rules of co-ownership:

    * The rules concerning the representation of the association of co-owners and its legal capacity are refined. The association has, for instance, since the new law’s entry into force, the required legal capacity to make legal claims, including those relating to the common parts and their management;
    * Pre-contractual information disclosure provisions towards potential buyers were extended. The seller or the real estate agent assisting the seller, must request data and documents from the property management agency in order to incorporate them in the notarial deed of sale;
    * Equally, the notary must ask the property manager for certain information and documents to be included in the notarial deed of sale;
    * The law now explicitly prohibits statutory arbitration clauses;
    * Each year, a statutory auditor will be appointed by the general meeting to audit the accounts of the co-ownership. His duties and capacities are further specified in the rules of co-ownership.

7. Entry into force – adaptation of the bylaws

The law entered into force on 1 September 2010 and applies to existing co-ownerships (with the exception of the new rules regarding the determination of the shares of the private areas, which only apply to bylaws established as of 1 September 2010).

Strictly speaking, the law does not expressly require that the bylaws of existing associations be adapted according to the new law within a certain period of time. However, the property management agency has the obligation to present a coordinated version of the basis deed, the rules of co-ownership and the internal rules to the general meeting of co-owners before 1 September 2011. The bylaws must be amended during the general meeting in accordance with the applicable publicity, majority and quorum requirements and will require a notary deed.