The management plan is the fundamental instrument that determines the procedure by which a building subject to condominium ownership is to be administered, which powers the owners hold and which obligations they assume, and the rules on which communal life is to be founded. This document is counted among the constitutive instruments of condominium ownership; it establishes the order governing the administration of the immovable and performs a binding function in respect of all the owners.
This instrument is the basis for the arrangements governing how the common areas are to be used, the measure by which dues and expenses are to be apportioned, the purposes for which the independent units may be used, and how the management is to operate. It is therefore of considerable practical importance to know what the plan means in law, whom it binds and to what extent, and under which conditions it may be amended.
In this briefing note we examine, in outline, the definition of the plan, its legal nature and binding force, the procedure for drawing it up, the majority required for its amendment, and the consequences that may arise where it is breached.
The Concept of the Management Plan
The management plan is the fundamental instrument determining the mode of administration of an immovable subject to condominium ownership, the powers and obligations of the owners, and the principles governing use of the common areas. Forming part of the constitutive documents, this instrument sets out the rules concerning the administration of the main immovable and produces effects in respect of all the owners.
The instrument covers such headings as the manner in which the immovable is to be managed, the method of apportioning common expenses, the use of common areas and the provisions relating to the manager, and it serves to ensure that condominium ownership relations are conducted in an orderly fashion.
Definition
The management plan is a written instrument that sets out the rules concerning the administration of the main immovable and with which the owners are obliged to comply. It is drawn up when condominium ownership is established; it begins to take effect once it is submitted to the land registry.
For the purposes of the Condominium Ownership Act No. 634, this instrument is a binding arrangement governing how the immovable is to be managed, the purpose for which it is to be used, the duties and powers conferred on the manager and the auditors, the manner in which common expenses are to be apportioned, and similar matters.
Binding Force
The management plan binds all the unit owners in the main immovable. Owners must comply with the provisions of the instrument both when using their own independent units and when making use of the common areas.
Its binding effect is not confined to the current owners. A person who subsequently acquires an independent unit, a tenant who leases that unit, and those who make use of the unit in any other capacity likewise fall within the scope of the plan’s provisions.
In this respect the instrument is a fundamental legal document that establishes the order of communal life in buildings subject to condominium ownership and covers everyone concerned.
The Legal Basis of the Management Plan
The legal basis of the plan is formed by the provisions of the Condominium Ownership Act No. 634, and the instrument is regarded as one of the constitutive documents of condominium ownership. Drawn up in reliance on a power derived from statute, this arrangement is a body of rules of a special character binding upon the owners.
The Statutory Provision
The provision concerning the management plan is contained in Article 28 of the Condominium Ownership Act No. 634. Under that Article, the instrument is deemed to be a contract governing the manner in which the immovable is to be operated, its purpose of use, the duties and powers conferred on the manager and the auditors, the rights and obligations of the owners, and matters of a similar nature.
Within the framework drawn by the statute, the principal features of the plan may be listed as follows: it determines the fundamental principles concerning the administration of the main immovable; it contains rules binding upon the unit owners; it is among the constitutive documents of condominium ownership; and its amendment is made subject to a particular majority requirement.
By virtue of these characteristics, the instrument stands as the fundamental legal basis ensuring that condominium ownership relations are conducted in an orderly fashion.
Its Character as a Contract
The management plan is a contract of a special character concluded among the owners and determining the rules concerning the administration of the immovable. The statute has expressly characterised this instrument as a contract and has accepted that it produces effects in respect of all the owners.
It follows that the plan is deemed to be a contract concluded among the unit owners; it covers all the owners, it is valid also in respect of those who subsequently acquire an independent unit, and it cannot be amended by the will of a single person.
Its character as a contract is the principal factor rendering compliance by the owners with the rules of communal life obligatory.
Its Relationship with the Land Registry
The plan is a document submitted to the land registry directorate when condominium ownership is established and preserved together with the land registry records. It therefore has a direct connection with the register and produces legal consequences also in respect of persons who subsequently acquire the immovable.
A person who purchases an independent unit is deemed, in acquiring the registry record, to have adopted the provisions of the plan as well. Accordingly, it is not open to the new owner to act contrary to the rules by asserting that he was unaware of the instrument.
Within this framework the plan, being tied to the land registry, functions as a fundamental legal instrument covering both the owners and those who make use of an independent unit.
How Is a Management Plan Drawn Up?
Since Article 28 of the statute counts the plan among the constitutive documents, drawing up this instrument is mandatory if condominium ownership is to be established; the instrument so drawn up bears the character of a contract.
