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The Latest Amendment Of The Act On Management Of Apartment Ownership - August 2011

On 26th July 2011, with State Gazette No. 57/2011, significant changes (by number and importance) in the Act on the Management of Condominium Ownership (herein after the Act) have been promulgated. The official main idea of the legislator was to simplify some procedures (like the calling of the General Assembly (hereinafter the GA) and the registration of the Owners Association), to clarify some badly composed provisions which were bringing misunderstanding and uneven application of the law (like the rules imposing obligations of condominium owners to pay for the various maintenance and management costs) and as a final goal - to make the law practically working and not frustrated by excessively complicated or unachievable requirements.

Our general opinion is that those motives can indeed be seen through in the new changes and these changes have rather made the law better and easier to observe and make use of. The old version of the law allowed for unconscious behavior and abuse of the law by the various affected parties. These defects of the Act have not yet been completely removed, but the changes have made a step forward.

We arise of the assumption that by now, owners of real estates in Bulgaria are relatively well acquainted with their rights and duties as condominium owners, so the purpose of this article is to introduce the more important changes in the Act and to interpret and compare them with the old provisions. Because of the large number of the changes, in order to make it an easier reading, the below statement is not exhaustive, so readers are advised to get acquainted with the full text of the Act or seek professional advice every time they decide to take certain step under the Act.

Costs related to the condominium ownership/common areas:

The most important change in the sections regulating the rights and obligations of the owners, habitants and users (see what "users" means below) to pay the costs related to the common areas is the precision of the different types of costs, which allows for more accurate defining of the nature of the incurred costs, respectively - the way of their distribution. The old Act was using the terms "costs for consumables" and "costs for maintenance of the common areas", but only had definition of the term "costs for consumables" and "maintenance of the common areas" which was vague enough to cause confusion. The new law has taken out the term "costs for consumables" and has introduced the common and more exhaustive term "costs for maintenance and management", which was used as expression in the old version of the Act anyway.

Thus, the Act now has a more clear differentiation of the costs for maintenance, management, repair, consumables etc., which is important improvement, because the distribution of the various types costs between owners is different and it is important to know which cost goes where.

To remind readers, in light of the new changes, these are: Costs for repair, renovation, reconstruction or change of designation of the common areas:

These costs are distributed between owners on the basis of the size of the ideal shares of the common areas, owned by each owner. In other words, the more apartments you own or the larger your apartment is, the more you pay. It is important to remind that there are different types of repairs (urgent, necessary, basic, useful) and the regime for their approval, respectively, for the obligation to cover for their costs depends on their necessity. The same principle applies to renovation, reconstruction or change of designation of the common areas - the least necessary the repair is - the higher majourity of votes at the GA is required.

Like the old version, the new version of the Act contains the requirement for the GA to maintain a Repair and Renovation Fund, also known as Sink Fund, and to determine the size of the fund installments. The new change is that a minimum of 1% of the minimal wage for the state has been set for the sink fund installments. This is done to encourage and ensure a minimum of funds collected. Bear in mind that the obligation of owners to recover or contribute towards costs for repairs and renovation is not limited to the size of the installment, payable to the Sink Fund. The function of the Sink Fund is to guarantee collection and availability of funds, but owners shall still be obliged to cover the full costs of any and all types of repairs and renovations as long as they have been approved and accomplished in observance of the law.

Costs for management and maintenance of the common areas:

The management and maintenance costs include the costs for consumables, costs related to the management of the common areas, costs for remuneration of the management and controlling bodies (now possible option), for electricity, water, heating, cleaning, elevator, janitor and other costs of the sort, necessary for the management and maintenance of the common areas of the building. These costs are distributed between owners, users and habitants, according to their number. The new figure of the "user" defines an individual or entity that has an established real right to use the apartment by the owner. Users have almost the same volume of rights and obligations as owners, with some limitations on their voting rights within the GA and on the obligation to cover costs for repairs. Habitants are the members of the family of the owner, as well as guests, tenants etc. (We put tenants in the group of habitants, because usually they rent an apartment with a simple contract which grants them ordinary temporary right of use, which is different from the real right of use, meant by the legislator in the case of "users". This division is a specific legal matter, unnecessary to go into deeper, but we mention it in order to explain why users have more rights than habitants.)

So, for example an owner, who has 2 apartments and his family is composed of 3, will participate in the distribution of these costs with 3 "shares", conditionally speaking. If an owner has 3 apartments, but lives alone, he will participate in the distribution of these costs with 1 "share". Tenants also participate in the distribution of these costs. The idea of the law is that unlike the previous type of costs, this type of costs is directly related to and dependent on the actual use of the common areas, in other words - the costs for cleaning, electricity, water and lift rise as the number of people who live there grows. Therefore the law provides for the right of owners, habitants or users, living in the complex no more than 30 days within the calendar years, not to pay for such costs. Similarly, owners, users or habitants who are absent for more than 30 days within a calendar year, may be released by the GA from 50% of the due costs for that period of absence.