Our Building is Our Property
The well-known saying that every city has its own personality can be best applied to buildings. Indeed, it is buildings – old and new, grand and modest, attractive and not so much – that make up cities. And the majority of those buildings are where we live.
WHAT IS A RESIDENTIAL BUILDING?
It is a permanent structure intended for permanent residence and built in accordance with the requirements established by law and other statutory instruments.
HOW MANY PEOPLE LIVE IN APARTMENT BUILDINGS IN UKRAINE?
About a half of Ukrainians live in apartment buildings.
BESIDE APARTMENTS, WHAT OTHER PROPERTY DO THE OWNERS HOLD IN AN APARTMENT BUILDING?
According to Article 382 of the Civil Code of Ukraine, the owner of an apartment or nonresidential premises based on joint ownership owns everything without which the apartment would be uninhabitable, namely:
· Common areas (stairs, stairwells, elevator lobbies);
· Mechanical, electrical, plumbing and other equipment in- or outside the building, which serves more than one residential or nonresidential unit (elevators, water, sewerage, and heating lines, and electric wiring);
· Building load carrying, enclosing, and combined load carrying-cum-enclosing structures of a building (walls, floor structures);
· Buildings and structures located on adjacent territory and intended to satisfy the needs of the co-owners (e.g., waste container, children’s playground, clothes drying area, sports ground);
· The title to the land occupied by the apartment building and its adjacent territory, if such title is subject to state registration.
The Constitution of Ukraine sets forth three forms of ownership: state, municipal, and private. A natural or legal person, territorial community of a specific locality, or the state can be an owner in the apartment building.
The number of co-owners is not equal to the number of apartments and nonresidential premises. One apartment may have several owners (sometimes called the “legal ownership holders”); some person or legal ownership holder may own several apartments or nonresidential premises in your building.
WHO CAN BE AN OWNER IN AN APARTMENT BUILDING?
If an apartment in an apartment building is owned by municipality or the state (the so-called “non-privatized apartment”), the individuals living in such apartment are tenants rather than owners, and the tenancy right is granted to them pursuant to the housing lease agreement. In this case, the owner is either a territorial community or the state.
From the moment that non-state ownership is established, the owner shall also bear the responsibility for the management and maintenance of his/her property. The owner shall bear responsibility for the consequences of his/her actions/inaction with regard to his/her property. The owners of apartments and nonresidential premises shall be responsible for the maintenance of the joint property in the apartment building.
WHAT IS THE APARTMENT BUILDING MANAGEMENT?
An apartment building’s purpose is providing shelter to families and ensuring comfortable living conditions in any season. To achieve this, it is necessary to continuously contract services, and carry out the activities of building management, maintenance, and repair. Accordingly, there arises the need to systematically address the issues of the inventory, scope, schedule, and cost of conducting the required activities, identifying their implementers, sources of financing, monitoring of service quality etc. All these activities are called the apartment building management.
The organization of the management process includes a number of actions, regularly recurring during the entire building’s useful service life:
THE BUILDING MANAGEMENT PROCESS:
1) ASSESSMENT OF PROPERTY CONDITION
2) OWNERS’ DECISION ON IDENTIFYING THE MANAGEMENT OBJECTIVES*
3) DEVELOPING JOINT PROPERTY MAINTENANCE PLANS**
4) DRAWING UP A BUDGET AND SECURING FINANCING
5) MAKING ARRANGEMENTS FOR IMPLEMENTING THE PLANNED TASKS
6) COORDINATING THE ACTIVITIES OF IMPLEMENTERS
7) ACCOUNTING AND MONITORING THE PERFORMANCE OF WORKS AND PROVISION OF COMMUNAL SERVICES***
* To make a decision on identifying the management objectives it is necessary to reach an agreement among all joint property co-owners by majority vote.
** When developing plans, it is necessary to account for the objectives set by the owners and their financial capacity.
*** The implementation of works and provision of services shall be carried out according to the requirements of guidelines, norms, standards, rules and procedures, and in conformity with the legislation.
