Operating shared living areas gives rise to a cost; that cost is met by the service charge collected monthly from the owners of the independent units. As buildings grow larger and common areas become more varied, the amount inevitably moves upwards. The price fluctuations of recent years have made the picture harder still, and the service charge has turned into a substantial budget item for many households. The increase in actions brought seeking annulment of the management budget is a direct reflection of this.
The fact that the service charge has been fixed by a resolution of the general assembly of condominium owners and duly notified to those concerned does not lead to the conclusion that the amount is beyond challenge in all circumstances. Where the conditions required by the Act are present, the annulment of a service charge fixed at a disproportionate level may come onto the agenda.
In this briefing note we address the statutory basis of the service charge, who is liable to pay it, on whom luxury expenditure may be imposed, the procedure for objecting and the sanctions attaching to non-payment.
The Concept of the Service Charge and Its Statutory Basis
The framework of the service charge is drawn by Art. 20 of the Condominium Ownership Act No. 634:
Condominium Ownership Act No. 634, Art. 20
“Unless otherwise agreed among them, each of the condominium owners:
a) equally, to the expenses for the caretaker, boiler operator, gardener and watchman and to the advance to be collected for these;
b) in proportion to their own land share, to the insurance premiums of the main immovable property and to the maintenance, protection, strengthening and repair expenses of all the common areas, together with other expenses such as the manager’s salary, and to the operating expenses of the common facilities and to the advance to be collected for the expenses;
Is obliged to contribute.
c) A condominium owner may not avoid paying this share of expenses and advances by renouncing the right of use over the common areas or facilities, or by asserting that, owing to the condition of their own independent unit, there is no need or requirement to benefit from them.”
The final sub-paragraph of the provision closes off the most contested point in practice: an owner who asserts that they do not use the common facilities, or have no need of them, cannot escape the contribution on that ground. Payment may be made in cash, or it may be collected by transfer into a bank account opened solely for that purpose; the second method is recommended, as it makes proof easier.
The manager of the housing estate, apartment building or business centre charged with collection is obliged to explain to the residents on which item, and in what amount, the money collected has been spent. The source of this obligation is Art. 39 of the Condominium Ownership Act No. 634:
Condominium Ownership Act No. 634, Art. 39
“The manager is obliged to render to the general assembly of condominium owners, at the times stated in the management plan or, if no such time is stated, within the first month of each calendar year, an account of the income obtained and the expenses incurred in respect of the main immovable property up to that date. If half of the condominium owners so request, whatever their land shares may be, the presentation of the account may be requested from the manager at times other than those stated in the management plan.”
That provision ties the management’s duty to account to the principle of transparency; the income and expenditure items must be set out in detail and notified both to the owners and to the tenants. On the fixing of the service charge and the avenues to be followed where it is not paid, reference may be made to our note entitled “Service Charge Amounts (Residence, Housing Estate, Business Premises)”.
Who Is Liable to Pay the Service Charge?
Where condominium ownership has been established over the immovable property, the debt is owed by the owner. The fact that the independent unit is not actually being used, or is left empty, does not remove that liability; the person shown as owner in the land registry is responsible for payment.
Where the immovable property has been let, the picture changes. When the provisions of the Turkish Code of Obligations No. 6098 and Art. 22 of the Condominium Ownership Act No. 634 are assessed together, the tenant and the owner are jointly and severally liable for the service charge. The management, as creditor, may therefore turn either to the tenant or to the owner for collection.
In the case of immovable property passing by inheritance, the following picture is frequent: the deceased made no disposition upon death and the heirs have not been able to agree on the division. In that event, since the heirs hold the immovable property on the basis of joint ownership, they are also jointly responsible for the service charge debt.
Very Costly and Luxury Expenditure
Apart from ordinary common area expenses, there are particular uses regulated by Art. 43 of the Condominium Ownership Act No. 634 under the heading “Those Which Are Very Costly and Luxurious”. The cost of new facilities falling within that scope cannot be added to the service charge and imposed on all the condominium owners.
Condominium Ownership Act No. 634, Art. 43
“Where the renovations and additions desired to be made are very costly, or are of a luxury nature having regard to the particular condition of the building, or are not situated in those parts or passages of the main immovable property whose use by all the condominium owners is absolutely necessary, a condominium owner who does not wish to benefit from them is not obliged to contribute to the expense; the expense of such renovations and additions is paid by the condominium owners who have decided upon them.
Nevertheless, if a condominium owner who did not contribute to the expenses at the outset, or that owner’s universal or singular successors, subsequently contribute, in proportion to their own land shares, to the expenses of making and maintaining the renovations and additions, they acquire the right to benefit from the luxury renovation or addition made.”
The conclusion to be drawn from the article is clear: the burden of constructing, maintaining and repairing an addition regarded as luxurious, or giving rise to a high cost, rests solely on the owners who decided upon that addition. An owner who subsequently contributes to those expenses in proportion to their land share acquires the opportunity to benefit from the facility.