The plan may be drawn up at the moment condominium ownership is first established, or it may be made subsequently by the owners in an immovable where condominium ownership has already been established. However, creating the instrument for the first time and amending an instrument already in force are subject to separate procedures. The process must therefore be conducted in accordance with the procedural and majority rules laid down in the statute.
Who Draws Up the Plan?
At the stage of first establishment, the instrument is drawn up and signed by the owner of the main immovable or by all the owners. Where there are several owners, a declaration of intent from each of them is required. In newly constructed buildings the instrument is in practice most often drafted by the contractor; its legal validity, however, rests on the intention of the owner or owners.
Once condominium ownership has been established, the plan may be amended by a resolution of the general assembly of unit owners. At this stage, an amendment may be made only with the written approval of a majority of four-fifths (4/5) of the owners.
Accordingly, while the first instrument is created by the owner or by all the owners together, subsequent amendments are effected by a four-fifths majority. Confusing these two stages is among the most frequent errors encountered in practice.
It must also be emphasised in particular that the ratio in question is arrived at not on the basis of land shares, but on the basis of the number of owners.
The Procedure for Drawing It Up
The instrument is drafted in written form and prepared for submission to the land registry directorate when condominium ownership is established. In order to be regarded as valid in law it must be in writing and must bear the signatures of the owners.
The following matters are observed in particular when the instrument is created:
- Determination of the management model (manager, management board, etc.)
- The purpose for which the main immovable is to be used (residential, commercial, etc.)
- The method by which common expenses are to be apportioned
- The nature and number of the independent units
- The manner in which the common areas are to be used
The instrument is expected to be consistent with the actual use of the immovable and to be drafted with sufficient clarity to prevent disputes that may arise in the future.
Essential Provisions the Plan Must Contain
Article 28 of the statute requires the fundamental arrangements concerning the administration of the immovable to be included in the instrument. Since the plan directly affects the rights and obligations of the owners, it must contain comprehensive and intelligible provisions.
The instrument is expected to address the following matters in particular:
- The management model by which the immovable is to be administered
- The purposes for which the independent units may be used
- The powers of the owners and the obligations they assume
- The principles governing use of the common areas
- The duties and powers conferred on the manager and the auditor
- The measure by which common expenses are to be apportioned
- The conduct of meetings and of the decision-making process
- The procedure by which the instrument is subsequently to be amended
Arrangements left incomplete or drafted in uncertain terms constitute one of the principal sources of dispute in practice.
Submission of the Plan to the Land Registry
The instrument is among the mandatory documents that must be submitted to the land registry directorate when condominium ownership is established, and it is kept together with the register. Its submission to the land registry is the act that renders it binding on third parties as well.
A person who subsequently acquires the immovable is deemed to have accepted the provisions along with the registry record. For this reason the new owner cannot act contrary to the rules by asserting that he did not know the instrument.
Within this framework the plan is a document connected with the register, it covers those who subsequently take over an independent unit, and it bears the character of the fundamental legal instrument determining the order of communal life.
How Is a Management Plan Amended?
Although the instrument is a contract binding upon the owners, it is not unamendable. An amendment cannot, however, be effected by an ordinary resolution of the assembly; the special majority conditions laid down in the statute must be satisfied. A correction to the plan is therefore contingent upon compliance with the statutory procedure.
One of the disputes most frequently encountered in practice concerns the amendment of the instrument without the requisite majority, or the failure to enter an amendment in the register. Such transactions may produce no legal effect and may be made the subject of an application for annulment.
Conditions for an Amendment
An amendment to the plan depends on the common intention of the owners. Article 28 of the statute requires the owners to attain a particular majority if the amendment is to be valid.
For an amendment to take effect there must be a declaration of intent by the unit owners, the correction must be made in written form, the majority indicated in the statute must be obtained, and the outcome must be notified to the land registry.
Amendments made without these conditions being fulfilled are not regarded as valid in law.
The Required Majority: A Four-Fifths Majority
The statute makes amendment of the plan subject to the written approval of a majority of four-fifths (4/5) of the unit owners. In calculating this ratio, the number of independent units is taken as the basis.
Accordingly, a declaration of intent in favour of the amendment is required from owners corresponding to at least four-fifths of the total number of independent units; resolutions adopted without that ratio being reached carry no validity.
For example, in an apartment building consisting of 20 independent units, amendment of the plan requires an affirmative vote from at least 16 unit owners.
The reason the legislature adopted this aggravated quorum is that the instrument is a fundamental document binding upon all the owners.
Notifying the Land Registry of an Amendment
Whether corrections made to the plan can produce legal effects depends on their being entered in the land registry. An amendment cannot remain confined to a resolution adopted among the owners; it must be recorded in the register.
An amendment not notified to the register may not be binding on third parties, may not be asserted against those who subsequently acquire an independent unit, and may in practice lay the ground for fresh disputes.