WHAT ARE THE METHODS OF APARTMENT BUILDING MANAGEMENT?
Method one is the direct management of apartment building by its co-owners. This option will only be realistic in a building with a smaller number of joint owners.
A second method fits, however, if there are many apartments in a building, to preserve the functions of apartment building management, its co-owners have the option of founding a legal entity called a Homeowners’ Association (HOA).
Each HOA has its main document called a Statute. The Association’s highest governing body is its General Meeting, which makes all important decisions, including those regarding the method of managing its joint property. The Board elected by the General Meeting manages day-to-day operations in the period between general meetings. The Board is the Association’s executive body, which reports to the General Meeting. The Board is authorized to decide on the current issues of the Association’s operation. The list of such issues is set forth by the Statute. The Board elects its Chairman who shall act on behalf of the Association.
To control the Board’s financial and economic activities, the General Meeting shall elect an Audit Commission/Auditor from among Association’s co-owners or decide to hire an auditor. The General Meeting, Board, and Audit Commission are the HOA’s governing bodies. This second method calls for the management of the apartment building via the HOA’s statutory bodies.
There is also a third method of contracting an entity professionally engaged in such activities, i.e., a professional manager. It could be a municipal enterprise, private company or an individual entrepreneur. In this case, the relations between the apartment building co-owners and the manager shall be set forth in an agreement, which should include an appropriate fee for management services. The decision on appointing or replacing a manager shall be supported by the votes of the co-owners who have joint ownership of more than half of the building’s total floor area.
The choice of any of the above options shall not relieve the owners from responsibility for the maintenance of their property. In other words, the provider of management services shall never make the final decision and shall only prepare available options for addressing the problems. Only the owners of apartments and nonresidential premises, i.e., the co-owners of joint property in the apartment building, shall bear full responsibility for making the final decision.
WHAT IF CO-OWNERS FAIL TO DECIDE ON A MANAGEMENT METHOD FOR THEIR APARTMENT BUILDING?
In this case, the government will make this decision for them. Normally, the building management functions shall be entrusted to a housing maintenance company (ZhEK).
The local government shall approve ZhEK’s tariff for the maintenance of each building. More often than not, the tariff is insufficient for a ZhEK to provide quality services. For instance, the tariff structure may lack or have a negligible share of expenditures for routine repairs, and major repairs are usually not funded at all. Therefore, a ZhEK is unable to keep your property (your building) in proper condition. And it is not the ZhEK’s or government’s fault, but our own as co-owners who have steered away from making our own decisions on choosing the management method.
IF YOU ASK: “WHAT CAN WE DO?”, THE ANSWER IS SIMPLE: “ESTABLISH AN HOA!”
The relevance of establishing an HOA is unquestionable in the light of Paragraph 5 Article 13 of the Law of Ukraine “On the Specifics of Exercising the Ownership Right in an Apartment Building” dated 14 May 2015, #417-VIII. It states that if the apartment building co-owners fail to decide on the format of their building management, then a manager shall be appointed for that building. The manager shall be appointed on a competitive basis by executive body of the local council in whose jurisdiction the building is located. On behalf of the co-owners, the authorized person of the respective local council’s executive body shall sign a contract for the provision of building management services for the period of one year.
In this case, it is not us, the building co-owners, who decide on the price of our building management service, but it will be set based on the results of a tender.
If during the contract period the co-owners decide to change the apartment building management format or appoint a new manager, they shall have the right of early termination of such contract by notifying the manager not later than two months before the contract termination date.
YOUR HOME – A MOUNTAIN OF PROBLEMS? GET TOGETHER AND SET UP AN HOA!
DON’T SURRENDER YOUR BUILDING TO OTHERS, SET UP AN HOA!
THIS IS YOUR HOME. BE ITS MASTER!
USAID Municipal Energy Reform Project in Ukraine