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New Laws: Bulgarian Apartments Part Two - Gated Communities

Management contract in “gated complexes”

I will quote precisely this most ridiculous provision of the new Act, contained in art. 2, named “Special regime of management of common areas”:

“Art. 1, Par. 1. The management of the common areas of buildings in condominium ownership regime in a residential complex of a closed type, is to be regulated with a written contract with notarisation of the signatures, between the investor (developer) and the owners of separate units.

Par. 2. The contract under Paragraph 1 is to be registered in the lot of every separate unit and is binding on subsequent buyers.”

The additional provisions of the Act provide for the meaning of the term “residential complex of a closed type”, namely: “a complex set up as a separate regulated landed estate, in which buildings in a condominium ownership regime and other objects are erected, which serve the owners and the habitants, where a special controlled access of outsiders  is observed”

While I understand the supposed argument of the legislator that gated complexes are difficult to manage due to the different facilities located in them, owned by different owners and therefore require higher volume and quality of maintenance, somehow regulated by the law, I do not understand why this short, incomplete and absolutely inappropriate clause was found sufficient to solve the numerous existing problems in these complexes. The below questions illustrate what I mean:

-    For what reason was the investor given the exclusive right and privilege to conduct the management of the common area? After the complex is sold out, on what grounds is the investor put in a more favourable position than the other owners?
-    In the best case the investor is still owner of some of the facilities for common use such as the pool, the gym, the spa centre, but what if there are no such facilities and yet the complex can be defined as “residential complex of a closed type”? What if owners pay for the use of these facilities, will they still be obliged to sign a maintenance agreement with the investor and what would justify such obligation then?
-    What if the investor does not have the ability, the capacity or even the wish to deal with the management of the common areas? Why are owners obliged to sign a maintenance agreement with an investor/developer whose main subject of activity is, in the best case, construction, but may also be any other activity, having nothing to do with construction or moreover management. In Bulgaria during the construction booming every businessman with some free assets became “an investor” and now such investors, who are predominantly, say, a cherry exporter for example (inspired by a real case though), will manage the common areas of the poor buyers, if we follow this provision;
-    What would this contract state and since the legislator has ensured the rights of the investor/developer, how can they be limited? The investor may thus use this clause and impose any maintenance fee and any terms! Where are the consumers' rights here?
-    Is this clause to be applied from now on and will investors of already erected buildings, maintained by outside maintenance companies be entitled to “step in” their rights for the future?
-    What would the term of such binding relation between owners and investor be?

Many other questions like the above can be posed and, in my opinion, until the legislator realises how inadequate this clause is and revokes it, I suggest a few ideas how to overcome it:

-    If we interpret the clause literally, it will apply only to complexes where more than one holiday building is erected. If your complex consists of one building and a pool for example, you may argue that the clause is inapplicable. The plural is used in both art. 2 and the term definition.
-    Again if we interpret the clause literally, if there are no other objects erected outside the building, but for example there is only an indoor pool, the gym and the sauna are also inside the building, it may be argued that the clause is inapplicable – the condition is the “buildings and other objects are erected”;
-    If there are buildings and other objects, but no controlled access is provided – for example there is no life security or other means like a gate with remote control, the clause is inapplicable.

As a whole, in my opinion, the obligation to sign a contract with the investor/developer will be very difficult to enforce in its present form. If I, as an owner, refuse to sign such agreement, the investor cannot go to the notary without me and cannot register the contract without my signature. If the investor takes me to court I wonder what would the court rule when I object that such contract violates not only my consumer rights, but also the main principle of freedom of contractual relations. And finally, the investor will have to take all owners to court, with separate claims, which cannot be combined in the same court case and I will be curious to see an investor who will find such actions sufficiently justified.

This article, as well as part one, cannot be exhaustive in the matter of apartment ownership and its legal regulation. It may serve as a guideline outlining some of the most interesting new provisions of the new Act.

A lot more questions can be raised, a lot more issues can be discussed and surely the new Act can bear a lot more criticism. Besides, when it comes to application of the law, many more factors of the reality and your relations with the investor/developer and the other owners will influence your decisions and actions. Therefore, on every separate occasion make sure you are acquainted with the precise and up to date legal regulation and get proper independent and professional legal advice.

Related Articles
Part One of the New Laws Governing Bulgarian Apartments

Asja Mandjukova
Partner, GPNG Law Firm, Sofia


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