New Apartment Ownership And Apartment Association Act Soon To Be Adopted

The Ministry of Justice has initiated a third round of coordination of the draft Apartment Ownership and Apartment Association Act. The latest amendments concern possibilities for elimination of debt arising from unpaid management costs (including communal costs) in situations where apartment ownership is encumbered with a mortgage.

The draft Apartment Ownership and Apartment Association Act will facilitate codification of apartment ownership law in the framework of which the draft Act will replace and merge the Apartment Ownership and Apartment Association Acts currently in force. The new Act will regulate all legal ties and relations concerning apartment ownership.

Under the draft Act, management of all apartment ownerships will be carried out through an independent legal entity - an apartment association. Once the Act is in force, an apartment association will be automatically established when establishing apartment ownership. When apartment ownership is already in existence before entry into force of the new Act and is managed in the form of a community of apartment owners, an apartment association will be established by the state.

The planned reform should eliminate problems that arise from the coexistence of the community of apartment owners and its administration. For example, when concluding contracts with third parties such as a contractor carrying out repair works, it is unclear under existing law who exactly constitutes a party to the contract - the administrator or owners of apartments. It is also difficult to ensure that an individual claiming to be an administrator in fact qualifies as such. An apartment association which is established automatically under the draft Act constitutes a far clearer and concrete party to any contract.

In comparison with the Act currently in force the activities of apartment associations will become increasingly transparent for apartment owners. Each apartment owner will have access to banking details of the apartment association. Thus the new Act will eliminate risks of breach of confidence by the administration of the apartment association as all changes in the apartment association's bank account are visible to apartment owners.

The new Act will slightly modify the principles of liability of apartment owners as co-owners of the building. According to the draft Act, in case of danger associated with the building (e.g. falling icicles) claims for damages will be...