For this reason, once the resolution has been adopted the amendment must be submitted to the land registry directorate and entered in the declarations column.
Applying to the Court for an Amendment
Where the owners are unable to reach the requisite majority, it may in certain circumstances be possible for the plan to be amended by a court decision. Recourse to the courts is available in particular where the instrument in force is contrary to law, where its application has become impossible, or where it gravely impairs the rights of the owners.
The principal situations in which an application may be made to the court are as follows:
- The amendment cannot be made because the requisite majority cannot be reached
- The instrument contains provisions contrary to statute
- The application of the provisions has become factually impossible
- The instrument produces a result manifestly contrary to the rule of good faith
In such a case the court may, having regard to the particular features of the case, order that the plan be amended.
Action for Annulment of the Management Plan
Although the instrument is a contract binding upon the owners, its annulment may be sought where it contains provisions contrary to law or infringes the rights of the owners. An action for annulment is brought where the plan as a whole, or particular provisions of it, are contrary to statute, to the rule of good faith, or to mandatory rules.
In practice an annulment claim arises in particular where certain provisions restrict the owners’ right of property, unfairly limit the use of the common areas, or are irreconcilable with the principle of equality.
Conditions for an Action for Annulment
For the action to be brought, the arrangement contained in the instrument must be contrary to law or must impair the rights of the owners. Not every difference of opinion constitutes a ground for annulment; the incompatibility must be demonstrated in clear and concrete terms.
The principal situations that may be relied upon as a basis for an annulment claim are as follows:
- The instrument conflicts with mandatory rules of law
- The provisions contain arrangements contrary to statute
- There are stipulations that disproportionately narrow the owners’ right of property
- There are provisions contrary to the principle of equality in the use of the common areas
- The application of the instrument has become factually impossible
In these situations the annulment of the plan as a whole, or of the relevant provision alone, may be sought.
The Court with Subject-Matter and Territorial Jurisdiction
Subject-matter jurisdiction in an action for annulment lies with the Civil Court of Peace for the place where the immovable is situated. In actions of this kind arising from condominium ownership, subject-matter jurisdiction is a matter of public order and is taken into account by the court of its own motion.
As to territorial jurisdiction, the court for the place where the main immovable is situated has jurisdiction; that jurisdiction is exclusive.
In short, the action must be brought before the civil court of peace for the place where the immovable is situated.
Time Limit for Bringing the Action
No separate preclusive period has been laid down in the statute in respect of the annulment of the plan. Provisions of the instrument that are contrary to statute or to mandatory rules may therefore be raised at any time, without being bound by any period.
That said, in actions brought against an instrument that has been applied for a long time, the rule of good faith and the prohibition on abuse of rights may be taken into consideration by the court. It is therefore prudent not to postpone recourse to the courts once an incompatibility has been noticed.
Consequences of the Decision
If the court orders the annulment of the plan, the annulled provision no longer produces effects. As a rule the decision binds all the owners and the arrangement in question becomes inapplicable.
The principal consequences of an annulment decision are as follows:
- The provision found to be contrary to law ceases to be in force
- The binding force of that provision in respect of the owners comes to an end
- The relevant part of the instrument loses its capacity to be applied
- Where necessary, the drawing up of a new management plan arises for consideration
Independent Legal Assessment
The management plan is the document that should be consulted first in apartment and housing estate disputes, yet it is the one least often read. A great many controversies — from the level of dues to the allocation of parking spaces, from whether an independent unit may be used as business premises to the limits of the manager’s powers — are in fact capable of resolution by reference to the instrument. For this reason the first step to be taken when a dispute arises is to obtain a current and complete copy of the instrument from the land registry directorate.
Secondly, procedural errors made during the amendment process are a frequently encountered problem in practice. A resolution adopted without the requisite majority, or a correction not entered in the register, may unexpectedly be held invalid in an action brought years later. Structuring the process correctly from the outset is far more economical than the cost to be borne afterwards.
In a concrete file it will be appropriate to give priority to the following headings:
- Examination of the current version of the instrument held at the land registry, together with subsequent amendment declarations
- Assessment of whether the disputed provision is incompatible with mandatory rules
- Where an amendment is intended, calculating the four-fifths ratio in advance on the basis of the number of owners
- Reducing the resolution adopted to writing and having it entered in the declarations column
- Analysis of the conditions for applying to the court where the majority cannot be reached
- Where an annulment claim is contemplated, establishing the unlawfulness in concrete and documented terms
Independent Legal provides advisory services and litigation support in the preparation and amendment of management plans for immovables subject to condominium ownership and in resolving disputes arising from that instrument.