Objecting to the Management Budget
For a service charge to be regarded as excessive it is not necessary that a luxury investment should have been made. Today, service charge amounts approaching the level of rent are placing a strain on tenants and owners alike. Behind this lies not only economic fluctuation but also the low turnout at the assembly that fixes the amount; as scrutiny weakens, disproportionate figures emerge. The first step to take is to attend the meetings and have one’s objections recorded.
Beyond that, an objection to a disproportionately prepared management budget is also possible. The budget prepared by the management or by the assembly is served on the residents by post or against signature. The fact that service has not been effected at all, or has been effected irregularly, does not extinguish the debt.
The period for objecting is seven days from service. The objection is made by a written application addressed to the management of the apartment building, housing estate or business centre; in the application it is requested that the budget be reconsidered in the light of the objections. The application may be delivered to the manager by registered post with recorded delivery or by hand against signature.
Upon an objection, the assembly must reassess the budget. If necessary, a new budget is drawn up; if no change is made, the reasons for that choice are notified to the objector. If the seven-day period passes without objection, the budget becomes final. Where, notwithstanding the objection, the budget remains contrary to law and equity, resolution of the dispute may be sought from the Civil Court of Peace.
Consequences of Non-Payment of the Service Charge
Where payment is not made, enforcement proceedings may be commenced against the debtor or an action may be brought directly. The same power is also conferred on holders of a usufruct. Under the Condominium Ownership Act No. 634, default compensation of 5% per month accrues for the period of delay. When recourse is had to enforcement proceedings without judgment, the resolution of the general assembly of condominium owners may be annexed to the request for enforcement; proceedings may, however, also be commenced without that document.
For a condominium owner who persists in non-payment, a far more serious consequence is provided for by Art. 25 of the Condominium Ownership Act No. 634:
Condominium Ownership Act No. 634, Art. 25
“If one of the condominium owners, by failing to perform the debts and obligations incumbent upon them under this Act, infringes the rights of the other condominium owners to a degree that becomes intolerable for them, the latter may request the judge to order the transfer to them of that owner’s right of ownership over their independent unit.”
As can be seen, an owner who persistently fails to perform their debt may be compelled to transfer the right of ownership over their independent unit to the other owners.
Finally: making an objection does not necessarily mean that the amount will be reduced. It is of great importance that payments continue to be made without interruption until the dispute is concluded.
The Effect of the Pandemic Period on Business Premises and Shopping Centre Service Charges
The measures taken in connection with Covid-19 led to the temporary closure of many heavily used premises, or to a fall in visitor numbers on account of individual precautions; by the decrees issued, the activities of a large number of lines of business were suspended for a period. As undertakings with suitable infrastructure moved to remote working arrangements, the number of people present in business centres and office blocks also fell sharply. The emptying of these areas, heavily used in ordinary times, has made the fate of the service charge relating to such places a matter of debate.
The extent to which the businesses in shopping centres are to contribute to the common expenses is determined by the contract between the parties, provided that it does not conflict with the Regulation on Shopping Centres No. 29636. Article 11 of the Regulation contains the following provision:
Regulation on Shopping Centres, Art. 11
“Common expenses relating to the common use areas — such as electricity, water, heating, maintenance and repair not amounting to renewal, security and cleaning — which recur at particular intervals and which do not relate to the substance of the shopping centre shall be calculated and apportioned in accordance with the procedures and principles annexed to this Regulation.
The possibility of demanding from the retail businesses in the shopping centre a contribution for services directed at the common benefit, such as marketing and management, falling outside the common expenses referred to in the first paragraph, is conditional upon that matter having been stated in the contract between the parties. Unless otherwise stated in the contract between the parties, these expenses shall likewise be calculated in accordance with the procedures and principles annexed to this Regulation.”
These items are costs borne so that the shopping centre may function without interruption; even if visitor numbers fall, security, cleaning and technical support services must be maintained. When the lessor’s obligation under the contract to keep the leased property fit for use is assessed together with the shopping centre’s statutory obligations towards its staff, the tenant businesses’ liability for the service charge continues.
Independent Legal Assessment
What is decisive in excessive service charge disputes is not so much the size of the amount as the procedure by which, and the expenditure items on which, that amount was arrived at. In files where the duty to account has not been met, where the breakdown of expenditure has not been documented, or where luxury investments have been passed on to all the owners, the prospects of a successful objection are higher. Objections resting solely on the size of the amount and unsupported by documents, by contrast, do not succeed.
For the process to be conducted correctly, the following points should be given priority:
- Documenting the date of service and not missing the seven-day objection period
- Placing the objection on record by registered post with recorded delivery or delivery by hand against signature
- Scrutinising the expenditure items by comparing them with invoices and bank movements
- Treating luxury or very costly additions as a separate heading under Art. 43
- Clarifying joint and several liability by contract in the case of let immovable property
- Continuing payments without interruption while the dispute is ongoing, so as to avert the risk of the 5% default compensation
Independent Legal provides advisory services and conducts litigation in service charge disputes arising from condominium ownership, from the scrutiny of the management budget through to the trial stage.